Provider Strategy

Getting Started in Respiratory

How DME pharmacies can tap into new revenue via respiratory.

Respiratory DME can represent a profitable venture for DME pharmacies, but it’s not for the faint of heart. It takes a significant investment of time, money and resources and depending on which products are offered, it might require additional, specialized staff. If you are looking for growth opportunities and have the right clientele for respiratory equipment, it’s going to take a lot of planning. HMEB asked David C. Lyman BA, RRT, RCP, director of alternate care and respiratory services for VGM & Associates, to give us the lowdown on what to consider before getting into respiratory, how far to go and how to get started.

HMEB: How can a DME pharmacy approach funded respiratory?
Lyman: The first questions that have to be answered are: Do I have the right customers now for respiratory equipment? And, am I providing respiratory medications to my customers? Some of these customers may need a nebulizer for their medications. The pharmacy would need to look at their contracts with their payers to see if they could bill for the DME. Other vital questions include: Is there a need in the community? How many providers/competitors are in the area? Do they currently have customers asking for equipment such as nebulizers, oxygen and CPAP? Does the pharmacy have the knowledge and/or personnel that can start a respiratory program?

HMEB: What kind of infrastructure and resources does this take?
Lyman: First the pharmacy DME would need to have the appropriate licensure for the state to provide services. They would also need to apply for Medicare and Medicaid numbers if they are going to bill these services. Most managed care plans require the provider to have a Medicare provider number. Depending on the area, they may not be able to bill Medicare if they do not have the competitive bid.

The pharmacy would need to get accredited for respiratory equipment. They would need policies and procedures, follow the Medicare standards, have adequate space for the equipment, billing system, process flow, FDA knowledge and a marketing/sales plan.

The next step is to create a budget so they could understand their cash flow needs. They would need their state’s licensure laws on who can set up the respiratory equipment. Many states, through a pharmacy board or respiratory board, require that a respiratory therapist be on staff. The staff would need to understand the process from intake, setup, billing, denials and equipment maintenance.

And don’t forget about the logistics of providing on-call, delivery and other services. Like any new business venture, there are a number of details to know prior to entering the respiratory market; however, there are resources available through membership groups like VGM Respiratory.

HMEB: What kind of assets does that require?
Lyman: The assets that would be required depends on what respiratory equipment you are going to offer. If it is just nebulizers, the assets would be fairly minimal. If it is oxygen, what is the business model? Stationary concentrators and oxygen cylinders? Liquid oxygen? Portable concentrators? There could be thousands of dollars of assets needed to venture into this market.

One way to decrease your assets on hand is to work with a distributor to help create a just-in-time model (JIT). This could help reduce inventory and help with cash flow. Just-in-time inventory is a strategy to increase efficiency and decrease waste by receiving goods only as they are needed in the production process, thereby reducing inventory costs. JIT inventory is a standard in other businesses. It is very beneficial to forecast what your projected inventory need may be. It is important to really do your homework and evaluate your vendor partners. It is a good practice to create a formulary for your equipment.

HMEB: Is retail a better or more viable option?
Lyman: Retail is always a good option. Selling nebulizers, CPAP and portable oxygen concentrators would not require as much infrastructure. You would still need to have the appropriate staff and have them educated on the equipment. You would also need a good customer base for walk-ins, and a strategic marketing plan is instrumental in planning for retail.

Assets may be less for a retail model; however, you would probably need to have a better selection for your customers so they can compare products before they purchase. Also, customer service is imperative with the retail model. Your staff should display patience, empathy, warmth, friendliness, responsiveness and knowledge of the products.

HMEB: How does a pharmacy approach developing referral partners?
Lyman: Referral partners are essential for the program to survive. You will need to know: Who are my referrals coming from now? Do they order respiratory equipment? How can I get them to refer to me? Most referral sources are looking for a provider to have exceptional customer service, ease of referral, who’s knowledgeable, has great patient satisfaction and be timely.

You should also have a keen knowledge of your market. Who else is referring respiratory equipment? How can I get to them? How do I differentiate my company from the rest? This can be a difficult task, but there is market data that a company can get from CMS. You can also purchase referral data from companies that specialize in these analytics, such as VGM Market Data. This information will detail who and where the business is coming from.

HMEB: How does a retail business market itself to end users?
Lyman: The marketing plan is very important for success. The pharmacy should market to all their existing customers. This could be done by material in the store such as posters, brochures and advertisement in all prescription bags. Especially target patients who are on respiratory medications and have a respiratory diagnosis. You can find a lot of existing patient data through your CRM. They would need to develop a plan to call on physicians, case managers and pulmonary facilities. This is a new thing for most small pharmacies but can be a very effective marketing tactic to grow your respiratory business. Also, there are a number of experts and resources that can help you evolve into the respiratory market. Don’t hesitate to reach out and ask questions.

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

About the Author

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

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