Shining a Light
As the industry enters a transitional phase, HMEB’s Editorial Advisory Board helps providers plot a course through uncertain waters.
- By David Kopf
- Oct 01, 2017
Each year members of HMEB’s Editorial Advisory Board survey the state of the industry and join a set of roundtable interviews in order to share the key trends, issues, challenges and opportunities that they feel providers should have on their radars. This year’s installment of our annual roundtable discussion is perhaps one of the most important.
The industry is in a transitional phase: HME now has friends in HHS and CMS, as well as a host of allies in the House and Senate, but at the same time, competitive bidding and a scaled-up audit program have had years of momentum behind them. While these programs have had their impact on the private payer market, providers have sought to diversify their businesses not only into private insurance, but also retail and facilities care settings such as skilled nursing facilities, residential care, and hospitals.
In other words, the waters are uncertain, and providers need help charting a safe course, which makes the 2017 edition of our roundtable both timely and impactful. So, without further introduction, let’s dive in and see what this year’s panel of experts has to share:
Steve Ackerman, president of Spectrum Medical and chairman of the American Association for Homecare
Both as a provider and the chair of the industry’s national association, Ackerman says advocacy should be a top-line concern for providers. "The most important thing that people can do right now is get involved with the industry if they haven’t already," he says. "The next six months are going to be really significant, because I firmly believe there’s some changes coming from Medicare."
Reason being, he explains, is that the industry has allies in HHS Secretary Tom Price and CMS Administrator Seem Verma. "The new leadership that Medicare is taking a serious look at what we’ve been discussing as problems, and they are working hard to solve them for us," Ackerman explains. Focusing on regulatory fixes ensure the industry can achieve "smaller changes made at an administrative level, so we’re not feeling like we’re being forced to legislate everything that could make real differences in our business."
At the same time, providers need to develop solid relationships with their lawmakers and legislative staff, as the industry is working the legislative front, as well. "It’s a great time to get a relationship started or renewed," Ackerman advises. "We’re going to be looking for a lot of grassroots support going into next year." For now, he says providers need to inform lawmakers: "It’s mainly keeping your congressional delegation up to speed on what’s going on, so at the time that we may need to have somebody sign on to a letter, or take the lead on an issue, that they’re ready."
Jeffrey S. Baird, Esq., chairman of the Health Care Group of Brown & Fortunato, P.C.
From his position, Baird says a key concern for providers is the legal issues stemming from Billing non-assigned, a popular strategy for providers suffering stiff reimbursement cuts.
"When a DME supplier elects to bill non-assigned, it can charge the patient greater than what the Medicare allowable is," he says "… And there are no restrictions as to how much more the DME supplier can charge. If the beneficiary doesn’t like it, he can go elsewhere.
"If it wants to charge less than the Medicare allowable, it has to be aware of a statute that says that the supplier cannot charge Medicare substantially in excess of the supplier’s usual customary charges unless good cause is shown," Baird continues. "Now what does that mean? Well it’s not clear what that means. We’ve not had any real clear guidance by the government."
That uncertainty should sound familiar to any DMEPOS provider. Also it’s important to note that none of this applies to providers with competitive bidding contracts providing items covered by that contract. In that case the provider take assignment for the bid rate.
Also, providers can’t discriminate against Medicare beneficiaries, meaning that they can’t opt to supply inferior products to Medicare patients and far better options for other patients
Lastly, while billing non-assigned, "the supplier still has the responsibility to collect documents to justify medical necessity," he says, because a claim can still be audited. If the claim is recouped, the provider must refund CMS for the reimbursement and the patient for the difference.
Rob Baumhover, director of retail services for VGM Retail Services
For Baumhover, the priority for retail HME is focusing on customer experience. "If you read any blog right now when it comes to retail, they’re all talking about store experience," he says. That starts the moment customers walk in the door. They need to be greeted in 30 seconds. "Sales increase because that customer feels welcome and comfortable. If no one approaches them, and they don’t see what they’re looking for, they walk right out the door, because they won’t feel comfortable going up and asking that sits behind a desk."
