MSOs: All for One
How MSOs have evolved, and how to maximize a membership.
- By David Kopf
- Oct 01, 2008
Buying groups make a tremendous amount of sense when it comes to home medical equipment. A group of businesses with limited buying power can band together to gain volume sales discounts from various vendors. No wonder such groups have played an important role in the healthcare industry.
However, like their members, HME buying groups have evolved beyond group purchasing into member service organizations (MSOs), and play a much broader role in the HME industry. They offer professional education, webinars, conferences and even help providers fight regulatory threats to the industry. But before we look at how far MSOs have come, it’s worth a moment to look at where they started.Quick History
Buying groups have a fairly deep history in healthcare. In fact, the very first group purchasing organization in the United States was the Hospital Bureau of New York, which was formed nearly a century ago in 1910. But as smart a play as group purchasing is, the growth of healthcare buying groups was so slow that there were still only 10 such groups more than a half century later, in 1962.
Medicare and Medicaid changed all that. A dozen years later, 40 such groups had been formed, and that number expanded to more than 120 by 1977. Today, the overwhelming majority of acute care and community hospitals participate in group purchasing.
And, of course, the HME industry has been leveraging the value of group purchasing power for some time in order to get solid deals on what is often very expensive medical equipment. Of course, the independent spirit of many providers can sometimes run at odds with joining an organization.
Full-service HME provider Greenbay Home Medical (a division of LaSante Wisconsin Inc.) was the 11th provider to join VGM &?Associates, but the value of that membership wasn’t always clear. Just ask General Manager Bill Stelzer, who, when he joined Greenbay Home Medical 10 years ago, wasn’t convinced of the upsides.
“I was here about a year, and we were paying VGM dues, but I didn’t know what it was for, frankly,” Stelzer recalls. “I called them and said, ‘I can get better pricing myself than I can get through you.’ So they said ‘Well, come down and we’ll show you what we’re all about.’”
Stelzer says he and three co-workers took VGM up on its offer and traveled to the MSO’s Waterloo, Iowa offices to learn more about what the organization had to offer.
“I would tell you that it’s the other services — especially the educational and networking components — that convinced us to keep paying our dues,” he said.
That perceived value is catching on with providers, as they realize what they are missing now that yesterday’s buying groups have transformed into much more. Approximately 20 percent of HME providers are a member of some kind of member service organization, according to Ron Bendell, president of VGM & Associates, which has approximately 2,350 participating members. Evolving Role
“It’s evolved from what everybody originally viewed as a buying group into much more than that,” Bendell says. “We still provided buying group services, but also a number of other services that are designed to help keep the independent HME provider profitable — to give them the opportunity to grow and expand their business.”
For VGM, that means offering a variety of services including marketing design and printing services; web site and e-commerce tools; services to help ensure traveling and relocating patients are covered; online and in-person seminars; special groups to help members confer based on their specialty (such as rehab or respiratory); and, of course, its financial and insurance arms.
Education is a particularly important aspect of the services The MED Group provides to its members, says John Allman Director of Business Solutions for The MED Group. “Our primary goal is to help our members prosper ... and to help them focus more intently on their businesses,” he explains.
To that end, Allman says The MED Group conducted a series of webinars on management to help providers find the means to remain profitable in an era of declining reimbursement and difficulty on the part of manufacturers to further reduce prices.
The evolution of HME MSOs isn’t just limited to traditional buying groups, either. The MSO “gene pool” of ideas and players is expanding from unlikely corners of the industry. For instance, HME software provider Fastrack Healthcare Systems Inc. raised eyebrows across the industry when, as HME Business broke the news in January, the company leveraged its networking savvy to launch an MSO, which is available to anyone in the industry, not just users of its software. Currently, more than 480 members have joined up.
“We saw a couple needs in the industry,” says Fastrack President and CEO Spencer Kay. “One, finding ways to help providers reduce their operating costs ... but we also felt that with the technology that we had, we could offer a technology component to the buying group, which is a purchasing web portal that allows them to place orders online with the manufacturers or distributors.”
Fastrack’s electronic fine tuning of the group purchasing element to an MSO includes order acknowledgements from vendors connected to its portal, shipping notices, electronic invoices, and downloadable electronic catalogs and pricing.
To pull that off, Fastrack had to look at how such a system could benefit the manufacturers on its network, as well, Kay says. “The web portal also reduces their costs,” he says. “When an order comes in electronically, it eliminates phone calls and mistakes that are made. Collectively, if we can take the costs out of doing business for everybody, then everybody should win.”
Additionally, Kay says that the group purchasing benefit of its MSO is also expanding to include services. Fastrack’s MSO, for example, includes 12 service providers offering services such as credit card processing and collection agencies, as well as a firm that offers online classes for obtaining continuing education units that providers can offer to their referral sources to reinforce those relationships.
An increasingly important aspect of many MSOs is their regulatory efforts. Just like state and national associations, MSOs have had to fix their attention on Capitol Hill as of late.
Bendell says VGM worked to get more providers involved in involved in their state associations and the American Association for Homecare in order to work on behalf of their businesses and their industry.
“We conducted a number of competitive bidding seminars last year, educating people on what they could expect, what they needed to do and in what time frame they needed to do it,” he says. “This is a multi-front attack on our industry and we need to take every opportunity and angle we can to educate Congress and consumers about the advantages of what we offer to the marketplace.”
