The 2013 HME Handbook: Software
Bringing Order from Chaos
How to employ HME software to improve inventory efficiency and cut costly overhead.
Providers need to cut costs. Round Two of competitive bidding is poised to go nearly national with an average reimbursement cut of 45 percent to its product categories. Round One has already been implemented in the initial nine competitive bidding areas with an average 32 percent cut, and is approaching re-bid. And, a number of other reimbursement cuts and complications are already affecting a number of broad DME categories, such as oxygen’s 36-month reimbursement cap, or the removal of standard mobility’s first-month purchase option.
The net-net is that providers need to remove any and all unnecessary costs and overhead from their businesses as possible. Any single extraneous dollar that remains on the books hits the bottom line again and again. That cannot be tolerated in HME’s new financial reality. Providers must keep a tight lid on costs.
And what’s one of the biggest pieces of overhead impacting providers’ bottom lines? Inventory. The expensive DME in providers warehouses can often rival or exceed their investment in human resources for the top recurring business expense. And while human resources cuts are difficult and can negatively impact the provider’s efficiency and productivity, inventory cuts — if approached with a smart strategy — can often be undertaken with minimal impact to provider operations.
The cornerstone of driving smart, efficient inventory management strategies for minimizing overhead is information technology. Most HME software systems incorporate a wide range of inventory management features and tools that can help providers bring order from the chaos that could be possibly millions of dollars in capital sitting, doing nothing.
So how can providers leverage their HME software systems to benefit their inventory management? Let’s look at some important factors:
Inventory management and reduction is a holistic practice. A good software system will approach inventory management from a business-wide perspective. Its inventory control features should be integrated with the other aspects of the HME management system, such as billing and point of sales system. This way, all systems are updating the inventory as it is used and moved through the system. That way, if a product leaves the warehouse or the showroom, overall inventory will be updated.
Products must be coded. An important first undertaking is to determine how products will be coded. A good first step is to code DME based on broad categories and narrowing down to more specific products. Providers might also want to associate codes with Medicare reimbursement codes, vendor product codes, or both. This will help makes the inventory management system easier to navigate, maintain and expand as needed.
Barcoding is essential. Once a coding convention has been determined and can be applied to all inventory, providers must start barcoding. Barcoding helps ensure inventory is correctly recorded and also lets management monitor inventory in real-time, or nearly real time, depending on the system. Using handheld scanners, which are supported by most of the HME software systems, staff can log equipment as it is received and moves through the provider’s operation. This benefits not only day-to-day management, but can drastically reduce static and seasonal inventory counts, such as at tax time.
Consider your entire inventory. Many providers stop at the warehouse and perhaps the showroom when tracking inventory, but there could be more inventory “locations” — and that means overhead — throughout your operation. For instance, what about delivery trucks? If technicians in the field are capable of providing additional DME to patients and conducting transactions, then the inventory in their trucks needs to be counted and updated as well. Seek software solutions that can support this scenario.
Leverage automatic purchasing. Ultimately, the goal is to keep inventory overhead as low as possible. This means ordering inventory on an as-needed basis. That said, there are some items that need to have certain levels of on-hand stock, as well. Providers need to leverage inventory control systems that can monitor user-defined thresholds for various supplies and automatically reorder them when they get low. For example, if diabetic test strips fall below a certain level, the system will automatically place an order with the vendor.
Better yet, to help providers further manage costs, some automatic purchasing tools can log purchases so that provider management can review past orders to find the best unit prices or shipping costs, or perhaps the shortest shipping times. This can prove extremely beneficial, give that the shipping costs or delays associated with placing orders, can wind up costing almost as much as the product itself.
Points to take away:
- With providers fixated on cutting costs and slashing overhead, they must bring their inventory under control.
- A key way to accomplish this is to leverage HME software systems, which offer various inventory management features.
- Providers should start by developing a coding system and then applying that to their inventory via barcoding.
- Providers must apply that barcoding system through the business. This way when an item is bought for cash, the inventory system is updated, or if a product is provided out of a delivery truck, the system is updated.
- Providers should also leverage automated purchasing tools to ensure that specific supplies don’t fall below certain thresholds.
- Providers can read various features, articles and columns to learn more about the various HME software systems and strategies for using them at our software solutions center at hme-business.com.
This article originally appeared in the June 2013 issue of HME Business.