Historically, the HME industry has had to cope with many challenges, but recent reimbursement cuts, looming competitive bidding, the Federal Employees Health Benefits Program (FEHBP)-based pricing reductions, accreditation requirements, and the Office of Inspector General (OIG) exclusionary rule combine to make today’s environment one of the most threatening in years.

Even in the best of times, many dealers turn to member service organizations for help in running their businesses more efficiently. A strong backing organization makes even smarter sense now. Home Health Care Dealer/Provider magazine spoke with representatives from four member service organizations to find out what they have been doing to help members cope with both current and potential changes in the field.

Van G. Miller (VGM) & Associates, Waterloo, Iowa
The focus of the VGM Group is to make its members more competitive with national chains. Lately, that has included helping them deal with increased regulation, work around reimbursement challenges, and understand more about what drives their bottom line.

“In the short-term, we have coped with federal contractor initiatives aimed at reducing fraud and abuse,” says James E. Walsh, Jr, president of VGM Management and general counsel of VGM Group. “Long-term, our members have had to deal with increasing competition from national chains, increased regulatory costs and inefficiencies, and stagnant or decreasing prices.”

To help members with these strains on their budget, VGM has arranged a discount program for members to use an activity-based costing consultant.

“Learning the true costs of providing any product or service is always smart,” Walsh says. “But it will be of particular interest to members who are in member service organizations that will be on the early list to face competitive bidding under Medicare.”

Because the new Medicare law will require all providers to be accredited, VGM has arranged for its members to get discount pricing with the lowest-cost HME accreditation organization available.

“We are also working on the feasibility of offering an even lower-cost alternative,” Walsh says. “VGM is in the process of developing an FEHBP pricing model to suggest as an alternative to the competitive bidding features of the law just passed by Congress.

“We continue to present new purchasing programs and new finance programs to members on a regular basis,” Walsh says. “Our goal is parity as an overall concept. Our members should have at least a comparable cost of goods sold to the largest national chain competitor, as well as access to finance programs that are cost-effective and easy to use.”

The MED Group, Lubbock, Texas
According to CEO David Miller, The MED Group wants to make sure it is providing business tools that members can use to decrease costs. “In these challenging times of broad regulations, eroding prices, and slow reimbursement, it can be difficult to maintain cash flow,” Miller says. “There has never been a greater opportunity for The MED Group to step into a time of crisis and need. People don’t want to be alone, and there is strength in unity. We provide that for our members on many fronts.

“At the same time,” Miller says, “we want our members to be serious about the business of committing to the overall global concept of lowering acquisition costs while still maintaining services.”

A year ago, The MED Group announced new contracts with manufacturers that were the culmination of a request for proposal process intended to lower the acquisition cost of inventory goods. To offer that competitive pricing, however, the company needed more of a commitment from its members.“We went through the lengthy process of meeting with each member and having them sign an updated membership agreement that showed how much business they would move to a contracted vendor, and how much business they would do overall,” Miller says. “Our members have stepped up and made changes that are beneficial to their bottom lines,” he continues. “It does not work to simply lower costs; there has to be significant movement of business to those selected vendors.”

So, while a year ago, The MED Group had 235 members, today it is down to 195—because, says Miller, “we parted ways with 40 companies that have chosen not to make that commitment.

“Our focus is not just on signing up members, but on aggregating their commitment volume, then getting better prices,” he says. “We are drilling down deeper with businesses and having them move from not contracted to contracted vendors. As a result, they are enjoying incremental increases compared to before.”

Northwood Inc, Center Line, Michigan
Northwood bills itself as the nation’s largest network of independent HME dealers and prosthetics and orthotics practitioners organized to provide services to sponsors of group health benefits who seek alternatives to traditional health care delivery and financing systems. “We always look out for the best interests of our members, who are independent providers,” says President Ken Fasse. “Our parent company is an independent, so we know the challenges of competing as a small business. We believe that independents need to network to compete with the nationals.”

Unlike other buying groups, its members receive annual rewards while Northwood invests in bringing more business to them. Northwood members also keep their eyes on legislative matters, so the organization functions as a resource to help them do so.

“We help them stay abreast of the issues by retaining a professional lobbyist in Washington, DC, and calling upon other lobbyists and resources from time to time depending upon the issue,” Fasse says. “Our executive staff frequently accompanies Northwood's lobbyist on important Capitol Hill issues. Our members expect us to monitor legislation and be heard by policymakers.”

Fasse notes that, though many Northwood members may not realize it, they are actually part of the largest private sector version of a national, competitively bid program. “Northwood and its 3,000-plus provider locations have successfully managed this program for more than 5 years—that is why CMS was interested in our model,” Fasse says. “Northwood and its network of providers have proven we can successfully implement a national HME program if CMS goes down that path. A network model of independents is a better option for CMS than the nationals.”

Essentially Women, Oxford, Michigan
Essentially Women focuses on women’s health companies and strives to help members meet today’s challenges. The greatest method of doing so, according to Cindy Ciardi, CO, manager of vendor services, is dispensing sound advice. “The best example of good advice is to diversify the payor mix,” Ciardi says. “Losing a payor that represents more than 15% of your market could make you unprofitable. We tell members to strengthen their relationship with existing contracts and decrease Medicare dependency.

“Improving business operations involves taking a hard look at how you run your business,” Ciardi continues. “Increasing productivity, reducing operating costs, improving billing and collections procedures, and exploring alternative products that yield better profit margins are all ways to keep your business viable.”

Essentially Women emphasizes quality of service as well—and so is in the process of partnering with the Accreditation Commission for Health Care (ACHC) and the Board for Orthotist/Prosthetist Certification (BOC) to promote the highest standards possible in business practice and fitter certification.

A member newsletter features articles that promote better business practices. The organization also hosts an annual conference and trade show called Focus on the Future, that offers continuing education credits in such areas as legislative and regulatory updates, networking, and marketing with limited resources. “Don’t give your customers a reason to shop around. Dedicate time to continuing education and the pursuit of excellence for your entire staff.

“But the best benefit of all,” she adds, “is that we rebate our members’ quarterly fee based on their overall purchases as a bonus for using our participating vendors.”

Elizabeth Finch is a contributing writer for Dealer/Provider.