How do you define a successful venture or investment? Each of us has a different perception of how much of a good thing equates to “Success.”
There is an old tale that had two hikers trudging across a remote meadow when they suddenly became aware of an enormous grizzly bear heading toward them from a distance. The more the hikers tried to put distance between them and the now angry bear, the faster the bear ran, and the louder he snapped his massive jaws. In their blind panic to run away, one hiker suddenly stopped, ripped off his hiking boots and backpack, and began lacing on a pair of running shoes he had in the pack. His companion screamed over his shoulder, “Are you crazy? You’ll never outrun that bear!” The first hiker calmly replied as he came sprinting up behind, “I don’t have to outrun the bear, I just have to outrun you.”
So, success is a relative term. For the purpose of my discussion, I will assume success to mean that the company is achieving double-digit growth in sales, and earnings before interest, taxes, and amortization (EBITA) at or above industry norms.
Many reading this magazine have small companies with minimal oxygen business, have been in the industry for 5 years or less, or have been heavily involved in rehabilitation or HME and are now trying to grow a respiratory division. This article is written with you in mind.
Then and Now
There were “good old days” when reimbursement was more generous. In fact, liquid oxygen was paid for by the pound and we even got mileage. These margins allowed us to increase the services we offered, and we added professionals such as respiratory therapists, registered nurses, and registered pharmacists to our staffs to handle increasingly complex therapies and sicker patients.
The competitive environment demanded that you match the level of professionalism and care of other companies, or lose valuable referral business, and the patients won.
As we fast-forward to today, we find an industry that is caring for sicker patients who need more service and support than ever. We are expected to get patients home sooner and keep them there despite the fact that our industry has endured no less than 18 reductions in reimbursement via legislative and regulatory actions over the past 15 years. The Balanced Budget Act (BBA) of 1997 alone resulted in the largest single Medicare reduction of 30% to oxygen therapy allowables.
At the same time, “managed cost,” oops, I mean “managed care,” has further eroded margins as payors practice “voodoo reimbursement”—a term I use because there is often no logical way to calculate how they pay suppliers. Is it based on the Medicare allowable or some percentage of that?
In addition, regulatory requirements have created a paperwork nightmare. Close to 40% of our payroll is devoted to some aspect of intake, billing, certificate of medical necessity (CMN) completion, or other required documentation issues. And accreditation, certification, and licensure add another layer of expense.
Finally, competitive bidding is the monster that has lurked in our collective closets for years, and Congress is making sure the door is going to be opened very soon.
Managing for Survival
In light of these eroding margins and the aforementioned regulatory nightmare on the horizon, we should focus on the basics of survival. The dinosaur was a fierce competitor, but he couldn’t survive the catastrophic changes in his environment. Half the battle is just being here.
1. Conquer administrative challenges. It is imperative that you hire the best people you can find and invest in continual training. Starting with the front end of the order intake process, everyone must understand the rules of medical necessity.
Having clean and complete data at intake simplifies the billing process and speeds up your ability to get CMN and prior authorization forms out the door.
Adopt a clear process for managing turnaround times on CMNs and a quality assurance stop that monitors the accuracy and completeness of required information.
2. Control your audit risk. Unfortunately, we put so much emphasis on just getting paid for the products/services we provide that we often think that getting paid is the end of our problem. Cash is king, and we need to focus on reducing our days sales outstanding (DSO) as a part of aggressively keeping our cash flow as high as possible.
However, as an industry, we have a much greater risk on postpay audits than most of us understand. In fact, I think Medicare and Medicaid audits are the silent killers of HME. There are multiple examples of companies that have been forced to sell their assets after losing appeals on large audit recoupments.
Whether the audit finds are accurate or not, you are still expected to pay the money back. Can you afford to lose $300,000, or $1,000,000 overnight? To control your risk, remember that the best defense is a good offense. If you are going to minimize the amount of postpayment recoupments, you must actively incorporate internal audits. Part of your compliance plan needs to focus on regular audits of all aspects of your billing and collection processes. Mimic the exact audit processes used by the payor, and never cut corners.