He also says that providers shouldn’t cram their stores with their entire inventory. Rather, they should showcase items that are frequent sellers, or attract customer interest, and then use signage, displays, and interactive items such as tablets or video displays to showcase other items that aren’t on display. "Less is more," he explains. "… It’s picking the right product around kind of the right category that you can expand on."
Such was the case for VGM’s Retail Laboratory at this year’s Heartland event, which used an retail storefront in downtown Waterloo, Iowa to
demonstrate a more minimalist approach. "It doesn’t take a lot of money; it doesn’t take a lot of time," Baumhover says. "It’s just sitting back and saying, ‘Okay, what can I do here from a product placement, from the right fixture, to the right lighting, or even some signage in the store that can really help direct our customer to where they need to go?’"
Ty Bello, RCC, president and founder of Team@Work
A practitioner of improved process, Bello says providers need to place a premium on what he calls Business Optimization. He breaks it into various parts. "First I look at the team, and making sure that we have a cohesive, strong, leadership team," he says. "Everyone on the team understands roles and responsibilities, and has a clear vision for the company."
The next step Bello says is the overall health of the organization. Providers must look at their human assets and ask themselves, "How are we at the business?" he explains. "Do we have good people on our team? Do we have those people in the right role, with the right level of responsibility? Are we growing as an organization and as a team? And I don’t mean just in size. I mean, are we working more functional as a team?
After that, providers need to engage in some strategic planning. "We need to look at our business, historically," Bello says. "We need to look at all of our sales financially, how we’ve done in the past. We need to compare it to today, and we need to do a profitability analysis by product.
"Once we lay the landscape of what product we have, our most profitable for us … we need to take a look at where is that product at in our marketplace, and do we possess market share or not? … From there, we can go from marketing strategy that brings our product out there. This is the final stage: We need to have metrics in place that say whether or not we are successful.
When providers do those things in earnest, Bello says "this will change the landscape for every HME business out there."
UNTANGLING MEDICARE’S RED TAPE
Georgie Blackburn, vice president of government relations and legislative affairs for BLACKBURN’S
As someone who has spent the lion’s share of her HME career in industry advocacy, Blackburn advises providers to monitor the Ways and Means Committee’s Medicare Red Tape Relief Project (bit.ly/2x7llA0), a far reaching effort to reduce "unnecessary and burdensome regulation" that was kicked off earlier this summer.
"It’s the first time, any major committee has not taken one of our issues, but the whole climate of our industry, and the regulatory burdens we’re under and the things that don’t make sense for the patients we serve, in an investigative way," Blackburn explains.
And where the industry is concerned, both the American Association for Homecare and the National Coalition for Assistive and Rehab Technology have state the industry case when it comes to Medicare’s regulatory burdens.
"The summaries that went in from NCART and AAHomecare were very clear how this small, but important portion of the Medicare budget helps to reduce the federal spending has to be looked at," she notes "… I think we’re at a good start right now. We have started the dialog.
"I don’t think I’ve ever been so excited as I am right at this moment. It’s like we’re at the confluence," she adds. "We’ve got this major committee saying, ‘we’re going to take this to task;’ we’ve got Secretary Price in place; we have data on these issues, and we’ve got the tenacity of this industry to help drive it through."
Rob Boyeye, executive vice president of HME for Brightree LLC
What Brightree’s Boyeye sees is an increasing trend toward flattening the HME business. Providers must focus on their core business, and identify ways to outsource and distribute the operational aspects of their businesses as much as possible. "That patient portion of what they own is really the profit, is really their profit right now."
And in that respect, Boyeye says software companies such as his have been striving to facilitate that: "We’re at a point where most of the products that we will introduce from a software standpoint or services are pretty much in a box wrapped with a bow on it, and we will help you implement a business function and make it successful."
In terms of outsourcing, "you need to flatten your distribution supply chain," he says. "You do that by utilizing technology and then partnering with manufacturers and distributors that are connected to different vendors." Boyeye says a key way to achieve this is to use software that connects directly with distributors, to place orders, and have items drop shipped to patients.
Another area is billing. While providers have created highly efficient billing operations, they still represent overhead that might be more cheaply outsourced. "That allows you really to focus on what’s most important, and that’s getting the patients and referrals into your business," he says. "We’re seeing a lot of that now."
