Business Solutions

Paving HME's Path

The future of the home medical equipment industry will be what providers make of it.

HME Future PathSometimes, the future depends on your perspective. Every year HME Business takes time to sit down with its Editorial Advisory Board and asks the experts sitting on it (a list of the full board is available on page 6) what key trends, obstacles, challenges and opportunities they think providers will face in the coming year. And every year those experts have shared expert advice on some very important industry developments that truly impacted providers’ business strategies.

But this year is different. Certainly, many of our EAB members address pertinent and high-priority business issues providers must address right now. But in this edition of our EAB roundtable, many of our experts are also looking at the coming year and seeing an opportunity for providers to shape their industry’s future, to lay entirely new roads that their businesses can follow. And what they are saying makes a lot of sense.

While the industry faces many obstacles — bidding, audits, tough rental markets — many EAB members are also starting to identify stepping stones that can help HME providers pave a path to a new kind of business model.

Creating Value-Based Purchasing Arrangements With Payers

Tom RyanTom Ryan, President and CEO of the American Association for Homecare

While fighting the industry’s legislative battles remains a top priority for AAHomecare’s Ryan, he has also been working to develop new business models for HME providers. For instance, at press time, Ryan was preparing to travel to Chicago for a meeting with the American Association for Respiratory Care to help identify viable new respiratory care business models. The aim would be to develop a model that is an alternative to Medicare that would appeal to private payers as a business opportunity. The industry and providers need to be able to demonstrate the need for their services, the value of the market, and outline profitable business models for both providers and payers in terms of sustainable cost structures, while also delivering solid patient outcomes. Moreover, Ryan says the model could be demonstrated to the Medicare and Medicaid Innovation Center. This is an initiative any provider can undertake.

“Some providers are doing this already” he notes. “There has to be a drive to change reimbursement. We all know that homecare is patient preferred; we know it’s more economical. Yet, our niche industry, which is an important component for these patients with chronic diseases, continues to get commoditized.

“We have to somehow come up with an alternative. Maybe there are people out there with ideas that they can share with the [DME] community, and we’ll certainly be coming out of this Chicago meeting with a potential model for working with insurers.

“If you can go to the payer, and you can show patient satisfaction, good clinical outcomes, and you can save dollars over the continuum of care, there could be interest. You have to convince that payer that it can’t pay $42 for an oxygen concentrator in the state of Washington. You need to have some kind of value for the service, and that if you can get paid for preventing a 30-day readmission where the hospital would be getting dinged, but you as a provider get an incentive for preventing that 30-day readmission there is a reward system there.

“As we’re racing to the bottom and we’re seeing the reimbursement from other payers beginning to fall, I believe the wise provider is going to be three steps ahead. So, continue to have dialog with other payers about where you think you can win on the service end. If you can win on the service end and provide good clinical outcomes that payer has to realize there has to be reward for that, because you just can’t continue to pay for the HCPCS code as a commodity.”

Incremental Sales

Rob BaumhoverRob Baumhover, Director of Retail Services for VGM Retail Services

Retail sales is clearly a key opportunity for HME providers for providers looking to expand their businesses, but it’s also a way for HME providers that are still largely funded to make up for the losses they incur due to bidding and other reimbursement cuts. In other words, retail is going industry-wide, and it’s all do to a technique called incremental sales, according to Baumhover.

“What we’re finding is that our members and providers in general are looking for ways to make up for funding losses,” he says. “Let’s take a CPAP device; the E0601. Given the reimbursement reduction for that, if you provide CPAPs, what’s a way for making up that reduction?

“What we call it is incremental sales — making sure you [the patient] have a CPAP pillow; that you have CPAP wipes; those add-on products. For folks that don’t want to get ‘all in’ on retail, this is a way of getting ‘all in.’ They’re building a retail play around what their strengths are.

“So we’re currently building some incremental sales pieces that outline what the category or procedure code is, and then around that we’ve identified eight add-on or incremental sales items that someone can take a look at and say, ‘These are some good items that I can carry in my store, so if I sell one or two of these every time someone comes in it will help make up for the loss that I’m taking across the board.’”

“A pretty large percentage of providers are still not in retail and still very dependent on reimbursement. So we look at this as a way for those folks to dip their toe in. But it [incremental sales] is not taking a guess at retail. It’s some planning and some results on the back end that we’ve seen over the past couple of years, in terms of the products that are having some success.”

An Oxygen Stalemate

John C EberhartJohn C Eberhart RRT-SDS, RPSGT, President of Eberhart Home Health Inc. and Western Regional Clinical Sales Representative for International Biophysics Corp.

