How HME providers are driving efficiencies in their businesses to reduce costs and raise profit margins.
- By David Kopf
- Sep 01, 2015
In the early days of air travel, it quickly became apparent that shape meant everything. The more engineers could work to soften edges and smooth lines, the faster and easier a craft could fly.
Soon, that concept was exported to all means of travel. Cars, motorcycles, locomotives started to get smoother, rounder and more able to cut through the air with less energy. A vehicle that allowed wind to pass around it would go faster and consume less fuel. Eventually, during the glory days of land speed records, all manner of motorized transportation racing across the salt flats of the West started resembling like bullets on wheels. In fact, a popular option was to fashion the body of land speed racers from the supplemental external fuel tanks from Korean War-era jets.
Providers now find themselves in a similar spot. With reimbursement cuts radically reducing revenues, HME business owners and managers must find ways to streamline their operations. When programs such as competitive bidding slashing reimbursement by an average of 46 percent, providers must find ways to find some kind of survivable margin.
Certainly expanding revenues through initiatives such as retail sales (turn to page 30 of this issue to read more about how providers can expand their cash sales strategies) is important, but just as important is cutting costs. While’s there’s debate surrounding whether or not Benjamin Franklin actually coined the phrase “a penny saved is a penny earned,” there’s certainly no debate as to the axiom’s applicability to providers’ current situation. It couldn’t be more clear: at the end of the day, any portion of the business that can help raise margins is ultimately a profit center, even if it’s not specifically related to driving revenue.
So, providers are working overtime to identify the areas of their business that are cost-laden, and determine how they can reduce those costs. Some of those are obvious line items on the budget, while other are more nuanced. For instance, a provider might seek to reduce steps from a billing or documentation workflow and thusly save staff precious time, which allows them to do more work. Getting more from staff time and reducing the cost of each task would certainly qualify as smart, cost-saving streamlining.
This is the challenge that providers face: how can they turn their businesses into leaner, smoother operations and shave down operational costs so that they maximize the margins on every penny of new revenue they take in. In the same way that engineers from the glory days of streamlining sought to smooth out every corner and fill every seam, streamlining HME operations is detail-oriented work, but the pay-offs can be huge. Let’s take a look at some of the key areas of HME businesses that can be streamlined, and the way providers can maximize efficiencies in those departments.
Inventory often represent the biggest line item on providers’ balance sheets, or at least ties with human resources costs for providers’ top expense.
With money sitting in the warehouse, the showroom and in the backs of delivery trucks, a provider is well advised to ensure that inventory either moves quickly, or is reduced, lest that money sit idle. Fortunately, there are ways providers can streamline their inventory operations.
To control inventory, a provider must strike a balance between ensuring that money is not being tied up in DME that is not moving, versus ensuring that the right types and amounts of in-demand DME stay on the shelves.
Information technology can help can help accomplish that balancing act. By using software designed for the homecare industry, the system will be better geared to mesh its inventory control tools with the other aspects of the HME management system, such as billing and point of sales system. This way, all systems are updating the inventory as it is used and moved through the system.
The first place to start is with a coding system. As a provider implements a software system to help manage its inventory, an important initial consideration is to decide how the products will be coded. This can actually take some time, as various types of medical equipment have different tracking requirements.
For instance, how a provider decides to organize and code is oxygen supplies or rental equipment, will differ greatly from how it codes the more standalone types of DME, such as walkers or beds. Moreover, many providers often will want to incorporate vendor serial or product numbers (or even names) into their coding systems, as another form of reference, as well.
A good method for grouping and coding DME is to start with broad categories and narrowing down to more specific products. This approach makes the inventory management system easier to navigate and maintain.
Once medical equipment is grouped and coded, providers can move onto barcoding their inventory. Barcoding is essentially for maximizing the efficiency gains and reduced overhead they seek to gain through software. Barcoding helps ensure inventory is correctly recorded and also allows management to monitor inventory in real-time, or nearly real time, depending on whether or not the handheld devices are wireless or must be connected to the system and synchronized.
