The year: 2005. Small DME/HME retailers awaken to the inevita­bility of Medicare competitive bidding. Foreseeing themselves doomed to extinction once the nationwide cost-savings scheme takes hold, many scramble for the exits—or at least start thinking about it.

Rushing in through the doorway against the push of the crowd is Jordan Drug Inc, a pharmacy chain serving the eastern half of Kentucky. Its principals—Luther Smith, RPh, and his wife, Rosemary Smith, RPh—begin adding 16 linear feet of shelf space to each of their nine drugstores devoted to DME, and cut the ribbon on a 5,000-square-foot freestanding showroom-office complex for the rental, sale, and servicing of respiratory equipment, wheelchairs, hospital beds, and more. "Competitive bidding didn't scare us at all—not then, not now," says Rosemary Smith today. "We want to be right in the middle of it. And we're confident we can succeed. We have a lot in our favor. We serve rural areas. We have strong relationships with physicians. Most importantly, we have a large existing patient base, so it's not like we're starting from scratch. Our main business continues to be prescription drugs, and we're doing well with that. No matter how things go with competitive bidding on the DME side, we'll be fine."

As Luther Smith sees it, the departure of small DME/HME businesses introduces the very real possibility that many patients—especially in rural markets like his—will be left without anyone to serve them. "A vacuum is being created, and someone's got to step in and fill it so that those patients can receive the products and services they need," he says. "That's a big part of why we added DME to our drugstores."

JUMPED ON IT

Central to the Smiths' DME ambitions has been accreditation, which they obtained earlier this year. They embarked upon it in 2006 after hearing through the grapevine that their drugstores, along with the DME subsidiary—Jordan Medical LLC—needed to be accredited by 2010 (at press time, no official date has been announced by CMS). "As soon as we confirmed that accreditation would be required, we acted to get right on top of it and be ahead of the curve," says Luther. "Mainly, accreditation is a learning process, and we approached it from that frame of reference."

Even so, accreditation proved to be no gentle instructor. "The accrediting company was tough on us," Luther confesses. "But we had no problem with that. If you're going to go through accreditation, you should want it to be tough so that your accreditation actually means something."

“Competitive bidding didn’t scare us at all—not then, not now.”

—Rosemary Smith, RPh

In addition to being rigorous, the Smiths also found the accreditation process time-consuming. "When you first realize all that has to be done to become accredited, it seems like such an overwhelming task, and you're initial reaction is to tell yourself that there's just no way you can accomplish this," says Rosemary.

Reminding herself that the alternative to waving off accreditation would not be pretty, Rosemary girded herself for the job and plowed into it. "The process causes you to have to address everything about your organization—every issue, every policy," she says. "We did not have a mission statement. We did not have an organizational chart. We did not have specific, written guidelines for patient care. For accreditation, those and more were needed. But, then, as soon as I got started with it, the process did not seem overwhelming at all. I took it a step at a time, and that made it seem manageable, which, in fact, it was. "

DÉJÀ VU ALL OVER AGAIN

It helped that the Smiths came armed with accreditation experience. Before Jordan Drug, they owned a pharmacy chain known as Three Forks Apothecary, which included an institutional division, Three Forks Institutional. To facilitate the capture of business by that division, they sought and obtained accreditation through The Joint Commission (at the time called the Joint Commission on Accreditation of Healthcare Or­ganizations—JCAHO). "The JCAHO process back then was demanding, but not in the same way as the accreditation process we were facing in 2006," says Rosemary.

“The whole concept of competitive bidding doesn’t bother us because we’ve been involved with it for years in the form of private-pay, managed care capitated contracting.”

—Luther Smith, RPh

The Smiths have been in the pharmacy business since they each graduated from the University of Kentucky in 1970 (he started out with a job in the drug department at a Walgreens, she at a SupeRx Pharmacy, both in Louisville). In 1975, the couple opened the first of five Three Forks A­­pothecary outlets. That first store was in Beatty­ville, Luther's hometown. Twenty-five years later, the enterprise had grown to include at least a dozen more drugstores, all of which were added to support the institutional contracts held with hospitals, nursing homes, and prisons.

