Business Solutions

Taking Shape

Our 10th annual 'Big 10' review of the key trends that will impact a constantly evolving HME industry.

Building HMEA work in progress: That’s a great way to describe the U.S. healthcare landscape. A variety of sometimes conflicting and sometimes complementary factors, ranging from demographics, to innovations, to economics, to public policy, constantly twist and turn and unfold in unexpected ways that shape how we Americans care for our health.

Moreover, how a healthcare marketplace that is constantly “under construction” impacts the post-acute care space, and the home medical equipment industry in particular, seems to always be in a state of flux.

That’s why for the past 10 years HME Business has made it a point each January to identify its annual ‘Big 10’ list of key trends that will impact HME provider businesses over the next 12 months. Our goal is to help you see the opportunities, challenges, evolving issues and key business imperatives that should help you set your business strategy fro the coming year. And 2017 offers a host of important industry trends HME professionals must monitor and address. They are:

  • The likely outcome of national bid expansion reforms
  • The continued effort to reform bidding as a whole
  • The fight to protect complex rehab
  • Changes to Medicare’s audit program
  • The ongoing evolution of retail HME
  • Emerging verticals such as sports therapy, orthopedics, wound care and pain management
  • Women’s health as a key vertical opportunity
  • Connected care and remote patient monitoring
  • Cost vs. quality pressures in the private payer world
  • Creating improved communications and IT efficiencies with other healthcare professionals

Undoubtedly, this collection of ongoing issues, new developments, pitfalls and prospects will have an impact on our industry over the next 12 months, and savvy providers will plan for them. A smart business strategy will adjust for the obstacles and emphasize the opportunities for growth. Take a moment to review our 10th annual Big 10 and see how you can use this information to build a bigger, better HME business:

Rural Bidding Relief Reforms

Last year saw an incredibly frustrating fight to turn back the tide of national bidding expansion. Per the Patient Protection/Affordable Care Act, competitive bidding pricing was slated for nationwide expansion starting on Jan. 1, 2016. The process was to be phased in with partial rate cuts occurring at the start of that year, and the full rate cuts were to be implemented on July 1, 2016.

The fight to stop that effort was like something out a big screen thriller. Last-minute legislative pushes saw the House and Senate pass delays to the bid cuts on two occasions, but completely unforeseen circumstances such as a Congressional sit-in over gun control and a lastminute hold for inquiry scuttled attempts to forestall the rural bidding cuts.

As a result the full cuts went into implementation and rural providers started shuttering businesses or refusing to take on additional Medicare patients. Also, a ripple effect started to be felt across programs such as TRICARE, which bases its DME reimbursement on Medicare rates.

Fast-forward to last month, and the industry was able to achieve rural bid relief — of a kind. Congress passed the 21st Century CURES Act, which President Obama then signed into law (see “News, Trends & Analysis,” page 8), which retroactively sets the implementation date for the full bid expansion cuts to Jan. 1, 2017. Providers will be reimbursed for the additional amount taken from DMEPOS claims made after July 1, 2016 and before the start of this year. This was helpful, but the full rates were slated to be implemented on Jan. 1, which essentially leaves rural providers and patients right back at square one. A longer delay or more extensive reforms to bid expansion is needed, and hopefully the American Association for Homecare, the state Associations, VGM Government Relations and other HME industry advocates will be able to secure that.

Broader Bidding Reforms

It’s important to remember that rural bid relief is only one part of a much larger issue: competitive bidding as a whole still needs some reforms. That said, we must keep in mind that we’ve seen some solid victories that should not be discounted.

The industry succeeded in getting binding bids legislation passed last year in order to eradicate the scourge of suicide bidding. That’s a crucial victory. In addition to requiring bidders to maintain state licensure, the legislation requires bidders to obtain a “bidding bond” that functions like a surety bond. This way, if a bidder declines the contract and its bid was at or below the bid price, then that bidder would forfeit its bond.

