Where the Retail Rubber Meets the Road
Four experienced retail HMEs share insights they have learned from their cash sales experiences.
- By Cindy Horbrook
- Feb 01, 2013
For several years now, HME providers have been looking at branching out into retail sales so that they can drive new revenues in order to offset declining reimbursement. In that time, they’ve heard many arguments as to the efficacy of retail’s benefit to their bottom lines in the face of programs suc as competitive bidding. They’ve also heard various explanations of key steps they need to take as they venture into retail. But what about where the rubber meets the road? What’s the retail reality?
To get a better idea about how cash sales are playing out in the real world of home medical equipment, HME Business met with four experienced retail providers from around the country, who have generously shared their stories and some of their advanced lessons. Let’s learn from their insights and experiences:
Going Retail Only
Martha Hansen owns YouCan TooCan, now going into its 19th year of operation. YouCan TooCan has a single retail site in a supermarket shopping center in Denver. The company sells everything from high-end lift chairs all the way down to shoelaces, and everything in between, according to Hansen. Five years ago, the company became 100 percent cash and carry.
“With all the new regs, accreditation, bonding and the competitive bidding, we decided to drop our Medicare number at that time,” Hansen says. “The reality is we only sell three products that Medicare regularly pays for: walkers, canes and lift chairs. And so we just decided that for out of the 5,000 products we have here, that it was just probably not worth the expense and headache of going through all those requirements because we were not going to be involved in competitive bidding.”
This may be a risky decision for providers heavily involved in reimbursement, but there have been no ill-effects for Hansen’s company.
“We did not s ee a significant drop in the sale of any of those products. We do provide people with information on how they can file,” she says. “Many people don’t think it’s worth the trouble to do that, so our lift chair sales have gone up a lot, actually walkers are up a lot, canes up a lot, so we don’t think its hurt us at all, but we haven’t been a major player in Medicare either like a lot of major home medical supply stores have been where they’ve counted mainly on that.”
Hansen’s biggest concern is the big box stores that can offer the lower prices.
“They don’t stock [as much], they don’t serve as well as we do, but if people are just looking for price that’s where they are going to be going, and we really kind of find it unfortunate that many of our vendors also sell to Walgreens, Walmart at much lower rate than we get, so that’s kind of disturbing to us,” she says.
Still, she says good customer service is the key bringing in and keeping cash sales customers.
“If we look at who our customers are today, and we do track that, they’re either former customers or from friends that have been here, or from therapists and professionals in the field,” she says. “If we serve our customers well, and we think we do, then they come back and they refer to us to their friends.”
Keeping Pace with Change
HLS Health & Wellness — five retail sites in the Southeastern Illinois, Southwestern Indiana and Northern Kentucky tri-state area
In the past year, HLS Pharmacies Inc. shuttered its retail pharmacy division, rebranded and changed its name to HLS Health & Wellness. In additional to the usual HME Medicare reimbursement products, the company has expanded to offer products in categories such as bathroom safety, pain management, fitness and mother/baby.
“We’re just trying to expand our offerings to make us a destination to shop for, not just a place people come for just our Medicare reimbursed types of products,” says Meredith Voegerl, marketing director. “We’re definitely trying to make this more of a destination. That’s the changing face of home medical equipment to retail home medical equipment locations.”
Though the company has increased its cash sales business, the bulk of HLS’ business still is dependent upon Medicare and other third-party payors.
“We’re still beginning our retail journey, but certainly we would always entertain the idea of increasing our retail sales, and if it means one day we’re even less dependent upon Medicare, so be it,” Voegerl says. “I think that’s probably always the goal, but as of right now, we definitely are still very heavily into Medicare reimbursed equipment.” Voegerl says the company ramped up its cash sales as a way to offset declining Medicare reimbursement.
“We’re definitely a glass half full kind of group, and we say if this is the way it’s going to go, then let’s jump head first and let’s dive into this and we’re actually really excited about it,” she says. “I think that any opportunity to be able to ring items up in a cash register is certainly less labor intensive than having to bill something and then hope that it gets paid for 90 days later.”
Voegerl says the biggest challenges in expanding their retail offerings have been related to the four P’s: product, price, placement and promotions, or, more specifically, selecting the right mix of products, pricing them competitively, merchandising the store and getting the word out to public.
“We just keep trying things and trying to keep records of works and what doesn’t, so it’s a big game. It’s like a big puzzle,” she says.
The biggest insight Voegerl says she has gained is that cash sales is an evolutionary process.
“We’re not going to find the right combination of things and a year from now we may not be selling xyz product, we may be selling a lot more of something that we never thought we would have,” she notes. “We’re realizing that this is an ever changing process, but thankfully we’re geared to that in our industry because Medicare regulations are honestly always changing, so I think that our group is primed to do this.”