That’s a battle that VGM members and their industry peers will have to keep fighting, since the delay to competitive bidding is just that — a delay. Case in point: Bendell says VGM attended a recent Medicare conference where, “Kerry Weems said he’s putting together ‘competitive bidding 1.2’ for first round bidding again.”
“So, it’s definitely going to come back,” he adds. “And what we need to do is not stop what we were doing before. We gained traction. We were successful. Now we need to keep it up.”
Maximizing a Membership
Of course, for providers new to MSOs, the preeminent question is how to get the most from their membership. In fact, the same can be said for some long-standing members who perhaps simply relied on the group purchasing benefit of their membership. The best place to start maximizing a MSO membership is by doing a little homework.
“They need to investigate everything we have to offer,” Bendell says. “I’ll say that there is probably a very large number of VGM members out there that don’t fully take advantage of everything that VGM has to offer.”
A key way for providers to do that is to start monitoring all of the communications, which are increasingly electronic, coming from their MSO, Bendell says. “We have a number of emails that go out from the different areas of VGM and if they sign up with us, they’ll quickly get acquainted with everything we have to offer.”
Another way is to take advantage of the MSO’s local representation. “We have 13 member service representatives that are out in the field that are more than happy to come in and sit down with members and explain everything that we have to offer and how it could benefit their business.”
Another way to get the most from an MSO is for members to help shape it to meet their needs via the specialty networks they offer, as well as the more direct feedback mechanisms for influencing the organization, Allman explains.
“We have a web-based discussion database, and informal committees we work with all the time to seek our members’ guidance,” He says. “Whenever we have meetings we’re constantly asking our members what it is we can do better for them.”
And that feedback has directly resulted in the creation of new features and services, he says. For example, The MED Group runs a program called R-3, which stands for Reimbursement and Regulatory Resources, which grew out of the need for MED Group members to have such information quickly and in one place. So it worked with members to create a resource that does just that.
“I don’t think there’s any program within The MED Group that hasn’t been enhanced and significantly improved by the feedback we get from our membership,” Allman says.
From a provider perspective, Greenbay Home Medical’s Stelzer says that dialog between members and the MSO, as well as amongst themselves is critical. VGM’s regulatory efforts are a good example, Allman says.
“They keep that type of thing alive,” he says. “If we [the members] had to do that with 10 other companies, or 20 other companies, or 400 other companies, we’d kind of let it fall by the wayside. But they’re always there as a reminder, telling us ‘You’re a part of this; we’d like your input.’ In turn, I think that keeps us involved.”
Stelzer also advises providers looking to maximize their membership is to focus on getting the most from an MSO’s educational and networking offerings. “I think education leads to consistency,” he says. “All of our customer service people have at least a two-year Associate degree in some health field. The specialized training and programs [VGM] offers meet our needs when you get into specific programs.”
When it comes to networking, Stelzer says being able to compare and contrast experiences with other providers in the membership helps provide Greenbay with an “informal benchmarking” that helps it shape its strategies.
Also, Stelzer advises members to leverage the materials that MSOs provide them. For instance, VGM offers a catalog of options to help guide patients and their family through home medical decision-making. “To me, they help us educate the public, as well,” he says.What the Future Holds
One thing is certain, MSOs will continue to play an important and evolving role in the HME industry over the short and long term. How they’ll do that is a little less certain.
“I think a lot of that depends on the needs of the industry,” Bendell says. “Our government relations efforts were largely a response approximately four years ago when competitive bidding was looming on the horizon.
“I would think that regardless of whether of competitive bidding gets defeated, legislatively this is going to be an issue, and our offerings and what we do will be a response to the changing reimbursement environment, as well as new technologies that come along.”
From a technological standpoint, Fastrack’s Kay says an important element of MSOs’ evolution will lie in the continuing expansion of electronic purchasing.
“The fact that most transactions are not electronic today is one of the reasons costs are so high,” he explains. “If you take the paperwork out, you reduce the costs and errors. We’ve all done a good job on this for electronic billing, we now need to do this on the purchasing side, as well.”
In any case, MSOs can expect their evolution to continue. Just looking at the short term, much change is on the horizon. Between trying to sort out what is the best political action to take while competitive bidding is delayed, what the presidential election will bring, and the seismic shifts that have taken place in the financial and banking landscape, it is a safe bet HME providers will be leveraging their MSO memberships to navigate the next 18 months.
Points to Take Away
• Group purchasing organizations, a.k.a. buying groups, have played a long-stranding role in the healthcare industry.
• Buying groups in the HME industry are evolving in the same way providers are, and are offering a much wider array of services than simple group buying, thus putting them in the MSO category.
• MSO services include professional education, webinars, networking opportunities, marketing services, referral networks, conferences and even regulatory support.
• Providers considering joining an MSO — and current members, as well — should investigate these various services in order to maximize their memberships.
• The role of MSOs will continue to transform as the industry also evolves. The next 18 to 24 months promise to be a period of time in which MSOs play an crucial role in the development of the industry and their members’ businesses.
To get a better understanding of the broad range of services available from member service organizations, visit these sites.
This article originally appeared in the October 2008 issue of HME Business.