CMS issued a final rule that shifted the bid ceiling to the 2015 fee schedule. That’s huge. That’s huge. Now, bid ceilings for future rounds of competitive bidding will be based on the unadjusted 2015 fee schedule, instead of CMS’s earlier proposal to establish bid ceilings at the current pricing per competitive bidding area (CBA). The rule ensures that bids always have a fixed ceiling, rather than dwindle reimbursement down to nothing by using each successive re-compete as the ceiling for the next re-compete. In fact, when CMS first proposed the rule, it argued that setting the ceiling to pre-bid levels ensured the program’s long-term viability — the exact argument the industry had been making for years.

Also, that same rule stipulates that bidding providers must now obtain a lower, $50,000 bid surety bond for each CBA associated with a bid. The rule also sets surety bonds forfeiture conditions if bidders do not enter a contract when their composite bids are at, or below the offered amount.

So, binding bids, no downward bidding spiral and bidding bonds. Those are big wins, but they don’t ignore the fact that single providers lock up entire marketplaces and categories while they are under contracts. Broader bid reforms are needed, and given that longtime industry ally Rep. Tom Prices (R-Ga.) — a man who has championed the Market Pricing Program — will now serve as the incoming Trump Administration’s Secretary of Health and Human Services, perhaps the industry will enjoy broader reforms that truly competitive DMEPOS marketplaces. That said, providers should not let their optimism get the best of them. Now is the time for continued support of the industry’s legislative and advocacy efforts.

Protecting Complex Rehab

Some of the most vulnerable users when it came to the national expansion of competitive bidding were complex rehab users. “What’s that?” you say. “Isn’t complex rehab carved out of competitive bidding?” Yes, according to the spirit of the law, but no, according to CMS’s interpretation of the law.

While the 2008 Medicare Improvements for Patients and Providers Act (MIPPA) protected CRT from competitive bidding, it did not specifically list accessories. And accessories is a bit of misnomer in that while most people hear “accessory” and think that implies unnecessary things that aren’t truly needed, in the realm of CRT, that is not true. CRT accessories are needed items that ensure a patient can properly use his or her chair and receive its intended therapeutic benefit. CRT accessories aren’t options; they’re vital to the use of the chair.

So CMS boiled CRT accessories into its national bid expansion, thus exposing CRT patients to possibly not getting much-needed enhancements
to their chairs. Fortunately the CURES Act changed that. The legislation delays the application of competitive bidding-derived reimbursement cuts to accessories for Group 3 complex rehab mobility devices another 12 months until July 1, 2017. A previous 12-month extension had been secured in December 2015.

But again, broader protections are needed for these unique patients and their providers. The most sensible approach would be to finally establish a separate benefit for complex rehab technology. With the anticipated support from the 115th Congress, as well as the Trump Administration, various stakeholders are hoping that can finally be achieved. And, once again, provides will need to provide grassroots support to help achieve those aims.

Audit Program Changes

One thing is certain about Medicare claims audits: they aren’t going anywhere. Medicare claims audits cover all aspects of the program, including the little corner that is the DMEPOS benefit. So, while the industry might push for broader reforms of the program, HME providers must deal with the hear-and-now realities of Medicare’s audit program.

And for 2017, we can expect to see some definite changes. One of the biggest is with the RAC audits. CMS awarded its latest contract to Performant Recovery in November 2016, and that contractor was slated to begin reviewing claims at the outset of this month. The RAC has said it has already determined six issues it plans to start audit, but has been mum on what those specifically will be. What we know from the recent past is that the RAC auditors have engaged in complex reviews of claim in which they have requested medical records on claims involving ventilators, low airloss mattresses, beds, power wheelchairs, oxygen, lower-limb prosthetics, knee orthotics, pneumatic compression and TENS units. So it is likely those will be items that will initially be highlighted.

And there are other key developments, the Unified Program Integrity Contractor (UPIC) audits are coming online, which will replace the ZPIC audits. Those will cover five regions and involve at least seven contractors. We can see those start to transition starting in the first half and perhaps first quarter of the year.

Other key audit trends for 2017 will be the Supplemental Medical Review Contractor; the 2017 OIG Work Plan, which will examine a variety of claims against “high risk” codes; and changes to the appeals process. A great way to get an in-depth overview of all the changes coming with 2017 is to visit and sign up to listen and watch an archive of “Audits: How to Prepare for the Year Ahead,” which was presented by audit expert Wayne van Halem, the president and founder of audit consulting firm The van Halem Group LLC, a division of the VGM Group Inc.

