Business Solutions

Setting a Smart Strategy

Experts assess the market and help determine how providers can set a smart course for success.

Smart Strategy

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Today’s home medical equipment providers have to be smart. They have to be survivors. They have to constantly assess their market, look at large and small trends, and review and tweak the strategies they outline for their businesses.

The reason for this comes down to one word: change. After years of relative status quo, the HME industry suddenly had to deal with policies such as competitive bidding, the oxygen rental cap, the removal of the first month purchase option, and aggressive claims audits. The past eight years or so have been laden with dramatic change, bordering on upheaval.

Well, there are two responses to massive shake-ups in marketplaces, you can either alter your strategy, or stick to what you’ve been doing. Many providers that refuse to assess and adjust to change will likely wind up selling or shuttering their businesses, but those who regularly review what is happening in terms of public policy, healthcare trends and the economy are in a good position to deal with change.

To help providers develop smart strategies, each fall we ask some of the industry experts sitting on the HME Business editorial advisory board to share the key trends, challenges and opportunities that they see happening in the industry, as well as how providers should be preparing to deal with those trends.

This year’s feedback from our board members saw some thoughtful, compelling responses:

Competitive Bidding Expansion

Tom Ryan, president and CEO of the American Association for Homecare

Obviously when you talk about challenges, we have to look at the fix we need for this expansion of competitive bidding to the non-bid areas. It’s really where we’re focused as an association, and it’s all-hands-on-deck for that.

From the challenge standpoint, what’s going to affect providers and certainly our members is going to be the expansion. We had a win with the Binding Bids, but we’ve been dealing with this competitive bidding rule regarding the expansion that came out of CMS since last April, and we went as far as we could with the [working with] CMS approach; that’s why we had to go with the legislative approach. I think we’re there and we’re ready to go.

A good part of the summer was spent aligning the industry, trying to get large companies and small companies working on one strategy, as well as lining up our champions with Rep. Tom Price (D-N.C.) and now Sen. John Thune (R-S.D.). We have our legislative language being reviewed by Ways and Means, so we’re poised to go. We’re just waiting for it to get scored. Once we have that, we’ll be a little more transparent with the full language itself.

A couple of things will be going on in that language: We’re going to establish a 30 percent adjustment to the cost of the current single payment amounts [SPAs], so it will be a SPA-plus-30 percent. It will be a four-year phase in, and it will also establish a bid-limit ceiling for competitive bidding.

When you talk about a SPA-plus-30, there’s a reluctance sometimes on the part of the Congressional members to understand why you’re getting a 30 percent adjustment, but we have to continue to remind them that there’s still a $5 billion savings that would come by our estimate from the expansion just into SPA-plus-30 rates. So we still as an industry are going to be giving back $5 billion come Jan. 1, 2016.

But if we don’t get this legislation moved along and passed I think we’re going to have some serious access issues in the rural areas, because I’m not sure how the people in those areas can stand any adjustments of that magnitude without any increases in market share.

Everybody wants to be involved in advocating for this phase-in and SPA-plus-30 legislation, because if we see an overnight expansion of competitive bidding rates in the majority of the non-bid areas, the thirdparty payors in those areas are going to be looking at those rates, and we are also going to see a tremendous cut from our other third-party payors.

We’re going to be flexible in our approach in that it might be a standalone bill — like I said, we already have a House champion and a Senate champion; both in the committees of jurisdiction, and we have other Senators who are ready to come on board right away, and of course Price on the House side being budget chair is going to be terrific for us. It would be a good rallying point to have a bill number attached to it so that we can rally the co-sponsors and get our grassroots efforts out there, showing the strong support for it. And that could possibly be weaved into some larger piece of legislation later in the year. … We’re ready to go, and waiting for that final legislative piece.

RAC Audit Transition

Wayne van Halem, president and founder of The van Halem Group, a division of VGM Group Inc.

Related to audits, I think the biggest challenge we are facing currently is the looming RAC transition. They have been very quiet because of the contract protests but I believe they are going to resolve those and the new national RAC will be given the green light.

Since they are paid on contingency, they are incentivized to find errors and unfortunately, our industry is still very prone to technical errors that will cause denials and we still struggle with physician documentation. The first round of RACs in 2011 to 2013 was pretty bad, but I think this round will be worse because all the RAC has to focus on now will be DMEPOS and Home Health claims.

I also think because the RACs have been quiet, that suppliers might become complacent. While it’s a challenge, it is also an opportunity to seize the downtime and get prepared. Conduct internal audits and implement controls that will better prepare your company for these audits.

The claims they are submitting now are the claims that will be subject to RAC review. There were some improvements to the RAC program if a supplier can demonstrate a low error rate, than the RACs will be limited in the number of requests they can send to that supplier. So, technically, a company can make the RAC program go away for their own organization.

Information Technology Interoperability

Dave Cormack, president and CEO of software company Brightree LLC

Interoperability, the ability to share healthcare data across the care continuum, is a key emerging trend in the HME industry. Organizations across the healthcare system are striving to communicate better and share information to improve patient outcomes and eliminate unnecessary costs, such as unplanned readmissions and extended lengths of stay in the hospital.