Using handheld scanners, staff can identify equipment and log it as it is received and moves through the system. That way, the DME can be tracked wherever it is in the provider’s operation, which is often critical to accreditation requirements.
And with the inventory control system integrated with other aspects of the business, now barcoding affords even greater oversight. For instance, if the point of sales system is connected to inventory control, then inventory is updated every time a sale is made.
Barcoding along with inventory control systems can have an additional benefit each year when providers must take static accountings of their inventory, such as at tax time. A process that could at one time take several days and rack up overtime costs, can now be taken care of in a fraction of the time.
Another key efficiency gained through inventory control technologies is automatic purchasing. Many inventory control systems can monitor user-defined thresholds for various supplies and automatically reorder them when they get low. So, for instance, if key diabetic supplies reach a certain level, the system can automatically place an order with the vendor.
Some automatic purchasing tools even log recent purchases so that the provider can review them to find the best unit or shipping price, or the least amount of lead time or shipping time needed. Often the costs associated with making the order, such as shipping or lag time can cost nearly as much as the DME itself.
Another major element of HME business overhead is running delivery and repair fleets and their supporting operations. It is a staff-intensive, and involves continuing regular capital expenditure for fuel and repairs, as well as depreciating assets — the vehicles — that need to be regularly replaced.
Also, the practice of managing deliveries and planning routes consumes a good amount of staff time, which also means more overhead. Moreover, there are a number of hard costs related to deliveries that can be slimmed down:
- The cost of drivers and dispatch staff.
- The cost of the vehicles and their maintenance.
- Fuel costs, which are once again skyrocketing.
- The cost of the inventory stored in the trucks.
- The additional insurance, registration and other costs required with owning and operating a vehicle fleet.
Fortunately, there are a couple key technological solutions at hand that can help HMEs super tune their costly delivery systems.
The first is route planning. An essential element in overhauling delivery management is leveraging route planning systems. Rather than dispatch manually taking all of the next days and wracking their brains over how to properly distribute them to each of the drivers for the next day’s routes, software can completely automate the process.
Moreover, while dispatch still needs to make room in each driver’s schedule and route to not only ensure they can maintain efficiency and adequate service levels, but they must also have the flexibility to respond to unique or urgent calls that invariable arise during the day.
There are various systems specifically designed to take a provider’s list of orders and automatically generate efficient routes and apportion them to each driver. Dispatch can generate the following days’ deliveries each evening, and in the morning, when the drivers come in, they are handed their preplanned delivery routes and tickets for the day and set out on their rounds.
Better yet, many HME software systems already incorporate route planning as a feature, or as an additional module. If you have an HME software system in place, examine whether or not it offers that capability.
The other important technology tool in streamlining delivery operations is global positioning satellite (GPS)-based management systems. Outfitting delivery vehicles with global positioning satellite technology is another important element in maximizing delivery efficiency. GPS systems lets providers track their vehicles while they are out in the field.
The way it works is simple: A GPS device is installed in the vehicle, or a GPS-enabled smart phone or a GPS tracking device is either carried with the driver or installed in the vehicle. These units are then tracked by the GPS system’s company, and the HME business logs into that company’s system to see their vehicles and track where they are and what their next appointment is.
But the systems allow HMEs to drill down even deeper. With them, the provider can see a variety of information about each vehicle, such as how long drivers are taking at their stops, or the vehicles current and average speed. This can be particularly important when it comes to maintaining mileage lies in ensuring driver’s stick to optimal highway speeds.
GPS systems that are connected to the vehicle give the most accurate picture about that vehicle’s status and sometimes even diagnostic information on the vehicle as they are constantly on and connected to the vehicle, in comparison to a portable or phone-based device, which travels with the staff member, rather than the truck or car. That said, portable GPS devices and phone-based GPS have their applications, as well. For instance, an HME can use those devices to accurately reimburse traveling staff that don’t do delivery, such as therapists, for their mileage.
