Reimbursements headed south years ago for Knueppel HealthCare Services Inc of Milwaukee, ever since managed care began calling the shots in southeastern Wisconsin. So if the climate is harsh for the company now, just wait until national competitive bidding kicks in.

Knueppel, however, is not worried. The four-location enterprise is keeping its cool. How? By making good strategic decisions early enough to get the jump on the challenge lurking ahead. "We figured we had three options. One, we could offset the damage from declining reimbursement rates by cutting back on service. Two, we could provide junk equipment to improve our margins. Three, we could become a much more efficient operation. We chose option three," says Cindy Ciardo, BOC, chief executive officer.

Some of the efficiencies introduced were no-brainers: automating various chores to eliminate paper-pushing, for example. Others required a bit more thought. "We spent considerable time analyzing each of our many different processes to break them down into their component steps," Ciardo says. "From this, we found steps we could combine, other steps that could better be handled by different departments, and steps we could eliminate altogether because they were unnecessary."

Coming in for special scrutiny were the operations of the billing department. "We looked at all of our write-offs, all of our claims denials, things we were consistently having problems with, and things that kept seeming to slip through the cracks," Ciardo says. "We then tried to develop new processes to ensure better review of claims and denials so that we could improve our rate of payor acceptance and shorten the number of days in the payment cycle." One of those new processes established a system of automatic quarterly file audits. "We found inconsistencies through this audit process, which made it possible for us to take corrective action."

A change of process in the rehab department also proved particularly advantageous. Says Ciardo, "We found that the task of producing some of the required documentation on each client could be handled by clerical staff rather than by our rehab techs. This freed the rehab techs to focus more of their energies where they could be of the most cost-effective benefit—assessing and evaluating clients, performing fittings, getting out on the road faster."

A PREMIUM ON KNOWLEDGE

Knueppel HealthCare Services debuted in 1955. Back then, however, it was but a humble drugstore operated by Hilbert and Lillian Knueppel [pronounced KAH-nipple] and went by the name of Knueppel Pharmacy. It started to grow robustly when the couple introduced a handful of home medical products to the mix. Buoyed by the success of those products, the Knueppels kept expanding the line until eventually DME/HME came to dominate.

In 1972, ownership of the family business was transferred to son Richard Knueppel. He, in turn, passed title in 2003 to his own son, William Knueppel, and daughter-in-law Cindy Ciardo.

Today, Knueppel HealthCare Services encompasses nearly a dozen specialty departments. These include rehab and assistive technology, service and repair, fitting services, HME, medical supplies and personal care products, compression therapy, lymphedema management, orthopedic products, bariatric equipment, and independent living supplies.

Knueppel HealthCare Services bears the seal of quality bestowed by the Accreditation Commission for Healthcare (ACHC) and is active with the Wisconsin Association of Medical Equipment Services (WAMES) along with Continuing Care Coordinators of Greater Milwaukee. Among the clinical personnel on staff are registered and licensed nurses, physical and occupational therapy assistants, assistive technologists, rehab technicians, and orthotists and fitters—all of whom are certified or credentialed, something the company long has required of its employees. "We're also very big on the continuing education of our staff," Ciardo adds. "If there's a school or seminar worth attending, it's almost a certainty our people will be there for it."

With regard to product offerings, Knueppel enjoys a well-deserved reputation for carrying top-quality inventory. However, trends rocking the industry compelled the company to reevaluate its merchandise strategies. "We knew," Ciardo says, "that we could not survive by offering substandard equipment—not only would that chase away customers, but it would also be a money loser by forcing us to more frequently repair those products" owing to their low-quality components and slipshod construction. "At the same time, we also knew that we could not survive by continuing to offer only top-of-the-market products. So, for us, the solution was to begin offering midmarket products in addition to our customary high-end wares. This is what we have to do in order to satisfy the expectations both of managed care and of patients."

RELYING MORE ON VENDORS

Currently, the biggest financial challenge for Knueppel arises from reductions in complex rehab reimbursement having nothing to do with national competitive bidding. "Complex rehab reimbursement is a problem for us just because managed care is so strong in our market," Ciardo explains. "The reimbursements offered by our two biggest managed care companies are inadequate to the point of ridiculousness. What's become so difficult is finding good equipment that will meet the patient's needs yet that will be reimbursed sufficiently to cover our costs of performing the assessment, making the modifications, and completing all the other steps involved in providing that product."

One way Knueppel addresses this is by working as closely as possible with product manufacturers in hopes of shaving pennies here and dimes there. "We try to negotiate better pricing, better terms, free shipping, and so forth," Ciardo says. "The manufacturers are in as big a muddle as we are—why else go offshore to procure products."