Sandra Canally, president of The Compliance Team Inc.
For Sandy Canally, most providers serving Medicare beneficiaries will likely have to front burner accreditation renewal. Since Medicare began requiring accreditation, DMEPOS have had to renew every three years. "In the accreditation cycle, in 2018 we will probably double the amount of on-site visits," she says.
And this requires providers making sure they’re up-to-date with their accrediting organization’s standards, which have likely been revised since an HME has last renewed. Moreover, a provider will want to ensure they are using the process to their strategic benefit. "They need make sure that they’re updated, that they’ve at least looked their quality improvement plan," she says. "They need to look at their policy manual and make sure that the written policies actually match their process."
Also, while Medicare accreditation means an HME can bill DMEPOS claims, other payers use it as a gold standard. So even if a provider isn’t doing much Medicare, it still needs to use that accreditation to ensure it will pass muster with private payers and health plans. "Accreditation covers more than Medicare," Canally explains. "We see a lot of Blue Crosses, a lot of managed care—the Aetnas, the Cignas, the big guys—will not only contact the accreditor to verify the dates of accreditation for a particular DME, but they will also drill down the product lines that they’re accredited for. In other words, they’re mimicking Medicare in that product line specific."
John C Eberhart, president of Eberhart Home Health Inc.
Eberhart finds himself in a tricky spot. He is winding down his operation in Albuquerque, New Mexico, after closing down his Dana Point, Calif.- based provider business in 2013. While he now works for International Biophysics, the company that manufactures the Afflovest HFCWO solution, he is disappointed to shutter his respiratory and sleep businesses.
Still, he is taking a primary lesson to heart: "Don’t beat yourself up," he says. As providers twist themselves into knots trying to survive audits, competitive bidding and other regulatory challenges, and as they struggle to expand and diversify into cash sales and private payer, they must always keep in mind that much of their problems are beyond their control.
Moreover, they must remember that their patient and referral partner relationships still represent crucial assets.
"The most valuable thing that you have right now are the relationships that you’ve built over the years," Eberhart explains. "… They can put you out of business. But they can’t touch those relationships. Keep in touch with them, reach out to them, say hello and see how they’re doing and how the DME is treating them. Then down the road, if, God willing, something were to change, those relationships are still there and those people are going to appreciate you because you didn’t walk away from them or their patients."
RECAPTURING A MASSIVE MARKET
Joe Lewarski, vice president of global respiratory and sleep for Drive Devilbiss
At a time when providers are twisting themselves into pretzels trying to work underneath competitive bidding rates, branch out into private payer and retail sales, and appeal to untraditional market opportunities, such as facilities-based care, Lewarski points out an astonishing but true fact: they are losing vast sums to the Internet.
"There are literally hundreds of millions of dollars of durable medical equipment, including higher respiratory device, such as CPAPs, POCs and aerosol machines, transacting for cash everyday on the Internet," he says. "I’m not saying get into the internet business, because that’s hard thing to do. … I’m saying those customers go there because they’re not being served in the traditional pathway."
Traditional models are fraught with frustration and cost that are pushing patients online. In addition to Medicare often not covering devices patients want, patients of private payer plans often have exorbitant copays that exceed the online price for the same equipment. .
This leads Lewarski to wonder how can providers recapture the business that is lost in the no man’s land between funded business and retails? The path isn’t clear now, he says, but says some corners of healthcare are venturing into it, such as physicians creating boutique clinics, or cash menus at urgent cares. He advises HMEs must now explore ways to capitalize "in the gaps that exist in the current health care models."
GO WAY OUTSIDE THE BOX
Ron Resnick, president of Blue Chip Medical Products Inc.
In Resnick’s opinion, many providers need to branch out — way out. If the business of providing DME to Medicare beneficiaries is getting too expensive with increasingly diminishing returns, they must seek new path. He has some ideas on new markets they can try.
"A big area that they’re not going after, I think, is the Veteran’s Administration," he says. "The VA Hospital is in the hospital business."
He adds that the VA and facilities-based settings represent a great opportunity for providers who might not be able to transition into retail. "Take your inventory and start to move it out via long-term care facilities, hospice facilities," he says. "Rent it out. You may not be happy with the rental price, but at least if you do it right you can make money and start to build a business."