Ongoing Retail Evolution

Every year, for 10 years, the Big 10 has included retail sales as a critical industry trend, and this year is no different. When it coms to reinforcing providers’ revenues, and hopefully expanding their bottom line, no other opportunity offers as much as retail sales. It leverages providers’ existing patient relationships, their product knowledge, and demographic opportunities such as the Baby Boom to drive increased profits free from Medicare complications. In the early years of this publication’s efforts to beat the retail sales drum, a few stragglers would step out onto the dance floor, it took a while for the industry to start doing the cash sales boogie en masse. Now the entire industry is getting down to the sound of retail receipts. But this is an evolution, not a revolution. Providers will continue to ascend the cash learning curve.

As providers move from retail 101 to more advanced cash sales courses, one of the most important retail lessons they are learning is about metrics. The business of retail is rooted in numbers, in data, in the kind of information that can help a provider truly understand how their business is performing, and what they need to change or implement if they want to succeed.

Bearing that in mind, providers are starting to track key performance indicators for retails sales, such as gross profit; cash flow; sales per square foot; customers per day; customer conversion; average sales per customer; items per customer; repeat customers; inventory turn times; unit sales; sales by department; sales per employee; and category sales by employee. And providers are tracking this on an ongoing basis — daily, weekly, monthly, quarterly, by the half and by the year — so that they can start to not only get a realistic picture of their retail sales performance, but start to set goals and measure their performance against those goals.

If there is one aspect of retail sales any providers should focus on during the next 12 months, it is their retail sales reporting. As they track their performance based on the various performance metrics, they will uncover problems that need to be fixed, as well as opportunities for maximizing their strong points.

Diversifying Revenue via Emerging Verticals

If there is an absolute mandate when it comes to running a modern HME provider business in this era of rampant Medicare reimbursement cuts, it is revenue diversification. Providers must strive to find new business opportunities and markets in which they can leverage their product and patient care expertise in order to reach new patient segments, as well as expand their relationships with existing patients. Three of those opportunities that providers can enter in short order are sports therapy, orthopedics and wound care.

As a service, orthopedics offers serious potential because of its diverse customer base and because most orthopedic patients need more than one item. There are a wide variety of patient groups that are served by orthopedic goods: rehab patients, customers who are recovering from injuries, people suffering from sports injuries, athletic clients that need special support, post-surgery patients, maternity patients, and geriatric patients. Each of these patient groups need specific items. For instance athletic patients could need wrist, ankle, and knee braces, back supports, or, if they’ve suffered an injury, they could need ice packs, or slings.

When it comes to funded items, orthopedic goods often meet the criteria for reimbursement, and are more often covered than not when prescribed as medically necessary. Also, when orthopedics are prescribed, there are many complementary items providers can sell on a retail basis along with the funded products to increase their profits. For instance, when a patient is prescribed a knee brace, the provider can suggest custom orthotic shoe inserts, heating pads, analgesics and knee wedges, and then sell those items on a cash basis.

Wound care offers a solid diversification opportunity for some providers that already serve those patients. For instance, providers of therapeutic support surfaces might not realize how well positioned they are to truly help wound care patients and their clinical referral partners with their DME offerings. Wound care patients require specific therapeutic benefits depending on the type and severity of their wound, and often referral partners are not aware of what’s available. For providers that can pair a basic familiarity with wound staging with the detail provided in the recently implemented ICD 10 codes, providers can star to understanding what product solutions correlate with different types of wounds. In fact, that knowledge can help considerable give that many of their counterparts on the clinical side of the fence can really benefit from the product knowledge that engaged providers will acquire.

For providers seeking to capitalize on retail sales niches that leverage their product expertise and relationships, sports therapy/rehab is a key opportunity. Many sports therapy/rehab offerings are items providers already supply, or are related to them. Moreover, these products are often very much in line with providers’ staff expertise. Some of the clearly related sports therapy/rehab products would be compression garments and especially stockings; braces, supports and other orthopedic offerings; as well as both stock and custom orthotics.

Also, the sports therapy/rehab market lets providers upsell with much needed items, such as cold and heating packs, and pain management items, which also appeal to other DME patients. And, for some providers that might specialize in certain DME categories, such as mobility, they can even establish themselves in unique athletic markets, such as wheelchair sports.