3. Add new technology wisely. How many times have you heard someone say, “Work smarter, not harder”? I must admit there are days when I would consider punching someone if they said that to me. But the fact is that we have to find ways to reduce our cost of doing business. If you are going to purchase new technology, it should either reduce your costs or increase market share.
Look for ways to shorten the time you spend on labor-intensive functions, such as delivery and maintenance. Reduce home visits by using concentrators that require less frequent servicing; stage liquid systems so that you deliver only once a month; use conserving devices on portables and stationary systems; or consider equipment with data “upload” capabilities. Remember, inefficient companies will not survive.
4. Control inventory. A frequent headache for cost-conscious managers is that referral sources and patients always want “the latest” products. Draw a line between need and want. You can’t get caught up in keeping up with the Joneses.
Standardizing inventory saves dollars because multiple product lines require keeping larger quantities of goods on the shelf. In addition, multiple cylinder sizes can become an inventory nightmare leading to multiple regulators and content gauges as well as questions about which patients have which cylinders and of what quantity. You have to decide on what systems you are going to use, and promote them. Someone is always going to offer something smaller, cuter, lighter, or longer-lasting. Prepare to defend your choices.
Discuss consignment inventory with your vendors. For many items, this improves your cash flow by limiting outlays until the product actually goes out the door.
5. Get therapeutic credentials. If you do not have a good respiratory therapist on staff, find one—even if that means just hiring a consultant. New technologies are great if we look only at reducing costs, but many end-stage chronic obstructive pulmonary disease (COPD) patients will not tolerate some of the oxygen-conserving devices on the market. Every patient who is considered for oxygen conservers should have an overnight oximetry test to see if they desaturate on the conserver. Patient safety is still our primary goal.
6. Know your costs. If you do not know what it costs you to provide liquid oxygen to a patient at three liters per minute for a month, you are not alone. However, to survive in a marketplace that is “managed cost,” not “managed care,” and that has competitive bidding on the horizon, you need to figure out this and all your other costs.
Start by adopting some form of activity-based management (ABM). This is a systematic approach to planning, improvement, and control of any organization through management of each activity and process used in the provision of products and services to your customers.
In other words, spend the time and money to know what your real cost of doing business is. In general, you will need to identify value versus nonvalue activity costs and primary versus secondary processes as well as evaluate the profitability of possible improvement options.
There are several quality organizations and consultants who can help. Call one.
7. Manage productivity. Using technology to cut costs is often the easy part of the equation. The hard part is determining operational efficiencies of your staff. Use benchmarks whenever possible to monitor your employees’ productivity. The American Association for Homecare (AAHomecare) sponsors an annual industry financial survey. Get it and use it. Also, demand tracking of processes such as time studies from all departments, especially patient care staff. We can no longer afford to be social service agencies.
Industry Involvement
Zig Ziglar is fond of saying, “If you keep doing what you’ve been doing, you’ll keep getting what you’ve been getting.” I fully subscribe to this, except in the changing face of reducing reimbursement, if you keep doing what you’ve been doing, you will not be doing it much longer in the HME field.
You can’t survive by accident anymore. Our national and state associations are fighting for our collective lives on a daily basis. At times, they are the only ones who are going to bat for you. Join AAHomecare today. The National Home Infusion Association is also a great organization, and your state or regional association is a terrific place to network. National member service organizations, such as The MED Group, Northwood, and VGM also work hard to preserve our industry.
In closing, you need to get involved in this industry to succeed. You meet people who become incredible resources for information, and you have the opportunity to have a direct impact on whether your business is at the forefront of change, or reacting to the results of decisions made by others. Make education a priority for you and your staff. There are incredible programs being offered through the aforementioned associations.