A longtime provider, as well as a representative of a manufacturer, Eberhart says he’s witnessing a disturbing trend among small and medium respiratory providers: they’re not taking on new patients. The reimbursement environment for those products and services is simply becoming too hostile to justify the investment, he says. They’ve simply been priced out of the ability to provide care, and for such a “meat and potatoes” kind of HME product and service, that’s not only a concern, but a strong indication of how and why the industry is changing.

“I’m seeing people not taking on new oxygen patients, because reimbursement is so low,” he says. “Healthcare providers are taking some previously unheard of steps that I’ve never seen before in order to cut their costs.

“So if a physician isn’t going to follow his own CPAP patient, why would a DME company give an oxygen patient 10 tanks a week, or 40 tanks a month, at $3 a pop for a reimbursement of $70 a month or less? That’s the one thing I’ve been seeing with the small- to mid-sized providers that are left.

“And they’re picking up items, such as the Afflovest, that are not covered by competitive bid and for which reimbursement is still good. Maybe doing more Trilogy because even though the reimbursement got cut it’s still pretty good. They’re looking for different options out of necessity.

“In a way it’s kind of sad, because the reason everybody got in this business is to take care of patients and their community, and people aren’t doing that as much now. There are a couple nationals that seem to do a pretty good job providing portable oxygen concentrators to limit their deliveries, and that’s the model I see more now than any tanks.

“Nobody really focuses on the 26.2 percent readmission rate that has been that way forever. So whether it’s high-frequency chest wall oscillation, or something else, what is going to save the healthcare system money is keeping patients at home.”

Protecting the CRT Benefit and CRT Patients

Georgie BlackburnGeorgie Blackburn, Vice President of Government Relations and Legislative Affairs for BLACKBURN’S

Of course the industry’s legislative fights remain pertinent here-andnow issues that advocates and providers must address. For mobility providers, the central issue is protecting complex rehab, both in terms of the chairs and the accessories. For such an incredibly vulnerable segment of patients, the slight cut to reimbursement can be calamitous for them if it means they can’t get access to the supplies they need. So, as the year winds down, providers must work double-time to see that Congress passes H.R.3229 in the House and its Senate companion S.2196 this year, Blackburn explains.

“It’s paramount that, for providers that work with the rehab community, to make certain that we get complex rehab accessories paid at the CRT level and not at the level of competitive bidding. I think it’s paramount that before the end of the year if at all possible we have to get that done,” Blackburn says. “Beyond that, I believe the separate benefit has to be secured for the population that needs those products.

“In the back of everything we do our rehab population clients are very important to us because we realize that we really have to have Congress educated on their needs before we can provide the items they need.

“My hope is that we wouldn’t have to push through legislation; that logic would prevail. And this is one thing where we do have MIPPA 2008 [which was intended to carve out CRT from bidding] on our side, and we do have a lot of logical facts on our side, and if we are eloquent enough to convey them adequately enough then we can get the job done.

“My gut feeling is that we’re going to get it done. I know that my representatives understand it, and since our original champions signed onto this endeavor that a lot of my colleagues have educated their representatives, so we have a considerable push going, and I have faith this will get done.”

Prioritizing Professionalism and Service in the Face of Adversity

Steve AckermanSteve Ackerman, President of Spectrum Medical

Whether they have competitive bidding contracts, or are trying to reshape their revenues because they didn’t get contracts, there are many providers that are upset about the state of the DMEPOS benefit. The problem that Ackerman sees is that too often that anger and frustration — while understandable — is being shared with customers and referral partners. While it’s important that partners and patients are aware of the issue, providers could poison their own future wellbeing if they don’t start handling those interactions with more nuance. This is especially true as the industry shifts to other funding sources.

“What I saw happening in my office that I wanted to quickly put an end to was that there’s a general feeling of being discontent all the way up to feeling really mad about what’s going on in the industry. It starts at the top and trickles down through the organization.

“I found that dealing with my frustration about competitive bidding, and our case there were not enough bids awarded in the area so our phone volume quadrupled, and we’ve become a resource center for all sorts of questions, which just cuts into our business.

“Behind the doors of every shop are legitimately angry people because their lives have been upended one way or another, whether you’re a bid winner or not. All of that is extremely difficult on employees.

“So the thing that people tend to forget is that people calling into your office and referral sources don’t know about all this. They don’t know why you’re cranky on the phone; and they don’t know why you’re not returning phone calls promptly; and they don’t know why when you used to be able to get out in 24 hours you now can’t get out in 36-plus hours.

