The Perils of Part B

Before upgrading software, decide how deep you will wade into DMEPOS.

Like most other ventures, growing a small retail pharmacy by expanding into DME involves a lot of considerations.

On the upside, it can add incremental revenue and offer a natural extension of services you are already providing without necessarily needing a lot of extra space. But to get there the pharmacy owner needs to know his or her market, decide whether to stick to retail DME or move into Medicare Part B and insurance billing, and figure out what investments make the most sense for the business.

Medicare’s recently adopted practice of reverse auctions for suppliers may drive margins too low, or create exclusive territories for a supplier offering the lowest cost on an item. Insurers often follow.

“Medicare is trying now, instead of just cutting reimbursement, they look to who is offering the lowest price,” says Daniell Crane, training and support specialist at Universal Software Solutions Inc. “Can they compete when it comes to bidding wars, and are they targeting actual products that are going to be profitable? It is a very intense balancing act, especially when it comes to Medicare, but also private insurers are getting providers to compete in terms of the lowest price they will take.”

Jason Jacobs, COO of VirtueRN, explains the impact: “About five years ago there were 40,000 DME providers. Now it’s about 8,000. The competitive bid process has really drawn down and consolidated that space.”

DME can add to your sales numbers, but if you don’t plan on doing much volume, it probably isn’t worth adding a DME software system. Either way, it’s essential to be very selective about which items you offer to ensure you can make a profit.

“Can they compete when it comes to bidding wars, and are they targeting actual products that are going to be profitable?” Crane says. “When I think about the small mom-and-pop, I think of a lot of cash options. They would have to be really cautious about the types of products they choose to dispense. They would have to be really aggressive about running reports to see how profitable [each] product is.” That includes staff time for managing the products as well as the tracking system.

Another thing to think about: Part B includes accreditation exemptions for pharmacies that have been open for less than five years, or if DMEPOS is less than 5 percent of their business over the past three years. A small pharmacy can do a limited amount of DME business with Part B that may be manageable without dedicated DME software. “They have to follow the same rules and procedures, but they don’t need [DMEPOS] accreditation,” says, Timothy Safley, director of DME pharmacy and sleep at accrediting organization ACHC.

This article originally appeared in the DME Pharmacy April 2018 issue of HME Business.

About the Author

Holly Wagner is a freelance writer covering a variety of industries, including healthcare.