Building a Multi-Talented Team
Maximizing staff management to overcome difficult funding challenges.
- By Joseph Duffy
- Nov 01, 2011
A down economy, reimbursement cuts, reduced funding, or in the case of the HME industry, all of the above, create unavoidable consequences that ultimately impact the human-side of business. It starts with a memo about the need to pinch pennies. Then employee vacancies go unfilled. To-do lists double, maybe triple. And then an official first-round of downsizing, pay cutes, hiring freezes — all-too-common scenarios in today’s business environment. What’s left is a leaner group of employees who are unknowing, fearful and stressed from a lack of employment stability, and faced with the challenge of accomplishing more tasks.
But it’s not just falling revenues that are leading to staff reduction. As HME companies look to save revenue, they are finding success in improving their inventory efficiency and delivery operations, implementing new workflows and adapting cutting-edge software, which often lead to the harsh business realization that certain company positions are no longer needed. Each team member must become a multi-talented individual with knowledge in many areas of expertise — a Swiss army knife of HME capabilities, if you will.
Experts consistently applaud today’s successful HME companies that had the acumen to sense the coming storm, batten down the hatches and emerge ready to compete on a playing field influenced by cuts, caps and competitive bidding. Today, this is a model that HME industry business coach Ty Bello, president of HME consulting firm Team@Work feels is more about “rightsizing” than the traditional “downsizing” rampant in many other industries.
More on that later. The important lesson is, with no end in sight to cuts, caps and competitive bidding, it’s never too late to maximize your staff for the next wave of attacks.
Human capital remains the difference between business life and death. And how companies manage their staff in these times of change will influence success or failure. Therefore, it’s important to understand what is happening in the industry as Round Two of competitive bidding inches closer to rollout with more staff reductions expected, and what companies are doing to arm their staff to be successful in trying times.
First Cut Is the Deepest
Staff reduction has been a strategy employed by many HME companies over the last five years. One of those companies is Seeley Medical, a full-service home medical equipment company servicing communities in northeast Ohio and western Pennsylvania. Joe Petrolla, president, says that his company has made about a 25 percent reduction in staff, which he called “the correct business move but a sad state of affairs.”
“We have made several cutbacks and more importantly streamlined our operations,” says Petrolla. “Some of the reductions included the elimination of our switchboard operator and administrative assistant. We also looked for any possible duplication of responsibilities and when an early retirement was in order we accepted it.
“Competitive bidding has made it necessary to cut our clinical staff and some of the extra things we would like to do for our patients,” he explains. “Also, there were a couple of positions eliminated due to advancements in technology and workflow processes, mainly in our billing department.”
Miriam Lieber, president of Lieber Consulting, is an operations management consultant and trainer for the HME industry. She is currently co-presenting with the VGM Group on the Competitive Bidding Seminar Series (see News, Trends & Analysis, starting on page 8, to read more). She has seen most cuts directed at middle management with additional cutbacks occurring where automation can replace staff. Lieber says this happens predominantly in clerical positions. She points out that staff members with subpar performance are always in danger of losing a job when a company begins to reduce its workforce.
“[Staff cuts] have started to happen more recently as cutbacks continue or as companies plan for competitive bidding,” Lieber says. “In preparation for Round Two of competitive bidding and as audits are squeezing profitability out of HME companies, they are left with no alternative but to drastically cut expenses and reduce overhead. Further, when an employee leaves, I am noticing that the position does not always get replaced.”
While Seeley Medical’s cutbacks have saved the company money, they also created challenges to their business model. For example, Petrolla says while automation helped save dollars, some patients still prefer talking to a person versus an automated system. And competitive bidding could mean another round of cuts for many companies.
“As competitive bidding ramps up and reimbursement rates continue to get slashed, the service model will decline,” says Ron Adamov, CPA, vice president of finance for Seeley Medical. “Many private insurance carriers also base their allowable on Medicare, which will result in further declines. The bottom line is providers have to increase volume to make up the revenue cuts in reimbursement rates. Providers will be forced to make more cuts in staffing and operations in order to survive additional reimbursement cuts. These cuts will ultimately affect patient care in an adverse manner.”
Team@Work’s Bello says this is an evolution he has been witnessing steadily ramp up during his 21 years in the HME industry.
“The industry is becoming more aware of costs more so today than ever before,” he says. “We’ve been on that track for the past five-plus years, looking at things like activity-based costing, looking at a financial analysis of what we are doing, looking at our cost per FTE [full-time employee] and the revenue generated by those FTEs. So I think we are getting better as an industry and we are getting closer to where we need to be but we are not there as of yet.”