A consequence of the bind in which manufacturers find themselves will be less innovation, Ciardo foresees. "How can there be advances in product design and performance if the reimbursement climate is such that profits are too thin to pay for research and development?" she asks. "I'm afraid that rapid technologic progress will become a thing of the past if this situation continues."

In addition to seeking better terms, Knueppel HealthCare Services looks to manufacturers and distributors for relief by borrowing equipment at little or no cost. "We've made arrangements with some of the vendors to let us have loan of, for example, wheelchairs during the time that we're trying to work out with the payor a definitive configuration of the system the patient will ultimately receive," Ciardo says. "This is helpful to us because the loaner eliminates one source of expense during the period we're not going to be reimbursed for."

FEMININE MYSTIQUE

Knueppel HealthCare Services' decision to begin stocking a wider and deeper selection of retail products necessitated extra retail space. That meant a move to larger quarters, which occurred in 2005.

Knueppel's flagship store today occupies 25,000 square feet. Most of that is taken up by administrative offices, service-and-repair and fabrication shops, and a central warehouse. Retail space consumes 5,000 square feet of the total.

The company opened its first branch in 1997 with a facility in the city of Racine, Wis. This was followed a decade later by a location in Franklin. The newest site—in Mequon—is expected to open in August 2007. All were put in play in response to consumer demands for easier access. Says Ciardo, "It used to be that our customers came from all over and didn't object to the long drive to Milwaukee because they understood that this was where they would receive the best in service. After a while, they started asking us, ‘Don't you have anything closer?' We felt we needed to put ourselves out in the communities where our customers were coming from."

Like the Milwaukee store, each of the three branches has retail operations. They also have a department catering to women. In fact, the Franklin store began as a location for women only. "Franklin was originally opened in affiliation with a local hospital that proposed the relationship in order to better serve its women patients," Ciardo says. "The store site was chosen because it's in the same building where the hospital provided ancillary women's health services, making it exceptionally convenient for women needing fittings or supplies.

"But about 8 months after we opened the store, the hospital discontinued offering those ancillary services. We lost the referral pipeline and experienced a temporary reduction in revenues."

Cindy Ciardo, BOC

Ciardo says Knueppel sought to offset the effect of the subsequent diminishment of referrals by bringing in more cash-and-carry items and by waging an aggressive

marketing campaign to attract customers from the broader community, men included. Many of the new items were those suggested in interviews Knueppel conducted with local orthopedic physicians. "We asked them for a rundown of the products they prescribed most frequently," Ciardo recounts. "We wanted to stock only those items we knew would be strong sellers—we did not want to load up on items that would sit on the shelves and gather dust or that would do nothing to attract referrals from doctors. Our remedy has taken some time to show results, but now things are beginning to turn in our favor."

READY FOR COMP BIDDING

National competitive bidding will not arrive in the Milwaukee market for some time yet. When it does start there, women's health items will not initially be eligible for bidding. That does not surprise Ciardo—she says she was told by reliable sources that the early focus of national competitive bidding would be products involving bigger money, items such as hospital beds, mobility, and diabetic supplies.

For more information on women's health, bath products, and comp bidding, see our free online archives for articles such as: July 2007 Bath Products and Beyond, Retail bath safet products, along with incontience products, can build a monthly source of cash revenue. By Jack Evans. May 2007 Beyond Competitive Bidding:, Boost retail sales by turning buyers into shoppers. By Eric Kline. April 2007 Show Off Your Showroom, Boost ADL sales with designs that help cusomteres visualize how products can improve their lieves. By Ed Lemar.

Says Ciardo, "It's not a matter of if women's health products will be added to the list of goods Medicare wants bids on. It's a question of when." Ciardo promises Knueppel will be ready for that day, "We're taking steps to ensure that, no matter what happens with national competitive bidding, we won't be harmed. For example, we've stepped up our efforts to negotiate more and better private-sector contracts. Additionally, we're developing other facets of our business, those not expected to come under national competitive bidding. These will include compression hosiery and lymphedema management services, foot care products, incontinence supplies, bath safety, beauty aids, skin care products, fashion accessories—basically anything that is paid for with cash.

"It's incredibly difficult to make any predictions about the future until we see how things shape up with regard to legislation and how things turn out with national competitive bidding," she says. "But let's say that Tanner-Hobson does not become law and the status quo is preserved. If that's the case, I think we can look for a lot of consolidation and acquisitions in home health. And of those companies not acquired, many of the smaller ones will shut down because they don't have enough business to pay the bills and keep the lights on."

That likely won't be the fate of Knueppel HealthCare Services. The company is prepared for tough times. Correction, make that tougher times. And that, when you get right down to it, is the real key to its future survival and prosperity. Knueppel is practiced at dealing with miserly reimbursements and various other hamstringing circumstances. The company is battle-tested. It knows what it must do to stay a step ahead of the challenges, and it does those things supremely well. n

Rich Smith is a contributing writer for  HME Today.