Retail from the Get-Go
Valley Health — five sites retail sites in Virginia and two in West Virginia
Valley Health is a hospital-based full-service HME company carrying more than 6,000 inventory items from band aids to wound care to home safety products to homecare items such as knee walkers, rollators, portable ramps and power mobility devices.
Cash sales have been of part of Valley Health’s business plan since its inception in 1984 and the company continues to increase its retail offerings, most recently with a plan to open a baby boutique in one of its hospitals. As is the case for many providers, the big advantage of cash sales for Valley Health is that it increases revenue in a time of declining reimbursement from insurance payors.
“We had to look at other alternatives, not only just to remain viable, but we wanted to grow our business and to be a resource for the individuals in our communities, the physicians (and) the referral sources. There really aren’t many companies that offer the products that we offer,” says Angie Fishel, Valley Health’s corporate director for home medical equipment. Fishel says that one big strength that HME retail providers offer are expert, trained staff that are knowledgeable about the products, which sets them apart from a traditional pharmacy.
“(Customers) can go to their local chain drugstore and pick up a rollator, but are they really going to get the training and education that we do? I don’t think anybody at a Walgreens is going to do that,” she says. “At our store they are going to get all that education and then to back that up they also are going to have that service if they have a problem. If they need to come back, something needs a repair or they need an add-on product, we’re going to be able to help them and tell them what goes along with that.”
Over the past five years, Fishel says she has definitely seen an increase in cash sales.
“It’s been a point of emphasis for us in our strategic planning from year to year. It’s a line item that we are constantly looking at. We want to see that we’re growing that area of the business,” says Fishel. “We’re trying to focus—between our managers, our routine customers that are coming in with ideas or asking us if we have items, with Web searches—we’re always looking for items that are cash oriented.”
Since Valley Health has been retail business for almost 30 years, it is often a place that is visited by providers who are interested in starting up their own cash sales businesses. She says the providers are generally looking to find out what are the items that work or don’t work, what products that they definitely should sell, what type of upfront investment training is needed to sell certain items and how to set up or lay out the store.
“It amazes me in this day and time the people that don’t do retail, I’m just amazed that there are HME’s that don’t do it. I think a lot of people think it’s probably harder than it really is. Don’t get me wrong, there is a lot of work that you have to put into it and you have to do your homework and I think there is a certain knack for retailing, but it’s very doable,” Fishel says. “It just surprises me that there are people that are very intimated by it because I think our industry has people that are willing to be resources. I can’t imagine with the cuts that we have not doing retail. I think retail is where it’s at, and it’s only going to continue to grow.”
Griffin Home Health Care — three retail sites in North Carolina
Now celebrating its 30th year, Griffin Home Health Care offers products in categories such as wound care/skincare, ostomy, bathroom safety, ambulatory, lift chairs, wheelchairs, ready-made bracing and exercise therapy items.
Bill Griffin, president and CEO of Griffin Home Health Care, says he originally got into HME retail for “survival” and since his background was in retail and merchandising, it was just sort of a natural progression though he needed to learn more about the DME side of things such as the different sizes of wheelchairs, how to set a hospital bed and the requirements for maintaining an oxygen contractor.
“What I knew nothing about 30 years ago was the durable medical equipment side of things, the retail came pretty natural for me because of my history I’d been in retail since I was 15 years old,” he says. “The durable medical equipment (and) the home medical equipment industry has been good to me as a whole both on the home care, but also on the retail side. We pretty much sell the fact that we’re willing and able to locate those hard-to-locate items that the regionals and the nationals don’t care anything about.”
Over the past five years, Griffin says he has noticed manufacturers taking a greater interest in retail packaging for items that previously were not available for retail.
“One of the splendid things that manufacturers are aggressively, finally getting around to is retail packaging, as an example in CPAP supplies—filters masks, headgear. That’s just a wonderful thing for the retail provider,” Griffin notes. “There’s certainly a tremendous growth opportunity, even larger than a niche for the retail provider and the retail client. It’s not just those individuals that have hopped on the plane for the day and they forgot to bring their mask, just day to day people are walking in and saying ‘I need a mask, and I am willing to pay for it,’ so the scope has changed.”
The other thing retailers have done over the past three to five years is seek out and look for items that are possibilities for the retail segment—physical therapy items, exercise, sports medicine are examples.
Why does Griffin think more HME providers aren’t diving into retail? Aside from the intimidation factor, it’s location, location, location.
“A lot of the nationals and regionals have set themselves up in business parks and warehouses. That’s not very conducive to retail,” he explains. “We are on a main thoroughfare between downtown Charlotte and one of the very large, high growing, metropolitan suburbs of the city, but consequently, not literally, but as far as I’m concerned, a part of my rent expense is equivocally going toward marketing or advertising because of where we’re situated.”
This article originally appeared in the February 2013 issue of HME Business.