Bello echoes the position that the industry, in some instances, is cutting back because of reimbursement cuts, Round Two of competitive bidding, and whatever companies feel may snatch company profits in the future. He also points out that there are businesses that are growing. And in growing they are obviously adding staff.
But for those companies that are getting rid of staff, commonly called downsizing, Bello prefers to call it rightsizing — where organizations rightly adjust to the size of its organization based on the revenues that they are producing, or anticipate they will soon produce (in the case of impending funding cuts). He believes the process of making tough, savvy financial business decisions will continue regardless of the cuts, caps, audits and competitive bidding plaguing the industry.
“There are certain staff members companies can’t get rid of but companies are looking at productivity,” Bello says. “First, they are looking at those employees who are not producing and they are getting them, if you will, off the bus. They are getting those employees who are not producing, who they have given all the educational tools to, who they have worked with, who they have given every opportunity to, and they are getting them off the bus.
“Also, they are reeducating others who are on their team who may have a propensity to do something better in other parts of their business. And so they are growing them into those roles,” he continues. “The third thing is they are attracting other people who have a greater business acumen or business sense than the people they currently have on their team. So those three things combined is what I’m seeing throughout the marketplace today.”
What Is the Optimal-Sized Staff?
Finding the optimal-sized staff to help cut losses or even be successful in today’s market is like trying to hit a moving target, especially when you have Round Two of competitive bidding looking to shake things up very soon. “We have not been able to determine an optimal staff size,” Adamov says.
“We have many locations serving many markets in and outside of the bid area. It really has been a challenge to determine staffing due to additional requirements that have been put in place from the federal and state governments.
“In addition to the reimbursement rates being reduced, the requirements for documentation and regulatory compliance have increased,” Adamov adds. “As a result, we spend a fair amount of time operating in a ‘reactionary mode’ and less in strategically planning for some of these changes.”
To help providers get to that number, Greg Schmitz, Ph.D., president of VGM Education, studies are available that provide data which enables organizations to benchmark against others in the industry.
“The 2011 Salary Survey compiled by US Rehab indicates a median revenue per employee of $227,273 and a median personnel cost as a percent of revenue of 36.7 percent,” Schmitz explains. “Personnel costs as a percentage of sales should be in the range of 31 percent-36 percent of top-line revenue.”
Bello agrees that kind of benchmarking against others in the industry is the smart way to find calculate optimal staff size. Along that line, he says to assess the number of FTEs an HME company should have working for it, HMEs should calculate the annual revenue per patient. (What is the revenue generated by the patients the company is currently taking care of?) That is an activity-based costing principle, he says. Second, he agrees with Schmitz that providers should determine revenue per employee, and compare the figure to other companies in and outside the industry so they can see where they are benchmarked at a comparable level.
“People are doing more work today than they did in the past, and rightfully so,” Bello notes. “In many cases we were overstaffed. What we are also seeing is great relief from automated systems. Now we are able to verify insurance coverage online as opposed to by phone.
“We are also seeing software available in our industry that is much, much better,” he adds. “Our workflow software makes us more efficient. Mapping the delivery routes of our products and services for our technicians — this is making all of us much more efficient than we have ever been before. Yes, employees are doing more but we are giving them the tools to do more and do it more efficiently.”
Getting the most out of your staff
If a company has to go through staff reductions, it is imperative that management understands what a workforce reduction does to the remaining employees, who usually feel guilty, confused and vulnerable.
“Staff reductions affect all employees, not just those leaving the organization,” says Schmitz. “If a decision is made that requires cutbacks, how that process is handled is critical to the future success of the organization. Proper communication throughout the process is critical. If employees are aware of what is happening in the industry and what their organization has done to address the situation, ideally with the employees’ input and participation, the decision to reduce staff will not come as a surprise. How the organization treats the departing staff will have a tremendous impact on the remaining employees morale and productivity.”
Regardless of more cuts, more caps or more rounds of competitive bidding, there are businesses to run, patients to take care of and anxious employees expected to perform. Part of business success will be convincing your employees that despite any cutbacks to the company, they are valued and necessary. In this vein, Seeley Medical’s Ask for Action program takes new employees and helps motivate, develop and retain the right people for the job, Petrolla says.
