Products & Technology

Measuring for Success

Providers are increasingly measuring and monitoring their businesses to thrive.

Measuring HME Business SuccessIf there’s one good thing that has come out of CMS’s unrelenting barrage of funding cuts to DME, it has been that home medical equipment businesses have harnessed the power of information technology in ways that have helped them further their survival — and success.

Not to long ago, the uptake of software solutions that helped providers not only process claims but also manage their businesses from stem to stern was the exception, rather than the rule. But as competitive bidding started rearing its head, along with other programs such as the 36-month rental cap for oxygen, the removal of standard power mobility’s first-month purchase option and a string of other Medicare difficulties, HME business owners and operators realized that they needed to become savvier, more flexible business managers.

A look back, and a look ahead for HME.

Providers have quickly evolved from using cobbled together arrangements of small business software to bona fide billing and business management systems tailored for the HME industry. Why? Because, simply put, they needed to. In today’s funding environment that software often represent indispensable tools for business survival.

And HME software has helped them do that. Particularly when it comes to reporting and data tools, such as “dashboard” views that let providers manage their business activity at a glance using a set of key business metrics that help them easily monitor their performance. Where providers once used software for simply accomplishing the day-to-day operations of their businesses, now they fine-tune those operations to maximize their efficiency and profitability.

Containing Costs

And efficiency and profitability come down to costs. For Dave Pavlin, CEO of Therapy Support, a Missouri provider that focuses on beds, support surfaces and seating, his business needs data that can help it manage costs to ensure it remains flexible while working with a variety of customers and payor sources.

As competitive bidding increasingly came into focus, Pavlin said Therapy Support pivoted and began diversifying its payor sources and customers beyond Medicare into other care settings that need beds and respiratory equipment. As a result he needs data that helps him manage the cost structure. Reliable numbers on factors such as delivery, inventory and labor so that he can see how they factor into his business as a percentage of revenue.

“The payor source moves a lot,” he says. “Because I didn’t win a lot of competitive bidding contracts I’ve been forced into other areas.

“I like running a business I understand, and I like things simple that I can predict,” he adds. “I’m looking for things that are driving cost up and that are driving cost down.”

Pavlin says his top two costs are equipment purchases and labor. When it comes to labor, a key metric is what he calls “fully loaded labor” as a percentage of sales. This means he looks at his labor well beyond their pay, but all the factors involved that keep employers at their job and their support alive and well within the organization.

Inventory measurement and monitoring is an evolution he says, because of not just his costs, but his variety of customers. What products yield the best profitability can vary depending on the customers in the same way outcomes can vary depending on patient.

“We all still struggle with inventories,” he says. “I’ve done the bar coding. I’ve spent the money to manage that. But in a world where each day you’re not exactly sure where the demand will be that gets tricky.

“I want to know where the weighted products are, in terms of my purchases,” he adds. “I might have to buy a large quantity of concentrators or bed frames, and I need to see where the trending is.”

And data can go a long way when it comes to not just measuring labor costs but improving labor performance. For instance, software has helped Therapy Support motivate its team to improve their performance and thus drive down his labor costs.

“We’ve create an incentive program for labor,” he says. “My guys are able to get a quarterly bonus if they do certain things: everything from changing their oil to checking their tires.”

Keeping Things Simple

For Joel Geller, CEO, Medical Service Company, a multicategory HME provider with 15 locations in Ohio, West Virginia, Pennsylvania and New York, the important of business performance monitoring and measuring came when he toured an Invacare Corp. bed manufacturing plant six years ago. One wall of the plant was covered almost entirely with updated listings of plant performance metrics. Nearly 150 feet of data on how that plant was operating stretched across that wall, he said.

“That was the lesson for me,” Geller says. “We have to measure what we do in every aspect of our business — if we don’t stick to our knitting, then how do we know what it is we are knitting?” This was a key lesson, he says, and it came at a good time, given that the 30-year-old, family-owned business was dealing with an industry wide thread: competitive bidding.

“We did an amazing amount of work from 2005, when we knew competitive bidding was coming, to 2011 when the Round One re-bid began,” he recalls. “That gave us some opportunity to make some changes in our organization and make ourselves stronger.”

And the way to do that was to create a set of standard operating procedures across the business and then measure the company’s adherence to and execution on those operating procedures. To do that Geller says his business set up a set of three “functional team objectives” for each department. Two are operationally oriented and the third is revenue-related.

The goal is to have a simple way to quickly monitor how each segment of the business is performing. Managers meet with staff to assess how they are performing on a monthly basis, and then those managers meet with their vice presidents about that data, Geller explains.

“So we have a fairly sophisticated — almost cumbersome, set of team objectives, if you look at them as a whole,” he says. “But if you look at them departmentally, they make a lot of sense.”

The Next Step

Data can be used to differentiate, as well. For instance, Geller says that the next step in business metrics for Medical Service Company is to measure outcomes so that it can communicate its success and proven track record with referral sources. He notes that as entities such as Accountable Care Organizations continue to grow, this will become increasingly important.

Right now, the best way to do this is with oxygen patients, since if treatment does not go well, they can wind up back in the hospital.

“We’re starting to collect data on hospital readmissions and emergency room visits,” he says. “That is critical to the ACO model.

The goal is to ensure patients have good outcomes and those use metrics to prove they are staying out the hospital. So the company is working on internal studies to demonstrate that, and then share those studies with their referral sources to prove their success and value as an oxygen provider.

Pavlin notes a similar development at Therapy Support. His meetings with referral partners are becoming increasingly outcomes-oriented. “The day of going into an in-service environment and saying, ‘Here’s my concentrator, and here’s how to turn it on, and here’s how it works,’ those days are gone,” he says.

So, increasingly Therapy Support’s staff experts are meeting with its customers’ staff experts to share “carry-over knowledge.” In other words they are trying to drill down into discussing the details of patient care and results.

This is why Medical Service Company is focusing on a numbers-oriented approach to referral relations. Solid oxygen therapy data is the proof in the pudding.

“The proof is what are the measurable outcomes,” he says. “… We know clinically that there are benefits to long-term oxygen therapy. The longer the patient is on oxygen, the longer they are going to live and the better they’re going to feel. That’s measurable.”

This article originally appeared in the September 2013 issue of HME Business.

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