Women’s Health

One of the most important areas of revenue diversification is women’s health.

Clearly, women’s health services represent a substantial amount of business for providers that want to specialize in serving women’s health needs. Representing 50 percent of the population, women have unique needs that require unique products and services. Why wouldn’t a provider business be attracted to that?

That said, women’s health, at least on the surface, represents uncharted territory for many HME provider owners and operators. It’s obvious that while women need general HME products and services, they also need specialized products and services that also require specialized product and care knowledge and unique customer service. How do interested providers approach this important business and patient care opportunity?

The first step into exploring the women’s health category is to understand that there it represents serious marketplace potential and highly diversified care needs that require serious attention. Going beyond the basic demographics in terms of the population size (49.1 percent of the population by last Census Bureau count), providers need to understand the major health conditions impacting women that they as HME providers can tap into. Bearing that in mind, the two biggest conditions affecting women’s health are maternity and breast cancer. By serving those two specific needs, providers can serve a large swath of their local women’s healthcare market.

Additionally, all the conditions that impact women — maternity, breast cancer, incontinence, COPD, and OSA, to name a few key health issues — all involve unique referral partners. This means that as a category, women’s health can help providers establish new referral relationships that could generate increased patient volume in other parts of their businesses as a whole.

Also, women’s unique health needs evolve over time, just like any other patient. So, as a provider serves one patient need, she will likely return with other needs later on down the road, assuming the provider expands its women’s health services and product offerings to appeal to the continuum of care for women’s health. In other words, a maternity patient might someday require post-mastectomy products or sleep or respiratory care. A provider that can provide solid service up-front will build solid relationships that can last through a continuum of diversified care.

To serve such a large, diverse market, women’s health requires an emphasis on comfort, discretion and trust. Many women’s health services require private discussion with a knowledgeable HME professional who is focused on understanding their needs.

This can create a “demographic challenge” of sorts for any providers that are owned and operated by men. A maternity patient or post-mastectomy patient might find it uncomfortable to discuss her condition and product needs with a man, who might not be as familiar with her health issues as a woman might. Moreover, even if a male member of the provider team knew those issues backwards and forwards, there still might be a discomfort level.

Bearing that in mind, it’s advisable that providers ensure that a woman leads their women’s health practices. A female customer service lead will help build the comfort and trust levels that women’s healthcare patients will expect, and can then dive in to ensure that those clients are getting the medical products and services that they need. And again, executed with the right kind of product and care knowledge, that lead will help build longterm relationships with those patients.

Connected Care and Remote Monitoring

This edition’s other feature article, “Continuous, Connected, Care” (page 20) focuses on connected care and remote patient monitoring, and examines where remote monitoring stands, where it is headed, and why providers need to stay on top of this key development, but it’s also important to mention its import as it relates to this year’s Big 10.

Without a doubt, remote patient monitoring is a key trend that expand in the post acute space, and providers must leverage their function as technology and equipment suppliers to ensure they play a lynch pin role in this important care trend and market opportunity.

And remote monitoring and connected care represent a significant opportunity. The number of remotely monitored patients grew by 51 percent to 4.9 million during 2015, according to market researchers at Berg Insight. And that data does not include wearable health devices, such as Fitbits; it’s solely looking at patients enrolled in mobile healthcare programs in which connected medical devices were used as part of their treatment. Looking at money, revenues for remote patient monitoring reached roughly $6.8 billion in 2015.

Furthermore, Berg forecasted that the number of remotely monitored patients will grow at a compound annual growth rate (CAGR) of 48.9 percent to reach 36.1 million by 2020, according to the study. Berg reported it expects RPM revenues to grow at a CAGR of 32.1 percent between 2015 and 2020 to eventually reach $27.4 billion.

That market size cannot be ignored and providers must push to ensure they sit in the middle of that landscape. Clearly sleep is the current hotbed of connected care development, but it’s not the only ne. Remote patient monitoring is already spreading to diabetes treatment, with glucometers that wirelessly report patients’ blood levels, and oxygen care, where some oxygen concentrators are starting to report back data. In fact, there are even wound care devices that help referral partners stay on top of patients’ negative pressure wound therapy. This is a critical opportunity for providers to add value for everyone involved in patients’ care and must not be squandered.

