Taking Shape

A 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
hme-business.com/webinars 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; himss.org)
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 (commonwellalliance.org),
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.