Provider Strategy

Knowledge is Power

Re-supply offers providers a major opportunity, and technology is the key to tapping into it.

In today’s healthcare marketplace, regardless of what sector or size your business is, you must have information technology systems and partners in place in order to compete and survive.

Let me give you an example of the value of IT: In 2009 an HME owner came to me to consult on a business problem — specifically, his CPAP patient re-supply. Like many sleep providers, his business was starving for profitable, new and recurring revenue. And, like most, he knew there was available re-supply revenue that was virtually untapped. Also, and perhaps most important, he knew he was not upholding his fiduciary responsibility to his CPAP patient’s respiratory health given his “reactive” approach to re-supply. I spent a couple of days in the HME owner’s office analyzing payor HCPC reimbursements; the cost of goods; and expenses that would be associated with solving this business/patient issue. Was it possible? With technology, yes.

The Right Thing for Beneficiaries and the Bottom Line

Investing in IT was clearly the right thing to do for the patients. If you have to track fewer than 100 CPAP patients, you can accomplish the task with something as simple as Microsoft Excel. But for any larger a group of patients, or to track multiple categories across your business, a provider must turn to IT. In the case of the provider I was working with, he had more than 500 patients.

So, in partnership with Red Earth Systems, Revsuppliance was born. We designed replenishment software from the ground up, so that we knew which patients needed what items on a monthly basis. That’s important, because the bottom line is that every CPAP patient a sleep provider is re-supplying monthly to Medicare’s full allowable for replacement is worth more than $1,100 annually in accounts receivable — and that’s after cost of goods.

Of course, there is also a cost in people, hardware, software and related resource to obtain any revenue. My analysis found it would cost 20 percent of the anticipated funding. Add that resources cost and the cost of goods and you end up in the neighborhood of a 40 to 50 percent net on re-supplying a provider’s active CPAP patient base. In the business world I came from that represents an amazing profit picture. For example, in 2013 Wal-Mart reported a consolidated net income of 3.65 percent. Why would any business professional not seek sleep re-supply’s 40 to 50 percent margin?

Well, the answer I hear most often is providers don’t have the people, time or technology, and they think they can’t afford it. My answer to that is, yes you can and, more to the point, you can’t afford not to.

Furthermore, if a provider has to jump through all the paperwork, LCDs, regulations, time and effort to get a patient a PAP and mask and to submit the initial billing (which is good revenue), why not take it that one step further? With little to no more effort, along with the right IT infrastructure, and a good partner, why wouldn’t the provider pursue the additional $1,100 per year for the life of that PAP patient? That’s where the true revenue is and it surprises me how little both HME companies and vendors focus on it. And, let’s not forget that ensuring timely re-supply is the right thing to do for your patient and the responsibility you have to at least proactively have that capability.

With the government takeover of our healthcare marketplace via Obamacare and competitive bidding, the sleep market is sometimes seen by some as a sinking ship. But don’t give into that negative perspective, because vendors and HME operators are in the same boat, and vendors are working to supply HME businesses with tools that let them access the vastly untapped sleep re-supply business in ways that will engage patients and resonate with them.

Without a re-supply program, you are not communicating with your sleep patient, and if you are not communicating with your sleep patients you will lose them one way or another. You won’t know if a patient is struggling with the mask; that a patient is moving or has a new phone number; if that patient is considering changing providers, or is unhappy with your staff; you won’t know if the patient has been hospitalized or is moving to a nursing home. These examples are what we at Revsuppliance categorize as “failures.”

Let me share some of our own facts and findings of the five years in the re-supply business. HME owners have only general estimates of their active sleep patient base. The average “failure” rate of providers’ last two years of sleep patients serviced or set up is more than 50 percent. That’s astounding and tragic from both a patient care and financial standpoint, and is almost entirely due to a little or non-existent re-supply program. We also have found that more than 60 percent of failures are due to out-of-date patient contact addresses and phone numbers in the HME’s records.

Because we re-supply the patient as they desire, and stay in live contact monthly and or regularly, our HME partners’ patient “failures” are reduced to patients that simply cannot adjust and get used to sleeping with a CPAP.

Obamacare and competitive bidding are here to stay. Many in the industry feel these disasters will get “fixed.” They will not. If you are betting your future that reimbursements will go back up and that CMS and the government will come to their collective senses, I beg to differ. CMS touts the savings that competitive bidding has brought to the tax payer. CMS claims the drop in usage in those markets are due to there being overutilization, but the reality is that if CMS changes the number of available HME providers in a market from 30 to three, usage drops dramatically because patients simply can’t get serviced. Sadly CMS and the GAO cannot grasp that reality.

So what is the answer? You must use and invest in technology, increase your volume, and lower all expenses. You must become efficient in every aspect of your business. Find partners that can help you do that and admit that you need that help and expertise. Competitive bidding ransacked reimbursement roughly 40 percent across the board on sleep HCPC codes. This means efficient volume is the solution. Survival and success in this new healthcare system, regardless of what sector you are in, can and will be accomplished by those who adapt and change by the use of information technology.

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

About the Author

Russell Parker is the COO of re-supply firm Revsuppliance (Oklahoma City). He has 25 years’ retail business management experience and is a graduate of the Sam Walton institute of retailing from the University of Arkansas.

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