“This program is built upon the principle of recruiting, hiring, orienting, developing, and retaining the ‘right’ people,” Petrolla says. “This process of developing the right people starts on the first day of employment and continues throughout their career.
“Since we believe in developing people and not just job tasks, we teach that when attitude, skills, and knowledge are at the highest level, you achieve success in your professional and personal life,” he explains. “By each employee striving to continually maintain a 100 percent positive attitude, improve their skills and increase their knowledge, Seeley Medical has a higher probability and predictability of meeting and exceeding our goals.”
Each employee tasks must come under the microscope. Providers need to take a keen look at their staff to determine which of their tasks are critical and which are superfl uous, Lieber says. Further, they need to know how long, on average, it should take to perform each task. Finally, they will need to set goals based on the input of their staff and measure against them.
Lieber suggests setting ranges for acceptable achievement and subpar performance. Look for ways to automate each function and once this is done and the staff buys into the target goals, increased productivity should result. Low performers will be able to self-evaluate and get remedial training or find a more suitable position. The key is to set the accountability measures so that everyone understands what is expected of them and act on the results.
Bello says in order to pull more from employees, make them feel that they are owners in the company. And this happens when actual owners give more of themselves to their employees.
“Owners are motivating employees, coaching them, giving them the tools to do their jobs and rewarding them when they do the right job,” he says. “They are not settling for mediocrity. They are holding employees more accountable today than ever before in the history of our industry and that is long overdue.
“Owners are getting more involved,” Bello adds. “The absent owner is not the surviving owner of the future. They are getting the tools to their supervisors and managers to be more involved in the daily activity of their team members than ever before. So I think owners are motivating by giving a part of themselves — their presence — and I think that is helping them in a great way.”
Petrolla says he empowers his employees through staff communication.
“Our communications action plans clearly spell out our how we communicate as a company,” he explains. “This communication is bi-directional from the front line workers to the executive management team and everything in between. We ask for their input and as a result the employees feel like they are part of the future. If the employees have an understanding of why and how they are contributing to the ongoing success, they will likely be more receptive to take ownership in those decisions and be part of the solution.”
Another struggle for providers is keeping morale high in times of high stress. For Seeley Medical, raising morale is part of their company culture.
“Morale is improved and maintained when you accept nothing less than 100 percent positive attitudes,” Petrolla says. “We teach the difference between unrealistic optimism and unwavering resolve. We spend time teaching our people how to find opportunities when others see obstacles. We talk about striving for excellence and not perfection.”
Petrolla has also found that when explanations are provided to employees on the status of the organization and the overall direction of the company, they respond. “As I stated earlier, communication is one of the keys to better morale,” he says. “Although, there have been many challenges, there are also many opportunities. As long as we remain positive and continually increase our skills and knowledge, we will be in a better position to uncover some of those opportunities.”
For Schmitz, getting the most of your employees starts with making good hires. From there, provide direction and support for employees and set measurable goals for the organization and the individual. There should be baseline goals as well as stretch goals that should be incentivized. Measure the outcomes and analyze performance compared to the goals and then benchmark against other providers. Finally, Schmitz reminds companies to celebrate victories, even the small ones.
Small incentives go a long way. Lieber suggests using management accolades, positive reinforcement, luncheons when goals are met or exceeded, bonus bucks, and gift cards to raise morale and thank your employees.
Preparing for the Future
Whether you see the current state of HME staff management as downsizing, rightsizing or a runaway train on a collision course, the cuts, caps and competitive bidding will continue to help shape the direction of staff management.
Schmitz says to become involved and communicate with local elected officials on a one-to-one basis. Educate patients on how they will be affected by competitive bidding and encourage and support them, as voters, to contact their representatives. Remain or become active in your state associations. There have been estimates that up to 100,000 jobs will be lost throughout the HME industry if competitive bidding is fully implemented.
“For the home medical equipment sector, there are both risks and opportunities in the current environment,” says Schmitz. “In the forefront are the budget issues of the federal government and the task of the joint committee of Congress to recommend $1.5 trillion in deficit reductions by the end of November. Significant cuts could come from Medicare and Medicaid. The process could provide a framework for reforms that would provide a legislative vehicle to halt the harmful competitive bidding program.
“On the other hand,” Schmitz continues, “if recommendations are made and passed involving deep reductions to government health care programs, it could make repeal more difficult and possibly open the door for future HME reimbursement cuts.”
This article originally appeared in the November 2011 issue of HME Business.