As long as there are people with health problems, there is a need for well-run, independent home health care companies. Make the decision today to embrace change and be here for the long haul. With hard work, and a little luck, you can succeed.
Timothy D. Pontius, RRT, is president and CEO of Young Medical Services and Toledo IV Care, Toledo, Ohio. A home health care industry member since 1978, Pontius is a past board member and president of the Ohio Association of Medical Equipment Services (OAMES) and a current board member, regulatory committee chair, and ethics committee member of AAHomecare. Contact him at pontius@hmeiv.com.
| Merits Health Products Inc, Cape Coral, Fla, is moving into the respiratory market. Doug Strayer, its national sales manager, shared with Dealer/Provider what this will mean for the HME industry. Q Why did Merits Health decide to enter the respiratory market?
A The simple answer is that we have diversified our product mix to expand services and attract a different clientele. Obviously, the majority of people on some type of oxygen therapy or in need of respiratory treatment usually have a mobility need at the same time. It is a natural crossover. Q What will your respiratory line include?
A Initially, we were coming out with two concentrators in our first run. The first one is our 5-liter unit, which the US Food and Drug Administration (FDA) approved last year. Second is our 3-liter, which just received FDA approval. We are going to stay primarily in the commodity business of the respiratory market. [This means that] we are going to be doing the basic product lines and basic product mixes on the respiratory side. After introducing the two concentrators, we will introduce our piston-driven small nebulizer for aerosol therapy. Then we will follow with a continuous positive airway pressure (CPAP) device line. Q How are you spreading the word that Merits Health is adding a respiratory product line?
A Right now, we have been in a testing phase. We have done some preliminary introduction and display of products at some of the trade shows. We have also talked to some key national accounts that we have been interested in going after for the product line itself. We have been very low-key until all of our testing was completed. Q What makes you concentrator different from others like it?
A Concentrators are concentrators, but what sets this one apart is that it is one of the first units out of Asia. Second, the majority of internal components of this concentrator are 100% Merits. That is going to give us a cost advantage. This cost break is going to be very attractive to all the dealers in the marketplace. Q What should our readers expect from Merits Health in the next year?
A By the end of this year, we will have both concentrators in the marketplace. By the beginning of next year, we will introduce the new nebulizer line. We will most likely be following up with the CPAP line sometime next year. In addition, we are always enhancing and expanding our mobility line. For example, we have some new K0014 products that we just brought to market. We are going to focus on mobility and respiratory, and beyond that, on patient aids and rehabilitation. | |
| Respironics Makes Leap In CPAP Comfort Sleep apnea patients looking for a more comfortable alternative to the traditional continuous positive airway pressure (CPAP) device may be able to breathe easier thanks to Respironics, Murrysville, Pa. In December, the company introduced REMstar Pro® with C-Flex™ to help sleep apnea patients who find it difficult to exhale during conventional CPAP therapy. The C-Flex waveform is designed to take the work out of exhalation by tracking and reacting to every breath throughout the night. Patients can choose from one of three pressure level settings. Then, based on expiratory flow and the chosen setting, the device makes breath-by-breath adjustments to ensure the optimal level of pressure relief during exhalation. This delivers a more comfortable therapy and supports long-term compliance, Respironics says. The company also updated its Esprit Critical Care Ventilator with a communication option that provides caregivers with a host of real-time data to enhance patient monitoring and care. Compatible with Esprit software version 4.30 and higher, the Esprit Communication Option allows for the printing of any Esprit screen; captures real-time data for flow, volume, and pressure from the Esprit analog port for download and review; and communicates the same data plus alarms from the Esprit ventilator to a Philips Component Monitoring System via the VueLink® module. |
 ResMed Gets New BossKieran Gallahue, a former executive with Nanogen Inc, San Diego, took the reins at ResMed Corp, also in San Diego, on January 13 as the company’s new president and COO. “I am tremendously excited to join the ResMed team,” Gallahue says. “Sleep disordered breathing is a common and serious medical condition associated with hypertension and heart disease, yet it remains undiagnosed in far too many situations. I look forward to working with the entire ResMed team as we help change the lives of patients and their families.” Gallahue will report directly to Peter Farrell, PhD, DSc, chairman and CEO of ResMed Inc, the global parent of ResMed Corp. |
Respironics’ McClure Joins MED Group
In December, the MED Group hired a 25-year respiratory care veteran, Jacquelyn M. McClure, BS, RRT, as director of its National Respiratory Network and of government relations.
