Tricks of the Trade

Seven Steps for Building a Successful Respiratory Cash Business

Money may not buy love, but in most cases, it can buy comfort. That's good news for the HME industry, which has undergone massive reimbursement changes. In many cases, respiratory HME customers are willing to pay cash for extra comfort.

The practice of cash sales isn't a new venture for Accurate Medical Equipment in Fort Worth, Texas. Jeanne St. Peter, vice president of marketing and managed care, says the company has always sold items for cash when customers had no insurance coverage. But now, they're taking a strategic approach to how items are sold.

St. Peter says tackling retail is a completely different animal from the way respiratory HME businesses have operated in the past.

"You have to have more choice when it comes to retail," she says.

And those choices need to be displayed in a much different way than providers are used to. If a patient is waiting on a therapist, for example, the storefront should have engaging displays and literature that shows various available equipment options along with catalogs from vendors.

Accurate Medical's new storefront features recliners in its CPAP setup room to make patients comfortable as they take in a display of different CPAP masks and headgear.

Many customers who have never been on CPAP or oxygen may not be aware of the accessory items needed to go along with these products. If these items are properly displayed, however, patients will get an idea of all of the choices available.

"You've got to have good oxygen choice and quality masks to give to your patients," St. Peter says. "That's what makes us different."

For cash sale items, Accurate Medical focuses on accessory items and also used equipment, including CPAPs and nebulizers. Used equipment is a good option for customers who want to buy a second piece of equipment for travel or home use. These days some patients have the finances to purchase higher quality equipment, so Accurate Medical offers upgrades as well.

St. Peter has found that CPAP pillows, cheek pads, tube buddies, nasal lubricants, equipment cleaning supplies, spacers, asthma packs for kids, and nebulizers and masks that resemble toys are all great cash sale options.

"You just have to think outside the box and be creative," she says.

For example, an Accurate Medical employee recently sold a customer an oxygen concentrator so that the person could gamble in a casino without having to leave the table to take treatment. This is what St. Peter refers to as option.

The biggest challenge for Accurate Medical has been staff training. There has to be a total change in mindset among employees, St. Peter says. Staff can no longer ask customers, "What insurance will you be using?" Instead, they now have to ask, "What items are you looking for?"

To implement a cash model, St. Peter recommends hiring staff that is more retail-sales oriented. Also, staff should begin to think about how the company can benefit the patient as a whole, she says.

Running a successful cash business requires commitment on the provider's end, including proper staff training, quality products, snazzy displays and an inviting storefront. Outlined below are seven rules that industry experts suggest providers follow to set up a respiratory retail business.

1. Make a Good First Impression

If you who don't think the way an item is displayed is important, take a trip to a local department store. What you'll notice is these retailers use mannequins, halogen and track lighting, and strategic product arrangements to call attention to the product.

Likewise, the first thing a customer should notice when walking into a respiratory HME store is the core category. Whether that core category is CPAP or oxygen, it needs to be front and center. In other words: If you've got it, flaunt it.

"What I try to do is put the core category right up front, so you can't miss it," says Jack Evans, president and CEO of Global Media Marketing, Malibu, Calif. "You'll literally trip over it."

Providers need to prove their expertise to customers, but that can't be done if the products aren't on display. In fact, Evans says, "Most providers I walk into who are respiratory or CPAP specialists don't have CPAP or oxygen on the floor."

Evans says providers who believe that the look of the store has no bearing on sales are still operating on a reimbursement system. These are the same individuals who are simply filling scripts, processing insurance and delivering products to homes.

"What's happening is as insurance drops 20-30 percent a year, profit margins are decreasing, (but) the providers who have the retail component are compensating for their loss of reimbursement revenue by providing add-on products," Evans says.

Merchandising Basics

When providers set up a retail business, it's important to understand some of the basics of merchandising, advises Nancy Nunley, president of Ganesco. Many will not hire professional talent, but they can learn critical lessons by observing closely what they see when they shop. Regardless of the retail store — from Wal-Mart to Nordstrom's — you see certain common elements, such as:

  • Great lighting
  • Wide aisles to allow people to walk through displays with ease
  • A clean, up-to-date and professional store — otherwise the customer will walk away with a bad first impression.
  • Well-stocked displays — customers will not take you seriously if you only have a few products on the racks/displays.
  • End-caps to highlight special products or promotions

2. Show, Don't Tell

Creating a scene is important when displaying a product, according to Nancy Nunley, president of Ganesco, an Orlando, Fla.-based company that designs and produces continuing education projects for health care professionals. Providers can display many of the products they sell mixed in with everyday items people would have in their homes. This arrangement allows the customer to visualize how the product they are going to buy will fit into their home, Nunley says.

In fact, the reason why the industry's top retailers do so well is because of proper staging. Customers walk into other "respiratory only" type businesses and don't see any products showcased on the floor. Then they go into a retailer and see all of the products available — and that's the place where they'll go back. "It's extremely important not to just show someone a catalog, but have the products on the floor and allow the customer to decide what other products they want," Evans says. Pull the mannequins from the fitting rooms and put them in a prominent place in the showroom, he advises.

Comfort is king in retail. Providers are making it so that their place of business doesn't look like an equipment shop, Hoffman says. It has to offer comfort. "They're putting in fixtures and chairs and carpeting and making it more like a shopping experience vs. a hospital experience," he says. "That in itself puts the patient at ease."

If a product choice requires a private conversation, set up an area in the facility where you can take that person out of the public to show them certain items, Evans says. People tend to pay for comfort, and if they have disposable income, they'll opt for cash products, he adds.