“The tendency to share your problems with people who really don’t understand the backstory of what’s going on in the industry can really cloud the perception of your company on the part of new and very valuable customers.

“So we’ve been doing a lot of coaching with our folks, including a lot of our senior staff, about the importance of keeping this frustration within the confines of the executive offices; to be clear about what the vision is going forward; and definitely not be in a situation where you’re sharing your frustrations with the average person calling in just wanting to do business with you.

“You want to be succinct, and you want to be clear about what the problems are, and if you’re not going to be able to do something the way you used to, you need to be able to explain it clearly to the referral sources. At the same time you have to provide shockingly good customer service on top of it.

“The reality that we all have to understand is that the whole industry is going to be moving to more of a cash base for our services, because the Medicare program simply can’t sustain the number of people in the Baby Boom generation moving into it. So for 20 years we are going to see a slow erosion of Medicare activity and benefits that is going to be replaced by cash. Whatever model you’re going to end up with, customers are going to want to deal with friendly, knowledgeable staff, and they appreciate good service.”

Employee Training

Sandra CanallySandra Canally, President of The Compliance Team Inc.

Whether times are bad, or good, one of the most strategic assets a provider has is a highly training employee. And, now that everyone’s kids have returned to school, it’s an excellent time for providers to think about training their employees, as well, Canally argues. The more knowledge team members have, the more they can help the organization flexibly respond to a changing industry.

“This is the perfect time to look at how you are training your employees,” she says. “There are many things that need annual training and the documentation of that, such as OSHA. For example, if what you do exposes your employees to blood-borne pathogens, then this is agood time to get your employees OSHA training on blood-borne pathogens. Or, if you’re in an area that has been profiled as problematic or high risk for TB. Or, for your corporate compliance, are all your employees up to date on your standards for conduct? Also, HIPPA requires annual training.

“Even when times are tough, the best way to reduce your risk within the organization is to have highly trained employees. It’s going to reduce your risk. A lot of people are diversifying because of competitive bidding, so now is the perfect time to make sure all of the folks involved in the setup of those new products are highly trained.

“We’re talking about training from within in, internally. We’re trying to keep costs down. The owners have control about who’s going to get trained within their organization and when. And if you need some external training — say you have a new chair from Pride, you can get the Pride rep in.

“Every accreditor is going to look at how a provider trained, when they trained, and is their training up to date. So now is the time to start that.”

Facilities-Based Care

Ron ResnickRon Resnick, President of Blue Chip Medical Products Inc.

Now is the time for providers to get creative about new market development. That might be a tough pill to swallow for a provider that has been in business for 25 years with many tight referral partner relationships, but the name of the game is getting new clients, and Resnick says a great place to start is with facilities-based care.

“Maybe now you call on the veterans’ hospitals,” he says. “A lot of hospitals buy product and then redistribute it; mostly in sub-acute facilities and long-term care facilities. There are other avenues in which to become successful, but you have to take a start. You have to get out of your building. A lot of the homecare providers are stuck in their buildings waiting for the patients to come to them.

“Let’s say, as an example, that you have a retail store. Do you know how many nursing homes there are where they have a recreational therapist who is looking for some kind of activity for the residents? The provider can invite people into their store and then hire a diabetes expert to talk about what they can eat, or something relevant to that age group.

“They can bus them in, get two or three vendors to come in there, have a little nosh with some coffee and tea, and then one of the residents says, ‘Oh that looks nice. What is that?’ The provider can say, ‘Oh that’s a lift chair. Would you like to sit in it?’ There are a lot of facilities that have vans that will take patients on a little field trip that is 10 minutes away from their facility as long as there is some educational value.”

Increased Mobility and Accessibility Consolidation

Drew McCartneyDrew McCartney, President and CEO of Harmar

For providers working in the mobility and accessibility spaces, there is a good chance that they will see increased consolidation in their marketplace, and they must take care in terms of how they are going to pursue that. Those providers must also grasp the market forces driving this consolidation, and how the landscape could change as things play out, according to McCartney.

“Whether it’s the big alpha dog, MobilityWorks out of Ohio, followed by United Access, and then Ability Center, there is absolutely consolidation on the mobility side,” he says. “And it’s more due to auto adaptive equipment, than I think it is fueled by where I participate in the market, which is vehicle lifts. But I’ve always been puzzled why we haven’t been seeing it on the home access side. I think we’re now seeing that.