A couple key implementation issues to consider when putting route planning and GPS tracking into place is what kinds of systems you are going to use. As mentioned, there are options: off-the-shelve GPS tracking systems; GPS systems that are designed specifically for HMEs; a separate route-planning system that can be integrated with the HME software infrastructure; a route planning system that is already offered by the HME’s software vendor.
There is one key consideration in implementing these systems: the staff. While there is minimal training involved in learning how to use the systems, there could be some “cultural” acclimation required. Staff could chafe at the notion of having their driving habits monitored at all times. Providers should focus on the advantages these tools will bring and how they can benefit staff.
Managing paper files costs providers valuable staff resources and time in terms of the expense of diminished efficiency and productivity. Staff must chase paper files around the office, and spend considerable time ensuring they are properly filed. This is especially true when a workflow involves different departments that are not adjacent to one another. Now files must physically move through the office in a time- and cost-consuming fashion. Moreover, hunting down a missing record can gobble up inordinate amounts of time, let alone leave a provider sweating out serious concerns over a possible privacy breach.
As a result, many providers are considering document imaging systems to save employees volumes of time, ensure accurate record keeping, and protect patient privacy. With them, employees can quickly scan paper forms in order to update patient records, access key records on the fly, and more easily process billing.
If a provider already has an HME billing and business management software system in place, the best place to start is by with the existing vendor to see if it offers a document imaging system, or works with a third-party in order to provide a seamless integration.
If a provider is starting from square one, then it should start by understanding the various capabilities of document imaging systems so that it can review how different systems can benefit the business. Some key capabilities to consider:
- Flexible scanning options and the capacity to scan batches of unsorted paperwork. The system should be able to sort them as they are scanned.
- Automatic filing of documents so that data from forms is entered into electronic records.
- Task automation features that let staff shave time off frequently repeated recording-keeping tasks.
- Document retrieval that is lighting fast and can be performed based on various search criteria.
- Features that increase manual document filing efficiency in instances where the system is unable to scan poorly filled out or degraded paperwork.
- Tools to let staff stamp, edit, redact, highlight and annotate electronic records.
- The ability to store very large documents, such as manuals, licensing information, regulations, contracts, or handbooks.
- Security features that provider various levels of read and write access that should include audit trails that show who has been accessing patient records in order to ensure HIPAA compliance.
Once a system is selected, the provider should adopt a team approach to integrating the system into the business.
The provider can smooth implementation by demonstrating the benefits of document imaging to staff. When staff understand how much easier their workflow becomes using document imaging, implementation becomes that much easier.
A provider can create an implementation team by enlisting key players from various segments of the business to help shape the implementation and adaptation of the new system by each group. This team can identify the various processes the system should help automate, ensure the system meets their departments’ needs, and help set an implementation timetable.
Implementation can have hiccups. For instance, internal forms used by the provider might have to be redesigned in order to optimize the document imaging system. Forms might need to be cleaned of shading or images that could stymie smooth scanning. Each department must test the system multiple times, carrying out the various tasks using the system they will need to do. This will ensure everything is working smoothly and efficiently before you go live with the system.
And it’s important to note that document imaging is not an entirely technological process. There is substantial manual work in the actual scanning of documents. Once the system goes live, consider getting some outside contract help to begin scanning in some of your documents in order to help your staff focus on converting key patient records. For instance, training manuals, contracts, and large reference documents could be scanned by part-time help, while full-time staff concentrates on the top priority of scanning patient files.
Retail sales are becoming an increasingly important revenue stream for HME providers, and believe it or not, there are ways to increase the efficiency of providers’ cash sales operations. And, in fact, efficiency is critical. There is an expectation on the part of retail shoppers for fast, efficient, friendly transactions. If a provider can’t make that happen, then it won’t make the sale. If ever there was a marriage between cost-saving and revenue-generating, retail sales is that union.