Private Payer Cost vs. Quality Pressures

Given the size and scale of Medicare reimbursement cuts for DMEPOS, as well as costly complications from Medicare’s increased audit programs, may providers have focused on the private payer sector as another way to increase their revenues. Private payer reimbursement is familiar territory thanks to the fact that providers have already been working in this arena due to Medicare beneficiaries using supplemental insurance, and in the case of some business models, such as sleep therapy, private payer insurance is a key revenue source.

But as familiar as territory as private payer insurance might be to some providers, it is not without its challenges. For starters, most private payer insurance carriers set their rates based on Medicare reimbursement. Similarly, private insurance companies are increasingly auditing claims and demanding repayments on faulty claims or overpayments.

Moreover, there is an increased push for outcomesoriented care, another model set by Medicare. Starting in 2010, Medicare established accountable care organizations (ACOs). ACOs are groups of healthcare providers that provide end-to-end healthcare solutions that focus on optimizing patient outcomes for the lowest price. In terms of number, Medicare has reported that there were 32 ACOs in December 2011. Just five years later, there were nearly 400 ACOs in the United States.

Now we are seeing the same drive for optimize care and ensure good outcomes for lower cost developing in the private payer world. Insurance providers want to see healthcare providers work in concert to drive down the cost of care while increasing outcomes. Their thought: if Medicare can achieve it, why can’t we?

In the same ways providers have been using technology, fostering connected care, cutting costs, and driving efficiencies in the Medicare world, they will need to do likewise in the private payer world. And that’s not a bad thing. If anything it represents a solid market opportunity, because those providers will be able to leverage they efficiencies, skills and knowledge that they acquired in their efforts to properly serve Medicare patients and referral partners. This will help establish them as key players in the post-acute space, and affirm their reputations for product expertise.

IT Interoperability

There is a push within Medicare and the private payer care world to focus on outcomes-oriented care. The goal is to have various care professionals involved in a patient’s care work together more efficiently in order to cut costs and improve outcomes. That strategy has since been adopted by private payor insurance carriers, who are also looking to ensure their beneficiaries get optimal care for the money spent on reimbursement.

In order to pull this off, healthcare providers across the spectrum are trying to implement IT interoperability in order to foster data integration and information sharing that will lead to an improved care infrastructure that involves all stakeholders. This is the challenge and opportunity that care providers across U.S. healthcare have been experiencing for the past several years, and now that interoperability imperative is finding its way into post-acute care, and more specifically, the home medical equipment industry.

So what specifically is healthcare interoperability? The Healthcare Information and Management Systems Society (HIMSS; defines healthcare interoperability as the ability of different information technology systems and software applications to communicate, exchange data and use the information that has been exchanged. One organization that is trying to foster that interoperability is , the CommonWell Health Alliance (, and HME software company Brightree LLC, which was part of CommonWell advocated that the HME industry and similar post acute care arenas needed to be included in interoperability efforts.

That’s not surprising given that some HME providers are helping build the future of connected care. A good example of this is sleep therapy, where providers of CPAPs and other sleep therapy equipment use devices that track patient progress and therapy compliance on an ongoing basis, and report that data to physicians and other stakeholders in the patient’s care.

Of course, sleep is just one segment of the industry. Interoperability needs to happen across the spectrum of home medical equipment. Bearing that in mind, what do providers need to do in order to ensure that they achieve interoperability with their referral partners? While the technology companies and organizations might work on the standards that will ensure IT interoperability for post acute care, what needs to happen in the industry so that providers have liquid files that can move across the patient care continuum?

A key is to literally just start sharing information, and there are ways to use what is currently there to improve how providers share patient records and data in a secure way with referral partners and to tighten up efficiency in the how they communicate with their physicians. Now is not the time for HME’s to sit on the sidelines and wait for interoperability to come to them. They need to start investigating how much data they are collecting, starting figuring out how they can examine it in a meaningful way, and start sharing it with hospitals, physicians and other healthcare partners.

Doing so will create new possibilities for the provider to add new value in patients’ care and demonstrating and demonstrate that it is a key element in the care continuum.

This article originally appeared in the January 2017 issue of HME Business.

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