Editor's Note

The ROI of DIY

'Opportunity cost' is quickly outweighing hands-on control in HME management.

Confession time: I’m a do-it-yourselfer to a pitiable degree. I’d say braving the wilds of home repair generally proves beneficial, but I often ignore when I’ve waded out into waters beyond my depth. Sometimes, from my much saner wife’s point of view, it can take an act of congress to get me to call in the professionals. Eventually I relinquish control, but by that time my to-do list resembles Santa’s shipping register.

Call my diehard DIYism “entrepreneurial homeownership.” I like repairing and sprucing up my home, and I’m always game to tackle a new learning curve — as well as saving some hard-earned green. The problem is that I’m ignoring what economists call the “opportunity cost” of not bringing in a pro. By tying up my time to save the cost of paying a professional, I could be missing out on doing other things that could bring me more value than the money I saved.

Opportunity cost is a microeconomics reality that has increasingly factored into how providers manage their businesses. The first clear example of this was with HME software. Go back seven or eight years, and many providers had billing systems that were either home grown or cobbled together off-the-shelf business software. While providers might have had an medical billing application in place, that was about the extent of their HME-specific IT investment. Essentially, providers viewed IT as a cost center.

However, as software offerings and online services designed specifically to help HME owners and operators manage the entirety of their businesses — not just Medicare billing — providers quickly learned that these software applications could save them money in newfound efficiencies and the ability to drive increased revenue. Investing in their IT infrastructure wound up benefiting the bottom line. Now, providers see their software as an indispensable, strategic asset.

Now we’re seeing the element of opportunity cost influence other aspects of HME business strategy. A good example is discussed in this month’s top feature, “Links to Success.” For most providers, their inventory is hands down their biggest overhead item. As a result, they have become masters at managing massive inventories of medical equipment and supplies.

Providers have leveraged technology and crafted business processes and workflows to ensure that they have driven down the costs of that overhead as much as possible, while implementing purchasing strategies that ensure they have just the right amount of key offerings on-hand at any time. Now providers maintain inventory operations that would be the envy of any supply-centric business.

However, despite all that, it might be time for HME providers to off-load some of their inventory — and their delivery — in order to drive even more cost out of the business. Now providers are considering completely re-engineering their supply chains so that their suppliers can distribute certain DME items to patients in a completely turnkey fashion. The provider never has to receive the supplies into inventory or send them out on a truck. Instead, the items go direct to the patient, and customizable branding on the packages maintains the customer-provider relationship.

For a lot of providers, that scenario can seem a little frightening; it feels like they’re losing a considerable amount of control over their business. But that trepidation should be tempered by considering the opportunity cost. A revised supply chain off-loads a big chunk of inventory and delivery overhead, while freeing up the provider to do more. That could be adding care visits, pursuing new revenue opportunities, increasing retail marketing — anything to bring in more business.

Simply put, letting go of a little control over one thing can wind up giving HME owners and managers far more control over the direction of their businesses. It just takes a little faith. Now, if somebody could just remind me of that fact the next time my plumbing springs a leak.

This article originally appeared in the September 2014 issue of HME Business.

About the Author

David Kopf is the Publisher and Executive Editor of HME Business and DME Pharmacy magazines. Follow him on LinkedIn at linkedin.com/in/dkopf/ and on Twitter at @postacutenews.

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