3. Offer Complementary Items

Providers should offer retail products that match core lines, says Susan Nelson, director of sales at Air Lift and CareFore Medical, Evergreen, Colo. For instance, if a home care provider sells oxygen, he or she should sell accessories to match. Backpacks, fanny packs, and upgraded headgear and chin straps are a few examples of products that respiratory providers will want to integrate into a retail business.

"If they're providing CPAP, they should provide very high quality headgear and chin straps that make the patient want to upgrade to something nice," Nelson says.

Evans advises CPAP providers to move all sleep products and accessories into one area to create a sleep center — or sleep department. He recommends adorning the walls with eight to 12 mannequin heads all wearing different interface masks to show customers their options. In addition, Evans displays a mannequin in a bed wearing a CPAP.

When choosing inventory, keep in mind that some more comfortable cannulas, interface masks and alternative pressure systems aren't covered by insurance. These are the items that providers should be looking into, Evans says. In respiratory, the key is to not just provide the prescribed product, but also whatever else the patient might need to be comfortable, healthier or maintain a lifestyle. Providers have to think about the add-on aspect of the business.

Setup is a good time to focus on the consumers' needs and show patients what your company has to offer that will potentially make things better for them down the road, says Bob Hoffman, director of the VGM Group's Nationwide Respiratory, Waterloo, Iowa.

One of the most common retail items in sleep is the sleep apnea pillow, Hoffman says. The pillow accommodates the headgear and mask so that consumers feel more comfortable sleeping. Another potential cash item would be a nasal spray because nasal dryness and CPAP often go hand in hand. Hoffman says things like mask wipes help to deodorize the patient's mask, and hose covers help to reduce condensation in tubing.

4. Expand Beyond Respiratory

To increase revenue from cash sales, respiratory providers need to think beyond respiratory. Patients using respiratory products also may need mobility products and bath safety products.

"Those are your prime customers," Evans says. "So, don't just fill the script."

Typically when you're dealing with oxygen and elderly patients, bath safety and mobility items may be a good idea. With younger asthma patients, there are a lot of pediatric add-ons. For sleep patients, memory foam pillows and mattresses are a logical addition.

"Some dealers are even selling Tempur-Pedic mattresses as add-ons," Evans explains, which is a $3,000-$4,000 cash item.

Take advantage of today's smarter patients, Hoffman says. "We're in a market hour where the patients are willing to spend more for their health and are more aware of what's available because of the Internet and other sources."

Hoffman cautions providers to expand product lines in moderation. It's important to do research before you get into a new product line. "Find out what the needs are and order smaller quantities of inventory to begin with to see what actually moves," he says. "Once you get a little history, find out what is more apt to sell and what isn't."

5. Train Your Staff

A common mistake that providers often make is trying to sell items they know nothing about. You must learn the product, and manufacturers and distributors are the best sources. Invite your local sales rep to your store to provide training and in-service to educate your staff about the product.

Keep your expectations in check, however. Employees won't just shift from order takers to retailers overnight, Evans says. They need training.

Educating staff can make you or break you, St. Peter believes. "The biggest suggestion that I would give is to communicate to everyone in the organization about the options the company offers," she says. Employees are your best resource.

6. Listen to Your Customers

People enjoy walking into a well-designed retail store, but they also love the service at mom-and-pop stores. For that reason, providers must make it a habit to listen. Before pushing a product on someone, listen to what the needs are and then suggest an appropriate product.

Evaluate your typical patrons and ask yourself: What are their medical conditions? What are their health care needs? From that, determine what other products these customers may benefit from that aren't reimbursable, Evans says. "That's how providers are becoming more profitable today. Instead of just depending on that Medicare reimbursement for respiratory, for CPAP, they're also providing quite a few cash items," he says.

Don't be afraid to ask patients what problems they're having and then look for solutions to fix them. Following that advice may lead the provider to new product lines that they may not have thought about before, Hoffman says.

Providers also should realize that there are some things that just won't sell for cash, such as invasive products that require skilled professionals like tracheotomy supplies and ventilators. Talk to other providers and referral sources to determine what's hot and what's not, Nelson advises.

You'll also want to purchase items that are tried and true, Nelson adds. She says providers need to make inventory and stock decisions that make sense for their business model and they need to work hard to understand what their patient base needs.

7. Keep Them Coming Back

Before you can make a sale, you'll first need to let your client base know that you offer an item, and then get them in your showroom. There are various avenues that providers can pursue to inform customers about the products they sell.

Nunley suggests a promotional line/description on the paperwork that customers typically receive, special attention on the provider's Web site, yellow page listings, catalogs and local advertising.

Get creative when thinking of ways to draw in customers. Nelson suggests doing educational pieces, such as providing information on keeping humidifiers clean and getting the most out of a mask. Always let the customers know when an educational opportunity is coming up and make it more social than formal. For instance, offer coffee and doughnuts. Once the learning is done, try to do a little selling.

Hoffman says many providers have been successful by offering a Saturday morning coffee social. They invite customers to come in to share their experiences and discuss what works for them and what doesn't work.

"It's easy to sell something if somebody is right there saying it really works, and that's been pretty successful for anybody willing to take the time and effort to do that," he says.

Providers can market directly to customers through bill stuffers and follow-up phone calls, St. Peter says. Don't just use your follow-up calls to ensure that patients are using the equipment, use it for an opportunity to cross-sell. It's all about asking questions and listening, she says.

"Patients love choice, and they love to have something that is an instant upgrade to them," Nelson says. "It makes them more mobile or it makes them hands-free. They have a need in their mind, and if the home care provider gets them something that instantly upgrades their life, the patient will be back. And it keeps them from swapping providers."

This article originally appeared in the Respiratory Management May 2009 issue of HME Business.

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