“The mobility market has consolidated from a provider standpoint, whereas access is still a lot of moms and pops. We saw National Seating and Motion buy Hudson; a pretty overt play into the access side of the business from a group that recognizes complex rehab is going to continue to get tightened down by the Feds, so they need to have some other shots on goal. We have a group Lifeway Medical, which is operating now in Minnesota and Connecticut, and that’s some former DTG Rehab guys.

“To my view this is only going to get more intense, because everyone is going to look to distribution, because the last five yards to the customer’s checkbook are so critical in the sense that you need to have the ability to get your product to the consumer, but also get your product installed. There are a couple of independent install networks in the market, and I think some of those install networks are going to start getting M&A there. There’s an appeal of having an ‘agnostic’ install. I’ve seen it in a couple places.”

DME’s ‘Pain at the Pump’

Jeffrey S ABairdJeffrey S. Baird, Esq., Chairman of he Health Care Group of Brown & Fortunato, P.C.

As we all know, competitive bidding is creating a massive change within the industry, but the scale and the scope of that change might be larger than many industry participants’ estimation, according to Baird. With the competitive bid rates being extended nationwide, it is very difficult for providers to take assignment, and some are finally saying they simply can’t serve Medicare patients. That has bigger implications than we might realize.

“I call this ‘pain at the gas pump,’” Baird says. “Up to this point, DME companies have run interference for their patients; they have shielded their patients from pain. And there have been few patient complaints about accessibility, because DME companies have taken all the arrows for their patients.

“All that is changing now. The DME companies have been backing up, and backing up, and backing up to shield their patients, but now the DME companies are at the edge of the cliff and they can’t back up any more. So ‘pain at the gas pump means’ that when there’s a hiccup in the Middle East, everyone feels it at the gas pump.

“Here [in the HME industry] pain at the gas pump means that DME companies need to bring their patients in as part of the solution. And that’s a nice way of saying that DME companies need to spread some of the pain to their patients. They have no choice.

“So what’s happening is we’re seeing a sea change where more and more DME companies are choosing to be non-participating, meaning they don’t have to take Medicare assignment (except for certain circumstances), and these nonparticipating DME companies are saying to their patients, ‘You have to pay me cash right now. We’ll submit a claim on behalf of Medicare to reimburse you, but we get our cash up front.’ There are certain circumstances where they have to … but other than limited circumstances, DME companies can say to their patients, ‘We can afford to take assignment.’

“That is the sea change were beginning to see. We’re not sure how Medicare is going to react, but this is way to bring the patients into the problem and make the patients be part of the solution.

“And one other thing to take into consideration: When a non-participating provider does bill non-assigned, then the DME company can charge more than the reimbursement, and can within certain limitations can charge less.”

Reshaping Business Models

Joe LewarskiJoe Lewarski, Vice President of Global Respiratory and Sleep for Drive DeVilbiss Healthcare

Ultimately, what many on our EAB are saying is that the future is what providers make of it. The key is perspective. Providers must think about the current business environment and whether their businesses are suited to it. It could be HMEs should reconsider their operations, their revenue sources, or whether or not they need more automation, but Lewarski argues the key is that providers take a step back to reassess their markets and how their businesses fit them.

“Many of us were doing things that we thought were value-added services based on higher reimbursement, whether they were frequent follow-ups, or lots of extra phone calls, or unlimited free delivery of goods,” he says. “Now, are you moving toward more efficient models where you are eliminating a lot of nonvalue added things, such as unnecessary deliveries, or free clinical visits, and leaning that out?

“And, lastly if you are in markets that are really moving forward with a lot of these new models of care — whether you’re in an ACO-rich environment; or an environment where they’re doing a lot of bundled care; environments where the health systems are taking readmission issues very seriously; where you have a lot of Medicare Part B managed care plans — are you engaged in those relationships to look at innovative ways to use HME services an offset to reduce their risk and expense?

“We talk a lot about it, and it seems like a novel idea, but when I’m out there in the field, I think there are markets where things are very advanced, and there are markets where it’s almost unchanged from five years ago. So answering the question, ‘Does my current business model meet up with the current business environment?’ … I think there are a lot of academic conversations going on out there, but where the rubber meets the road, I think it’s the larger, more innovative health systems that are ahead of the curve. When you get more down into the more traditional environments and community hospital environment you don’t see that as much. So, while it’s happening, and it’s getting a lot of press, on the ground level it’s not happening yet. I think it depends on the market.

“But asking that question, ‘Is your business model aligned with your current market?’ that’s the overriding question I’m asking people.”

This article originally appeared in the October 2016 issue of HME Business.

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