The attractive attributes of rural life—no smog, low crime, and freedom from traffic congestion—dissuade many country dwellers from pulling up stakes as frequently as do people in urban areas. Consequently, rural-based businesses tend to enjoy remarkably stable labor pools. This low turnover among employees helps explain how hinterland companies can deliver quality service at levels that city counterparts might find impossible to match.

Flexible operations policies (in markets such as sleep therapy) give MES Team Inc an advantage over large nationwide companies.

For MES Team Inc, an HME outfit in wide-open western Nebraska, unmatched quality of service is the company’s ace up the sleeve, and its most crucial ingredient for success in a place where customers are comparatively few, and the miles between them many.

Small+Rural=Nimble
MES Team delivers to customers as far as 100 miles away in all directions from its base in tiny Scottsbluff, Neb. Covering that much turf is, of course, a big challenge. And it is not just the long distances that make things tough. There is the more basic problem of being able to find the homes to which deliveries have been scheduled: rural dwellings often are situated on dirt roads that may or may not be marked, let alone maintained and easily traversed. The situation grows bleaker during rainy season when dirt roads turn to muck. When it snows, those same roads disappear under a blanket of white. In western Nebraska, it rains and snows a lot. “Our customers appreciate the lengths we go to reach them and satisfy their needs,” says Derek Lovesee, CEO.

Another challenge, far more serious, is the marketplace incursion of nationwide home health companies—chain operations of sufficient size and muscle to be able to offer low, low prices. “The way we deal with the competition from the major nationals is by showing our customers that we can do a better job taking care of them,” says Lovesee. “Sure, payors and out-of-pocket patients can get a lower price by using a national. But the nationals are not set up to provide a high level of service in a rural environment. On that basis, they can’t compete with us.

“The nationals also are not set up to provide some of the ancillary items a home care customer is likely to need. For example, if someone needs a wheelchair, they can get it from a national, but they might not be able to also get from that same source the urological supplies they will need as well,” adds Lovesee. “Those and other ancillaries are items the nationals decline to carry because they don't find them profitable enough. We, on the other hand, are organized to provide everything for the customer.”

Being rural and small is another way of saying a company is nimble enough to turn on a dime. Lovesee asserts that such agility gives MES Team an edge over the nationwide companies, which often are hamstrung by having inflexible operations policies. “The territory we serve has just one sleep lab,” Lovesee offers as an illustration. “Because this lab is the only game in town, it has the ability, through its prescription-writing habits, to dictate the home sleep equipment we carry. And what the lab routinely does is specify product that we’ve discovered can be obtained from only one vendor. That is not a problem for us, but it is for one of the nationals because they have purchasing contracts that lock them into who they are able to buy from—and in this instance their sources do not offer the brand specified by the sleep lab. As a result, this one particular national is not able to provide any sleep therapy in this market.”

Surviving the Challenges
MES Team went live in 1985, back then going by the name of Medical Equipment Specialties. It took on the current moniker soon after it was purchased in 1999 by Lovesee (then a lower-level employee) and coworker Michael Sessions, now the chief financial officer. MES Team carries oxygen, wheelchairs, hospital beds, and “just about everything in between, including lifts, ostomy supplies, diabetic supplies, and compression hosiery,” reports Lovesee.

At one point in the mid 1990s, the enterprise under its former ownership operated three locations and offered additional services from a 36-foot mobile showroom/repair shop that roamed the highways of the Nebraska Panhandle and southeastern Wyoming. Following the company’s sale, one of the stores remained with the original owner; another unit (180 miles away in Casper, Wyo) was later forced into closure after that state’s Medicaid administration implemented draconian cuts in HME reimbursements. “We even had to stop driving our trailer into Wyoming because of the Medicaid reductions,” says Lovesee, who adds that the mobile program was subsequently discontinued owing to the high cost of vehicle operation without benefit of the Wyoming market to help support it.

Responding to reimbursement cuts, Wyoming Medicaid was not the only payor to nearly run MES Team into the ditch. Medicare (and the private insurers in thrall to the federal giant’s rate-setting precedents) pounded the company with a series of ever more stingy reimbursement formulas, including the latest in the guise of national competitive bidding. Responding to those threats, MES Team took steps to tighten its control over inventory. “We have less out-of-date and useless product on the shelves now than we once did,” says Sessions. “We are doing more just-in-time inventorying, we are supplying direct-from-catalog more often, and we are trying to obtain more favorable pricing consideration from our product sources, even though we are not a big-volume customer.”

Sessions says the threat response now includes buying when possible from suppliers that, like his own company, are smaller and rural. “We may not always be able to obtain name-brand product from those sources, but what we obtain is always high in quality, and that is what counts most,” he opines.

Despite the odds, sales for MES Team today are up. “We are moving more product from just this one location than we were from the two locations combined 5 years ago,” says an ebullient Lovesee.

Not A Level Playing Field
The battle for business between MES Team and its city rivals would be a well-matched one were it not for the unleveling of the playing field by payors. “Payors do not understand rural markets, so they set their reimbursement rates in accordance with national pricing averages,” says Sessions. “Those averages are lower than they are in rural America because they overwhelmingly reflect the highly competitive pricing that is common in the major metropolitan areas.”

The effect is that some consumers in rural environs cannot obtain products from local sources because their insurance will not cover it, Sessions indicates. “There are certain insurance companies that have entered into contracts with the nationals,” he says. “If you have a health plan from one of those insurers, you have to use the contracted national as your home care supplier. However, the national might not service your particular rural area. That being the case, you won't be able to get what you need unless you pay for it yourself.”

Says Lovesee, “Because of this, there is a huge lack-of-access issue out here.” Lovesee faults the feds for creating the circumstances that have placed rural dwellers in this bind. “The government seems to think its national competitive bidding program for Medicare providers is a great thing,” he complains. “But, in reality, all they have done is turn their back on rural America and small providers.”

Sadly, the plight of rural HMEs tends not to generate much concern in Washington. The reason is simple arithmetic: voter blocs are small in sparsely populated corners of Congressional districts and Senate jurisdictions. “Our elected representatives are mainly responsive to the interests of their constituents in the cities, since that is where the numbers to get them reelected are going to come from,” says Lovesee. Moreover, unless they hail from a small town in farm, ranch, or logging country, a Congressman or Senator is not likely to be much attuned to the needs of rural dwellers and the businesses that serve them, Lovesee suggests.

Spirit of Cooperation
In a rural market like western Nebraska, one would expect to find little or no locally based HME competition. Given that Scottsbluff has only about 15,000 people living there (34,000 in the entire county), it seems as if the region has an economic base big enough to sustain only a single provider. Not so. There are at least two other such enterprises seriously vying for business there.

However, the competition is said by Lovesee to be friendly. “The market can support all of us because each company has its own unique service or product niche and the others are respectful not to duplicate that,” he explains. “We also try to help each other out. If a patient comes to us and we are not able to accommodate his needs, we will refer the person over to one of our competitors.”

This spirit of cooperation is in part born of necessity, an all-for-one-and-one-for-all attitude that helps ensure survival against the major nationwide outfits. But the cooperation also is a natural by-product of the rural way of life, wherein people take pride in looking after one another. Directly linked to that mind-set is the way in which consumers relate to the companies they patronize. “Once a person out here becomes a customer, he will be loyal to your company,” Lovesee tells. “That customer won’t bounce around from one place to the next, going wherever he can get the cheapest price. Basically, as long as the individual is treated honestly and with respect, he is more than likely to be a customer for life.”

Rich Smith is a contributing writer for Dealer/Provider.