This means providers must implement sorts of efficiencies that traditional retail businesses have had in place since their inception. One of those efficiencies is a point of sale systems.
The primary benefit of having a dedicated system for a point of sale transactions at an HME business is that the entry and processing of transactions goes much quicker. A traditional retail application requires staff to create an order, bill it out and accept payment, but a true point of sale system allows for rapid entry of the product and payment.
So, the key driver for installing a point of sale system at the provider business truly comes down to speed. Transactions must be as efficient and fluid as typical retail businesses. Otherwise patients get impatient waiting in line. In a service-based business, fast is good and slow is bad. So how can providers best integrate point of sale systems into their existing software systems, as well as their business practices?
Key hardware for a point of sale system would include a computer hooked up to a cash drawer, along with a barcode reader and credit card reader. Also, in some parts of the country, the system must also include a display pole that lets the patient review the individual and total charges for the transaction as they are rung up. Some HME software vendors offer a point of sale systems that is integrated with their system, and that will offer the smoothest possible implementation path. If that option is not available, providers should look at self-contained point of sale systems from name brand third-party vendors, and confer with their HME software vendors regarding compatibility with their system.
The system must support credit card processing. The point of sale system should incorporate card swiper and credit card processing technology that is properly networked so that credit card transactions are processed at the HME provider’s business just as quick as they would be processed at any other retail business.
Integration with the providers’ back office is recommended. Using credit card processing software that is integrated means the provider won’t have to pay a rental fee on a credit card terminal. Also, with a rented terminal, the provider must go into the system and update patient accounts to show they are paid, whereas with integrated process, all necessary records are updated. Additionally, seek a system with PIN pad entry for debit card processing, and be aware of “chip and pin” credit cards, which are seeing increased implementation in the United States.
Another key to an effective point of sale systems is to reduce the number of steps and automate as much of the transaction as possible. For this reason, barcoding is critical. In the same way barcoding creates efficiencies on the back end of the provider’s business, such as in retail applications, barcodes should create efficiencies on the customer-facing side of the business. And in that sense, the register is where the rubber meets the road. So, a good point of sale system should be able to scan the barcode on a product and immediately capture the product number, serial number and automatically bring up the price.
Likewise, point of sale systems should be integrated with the other elements of a provider’s systems and share common databases. For instance, when a patient walks up to make a purchase, that patient might be a regular patient on the traditional, Medicare side of the HME business, but in this instance he or she is making a retail patient.
It would be ideal if the patient’s records could be updated with the purchases. Or, a patient might come in off the street and want to make a payment on their account for the traditional HME side of the business, such as for a co-pay or a delivery. They should be able to conduct that transaction on the spot via the point of sale systems, rather than draft a check and mail it in.
This means that the provider needs to determine which aspects of their HME management system — billing, patient records, inventory, etc. — should be connected to the point of sale systems and whether or not the point of sale system can do that. Moreover, if the provider operates multiple stores, it needs to determine which sites will be accessed by the retail sales system.
The point of sale system needs to be able to bring up the right retail prices. While a provider might typical work with Medicare, retail pricing is a whole different ballgame. Instead of thinking fee schedules, the provider needs to be thinking in terms of the marketplace. Also, discounts are a part of retailing, and the provider might have special pricing related to a coupon, to a special promotion, for certain customers, gift cards, or for certain stores. Moreover, the provider might have special pricing for key referral partners. So the point of sale system must be able to support a wide variety of pricing criteria.
As providers well know, CMS will not slow its efforts to reduce reimbursement rates. The industry can rein in competitive bidding and make reforms to other programs, but the agenda to cut costs will remain for CMS. And that means that providers must similarly implement an agenda to cut costs. These four key areas of HME businesses — inventory, documentation, delivery and retail — offer providers crucial opportunities to implement serious streamlining in an effort to cut costs, drive efficiencies and rocket their way to increased profitability.
This article originally appeared in the September 2015 issue of HME Business.