At Brightree, interoperability has surfaced as a reality, which led to our recent announcements to integrate with leading CPAP and respiratory equipment manufacturers. For instance, from within Brightree, HME providers can seamlessly monitor their patients CPAP usage and compliance data that is collected by the intelligent CPAP device. In addition to monitoring compliance, this automated exchange of information enables HME providers to enjoy new operational efficiencies. For example, the moment a patient achieves compliance they can automatically be placed into resupply campaigns, saving staff time and improving cash flow.

We expect to see referrals begin to move through a limited number of electronic referral management systems. We have recently developed a connection with a leading physician practice management solution that streamlines the referral process for both the referring physicians’ office and the DME provider. This type of interoperability enables providers to reduce order entry time, while strengthening referral relationships and creating new revenue sources.

My prediction for HME/DME providers is this. If you cannot share data bi-directionally with acute care and physician practice management systems in the next 12 to 24 months, including automating the referral and order process so that the participants can experience transparency of data across the care continuum, you will risk losing your referral sources.

Order and Billing Efficiency

Steven Ackerman, president of Spectrum Medical

With regard to Medicare, which drives a lot of your business, the biggest issue is that prices are at rock bottom. I think it’s almost laughable that we have to continue to bid when you look at where pricing is. I think that everybody has had to sharpen their pencil and walk around their office and literally look at every aspect of what it takes to get an order called in to actually have money come in for it at down at the end of the line.

People traditionally focused on the most expensive component of the business, which is delivery, which is also wrapped up in the price of the equipment. Trying to streamline that and stay within the Medicare allowed guidelines is extremely difficulty, particularly if you are in a rural area or a high-volume metropolitan area where you are dealing with a lot of traffic. And I think everyone has done their best in the delivery area.

The interesting area where we’re finding some traction in helping with our overall bottom line has to do with order intake, and specifically the number of “touches” an order has in your office. It’s a tricky area, because an order for a walker is not necessarily the same as an order for a ventilator in terms of the expertise you need to execute it. So to be able to move technical ability around quickly to talk to an order and then not have five people go through it and touch it again is really the challenge in the modern billing office or intake office.

And when you start to boil it down, it’s where a lot of money is lost. If you spend an hour developing an order for a small piece of equipment, you’ve lost money right there, before you buy it or deliver it or handle it any other way. … So to be able route a simple order to someone who’s maybe not a high-paid employee and can do basic data entry, while getting the compliance part of and make sure the insurance is taken care of is real tricky, but you can really get savings out of it if you do it well.

It’s a challenging area, but we’re working real hard on it. Even being a small operation, we have different skill levels that we want to have on the phone with different orders coming in. So we’re looking at ways to make that more efficient and maximize the use of the talent that we have while bringing the best service to our customers.

Diversification, part one

Sandra Canally, president of The Compliance Team Inc.

I’ll go with a three-pronged approach: The number one thing that will keep providers moving forward is staying compliant, overall. By staying compliant, providers aren’t going to be big targets for audits, and so forth. They need to understand that it’s still very much an important piece; staying compliant is an across the board requirement. Staying compliant means staying in business.

The second thing is diversification. Any accrediting organization, and I’ll use us[The Compliance Team] as an example, because of the acquisitions and providers going out of business, it’s been extremely important for us to diversify into different markets and different areas of accreditation. So obviously the same applies to the providers. So, maybe a provider wasn’t known for retail, for example, but getting into retail or different types of products or services that weren’t subject to bidding, is important.

And the third part of this is branding of what providers want to be known for. Maybe a provider used to be known as a respiratory company, and they didn’t get a bid for respiratory products, but they do really well in some other areas. How are they branding themselves for those new strengths in their diversification?

Diversification, part two

John Eberhart, president of Eberhart Home Health Inc.

The big thing I see that successful people are doing is broadening their base and exploring modalities that aren’t in their comfort zone.

For example, I have a DME industry friend who is doing a lot of complex rehab wheelchairs, which they didn’t do before. They wanted to do something different in order to broaden their base, and it is literally saving their business right now. They would have been out of business a year ago, if they weren’t doing complex rehab. It’s a ton of a work, and it’s difficult, but they’re doing okay at it.

Another owner that I know opened three brick-and-mortar retail facilities that he really didn’t want to do, but he broadened his base and it’s saving his business. He’s capitalizing on a lot of cash sales. He’s from a big company that didn’t win any bids, but had the cash to do this.

For me, getting more aggressive in the sleep industry has saved my business. I recently opened up a sleep lab right next to my DME company; we’re almost Medicare certified, and that’s going to save me, big time.

Those people who do take a leap of faith, and say, “I still have good relationships; I still can make something happen,” and don’t get so frustrated that they quit, I have yet to hear a story where branching out didn’t help, where it didn’t do something good for their prospects and the future of their livelihoods. So, my biggest piece of advice would be: get out of your comfort zone.

None of [branching out] is a walk in the park. None of it is a slam-dunk or easy. But if you like working for yourself, and you want to continue walking down the path of entrepreneurship in this industry, you definitely have to step out of your comfort zone and be a little aggressive.

This article originally appeared in the October 2015 issue of HME Business.

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