"I also think that a lot of the providers should go back into the maintenance of equipment," he says. "For example, equipment that came off of a bid, and it’s no longer covered to do service." Resnick adds that his business often gets end user calls for maintenance, which he then refers to local providers.
If any of this sounds like it is not as lucrative, or a lot harder, or represents a steep learning curve, Resnick says that shouldn’t come as a surprise to anyone. The industry is changing, and so too must providers.
"If providers are still thinking of the old days" he says, "there are no more old days."
Tom Ryan, president and CEO of the American Association for Homecare
Like Resnick, Ryan feels a trend that providers cannot ignore is diversification. From where he sits, providers must work overtime to expand their revenue sources. As much as competitive bidding might be chipping away at reimbursement, the demand is there. Ryan says providers must keep HME’s demographics at the fore of their minds.
"The market is tremendous," he reminds. "…The growth rate is predicted to five or six percent as we go through the next decade so the need for our services is going to continue to accelerate just by the population that is aging and living longer and needing the products that we provide."
So if funding is becoming a barrier to providing HME/DME, then it comes down to finding new ways that provider businesses can find their way to the patient. That might be retail, that might be private payer, or other models. For Ryan, his association is trying to work with members and sometimes other industries to create new care and business models, and particularly ones that prevent the possibility of a "two-tiered" system for DME.
"From a growth standpoint, and the more diversified our members are, and the more financially sound they are, I think we will continue to have a very viable industry," Ryan says. "Our job at AAHomecare is to continue to make a landscape for all beneficiaries, ones who need to work within the benefits and ones who might be able to pay outside of the benefits, to get good quality healthcare."
STUDYING REVENUE QUALITY
Wayne Slavitt, founder and CEO of Mobül: The Mobility Store
Slavitt is a retail crusader, and with good reason: his mobility business in Long Beach, Calif. Is 100 percent retail sales. There is not funded portion of his revenues. And he does that for a reason that he thinks more HMEs should study: Revenue quality.
"As business owners looking at the upcoming year, they should be looking at the quality of their revenues," he says. "Where are the revenues gonna come from? What is going to happen to margins? How predictable are those revenues going to be in the future?"
And there’s a reason that Slavitt wants providers to think in these terms: they need to be more hard-nosed about where their money is coming front. While many might have built their businesses around Medicare and patient funding, if they truly examine their revenues from a more straightforward perspective, they might not necessarily be too happy with what they see.
"If the prediction of those revenues is in jeopardy … then that doesn’t bode well for the upcoming year.
Furthermore, Slavitt says that providers shouldn’t necessarily look at their funded businesses with poor or no profits as ways to draw in retail customers.
"If you’re gonna program loss into your sales, then that’s no different than spending that money on marketing," he advises, adding that providers should be "going after that right customer, as opposed to this accidental customer who’s coming in to take product off your floor through Medicare at no profit to you."
TOUGH NEW AUDIT PILOT
Wayne van Halem, president and founder of The van Halem Group LLC
A major audit trend van Halem sees coming up is a special pilot program involving targeted pre-payment reviews. In the program, a given provider will get 20 to 40 pre-payment audits, and they have to respond to those. If the provider’s claims are clean, then that provider will get a six- to 12-month reprieve, he explains.
If they don’t perform well, then the provider must undergo education sessions and will undergo 20 to 40 more claims audits six months later. If the error rates don’t improve, several things can happen, such as being referred to the UPIC for more targeted, in-depth claims audits.
"If at that time their error rate does not improve, then they’re going to get referred to CMS," van Halem says. "With a referral to CMS, there are several things that can happen. One is they can be referred to one of the new UPIC contractors for them to do a targeted, more in-depth audit of the provider’s claims. Or, CMS can take a tougher tack."
And that can get very serious, he says.
"CMS has the authority to revoke billing privileges of a provider who shows a pattern of billing for services that don’t meet the requirements," van Halem explains says. "They started putting information regarding their authority to revoke billing privileges in their overpayment letters about a year or so ago. So, just a bit, warning to folks that there’s a risk of that with these new types of audits."
This article originally appeared in the October 2017 issue of HME Business.