“We’re excited to have an outstanding individual such as Jacki McClure join our team,” says MED Chairman and CEO David A. Miller. “Her clinical background, product experience, and work in the sales training and reimbursement areas will bring real benefits to our members. We are truly fortunate to have her on our team.”
McClure, of Pittsburgh, comes to MED from Respironics Inc, Murrysville, Pa, where she managed the company’s government relations.
“I’m very excited and honored to be joining the MED Group,” McClure says. “I have been aware of MED for quite a number of years through my work with providers and my committee activities with various professional associations. The organization’s reputation for quality and professionalism is well known. I look forward to working with the MED members to grow and improve their business.”
CPAP Improves Long-term Quality of Life, Study Says
Sleep apnea patients who receive continuous positive airway pressure (CPAP) treatment will benefit now and later, says a study by the University of Alberta Hospital Sleep Disorders Laboratory. Launched in 2000, the study found that patients who used CPAP over a long period of time reported a better health-related quality of life.
The researchers examined 723 patients suffering from daytime fatigue, sleepiness, and/or snoring. Of these, the 358 with an apnea-hypopnea index (AHI) of less than 20 were not prescribed CPAP therapy, and the 365 with an AHI of 20 or higher received CPAP treatment. Via a questionnaire, the researchers assessed the patients’ quality of life at the initial consultation, at 3 months, and at 12 months.
“We observed a marked and striking improvement in patients’ vitality in the first 3 months of CPAP treatment, particularly for those with AHIs of 40 or more. Most importantly, these improvements were maintained over a 12-month period, suggesting that CPAP therapy is effective in improving the long-term health-related quality of life of patients with OSA,” the researchers wrote in the study report, published in the November 2002 issue of CHEST.
Study Challenges Assumptions About Sleep Apnea Prevalence
While early studies found the greatest incidence of sleep apnea in overweight middle-aged men, this is far from being the only group affected by the disorder, says a study published in the January 23 issue of The New England Journal of Medicine. The study, which focused on professional football players from eight randomly selected National Football League teams found the incidence among these young, physically fit men was 14%—nearly five times higher than that noted in previous studies of similar aged adults. The highest incidence (34%) was found among linemen, who are often the heaviest players on the teams.
“Professional football players have some of the risk factors associated with sleep apnea but their age and physical condition previously would not have suggested a prevalence of the disorder until they were much older,” says Charles George, MD, professor of medicine, University of Western Ontario, and principal investigator of the study. “Many physicians have never considered such a diagnosis in young, healthy individuals because sleep apnea was previously thought to be associated with middle aged or older individuals. The study strongly suggests that sleep apnea be considered as a possible condition for larger patients under 30 years of age.”
The study was conducted by Dr George with management provided by SleepTech Consulting Group, New York, and the ResMed Sleep Disordered Breathing Foundation, San Diego.
WHI Home Care Director Becomes AARC Fellow
At its 48th International Respiratory Congress in Tampa, Fla, the American Association for Respiratory Care (AARC) named as a Fellow Timothy W. Buckley, RRT, director of respiratory services for Walgreens Health Initiatives (WHI) Home Care, Deerfield, Ill. The AARC Fellowship Program recognizes members who have made significant and sustained contributions to the field of respiratory care. Buckley, a respiratory therapist for almost 30 years, has been with WHI since 1996.
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