The Smiths sold the chain in 1996 to Omnicare. They retired until 2000 when boredom set in and they decided to get back in the game. Since the Three Forks Apothecary brand then belonged to Omnicare, the Smiths had to call their new pharmacy venture by a different name—they settled on Jordan Drug, after their son, Jordan.

In 2004, one of their wholesalers invited the Smiths to consider the merits of also offering DME. Eventually, they agreed to give it a try. That led to the launch of Jordan Medical in September 2005. Says Luther, "I wish now we had entered DME 20 years earlier. But the plain fact is we didn't have the capacities to take care of both our institutional pharmacy business and retail DME at the same time."

Rosemary adds that DME was a natural fit for Jordan Drug. "Many pa­tients came to us with prescriptions for DME products, thinking we could fill them—since we couldn't, we were always referring them to someplace else. It became clear to us that, by adding DME, we could hold onto business we had been giving away."

NOT YET AFFECTED

Despite the increasingly roiled reimbursement climate, Jordan Medical has done well for itself. It enjoys a brisk walk-in trade, and does good business on products and services for hospices in six eastern Kentucky counties. Luther notes that small companies like his are best positioned to handle hospice accounts: "The Lincares of the world really can't cost-efficiently enough take care of hospice contracts, and that's where we have the advantage," he says. "We think hospice can be an important part of a small company's portfolio of contracts because hospice demand is growing."

Jordan Medical at present remains untouched by Medicare competitive bidding—since it is located outside the limits of the nearest first-round metropolitan statistical area (MSA), Cincinnati. The Smiths think their chances of becoming eligible for the next round of bidding—when Medicare an­nounces 70 more MSAs—are slim because their service area is so thoroughly rural. However, they don't rule out the possibility of joining the party by expanding their company: they could either open a branch in a named MSA, or begin delivering into an affected region via mail. "The whole concept of competitive bidding doesn't bother us because we've been involved with it for years in the form of private-pay, managed care capitated contracting," says Luther. "So we know that it's possible to make money at it. But you can't if you're not a player, and the only way you can be a player now is by being accredited."

The accreditation obtained by the Smiths covers Jordan Medical and all of the nine drugstore locations. "We have the distinction of being among the very first independent pharmacy chains in Kentucky to be accredited," says Rosemary.

MADE IT CONVENIENT

To accredit both their DME and pharmacy enterprises, the Smiths chose the Healthcare Quality Association on Accreditation (HQAA), of Waterloo, Iowa, which they discovered through their membership in the VGM buying group, also of Waterloo. "What sold us on this accrediting body was that we could do the vast majority of the preparation online—and interactively," says Rosemary. "That meant we could work on it at night, at our convenience, and at our own pace."

The ability to generate the requisite policies, procedures, and forms by computer was a boon, too, in that at least some of the raw information for those documents could be culled with a few mouse clicks from the company's electronic archives. "Unfortunately, most of what we needed was in our heads, which meant we still had to do a lot of original typing," Rosemary clarifies.

The accrediting organization recommended a mock survey, something else the Smiths liked. "This helped us make sure we were truly ready to undergo the official, formal survey," says Rosemary. "The mock survey included about a month of off-site personal training by Mary Ellen Conway, an independent consultant with Capital Healthcare Group [headquartered in Bethesda, Md]."

No doubt the best part of the entire endeavor was the notification arriving in the mail to announce that Jordan Medical passed muster with the surveyors, who, according to Luther, were genuine sticklers. "Actually, the biggest reward isn't the accreditation certificate," says Luther. "The biggest reward is the smiles on the faces of your staff members. They've gone through all this rigorous scrutiny, and now they're told by the people holding the yardstick that they measure up."

If Medicare had not insisted on accreditation as a prerequisite for participation in competitive bidding, would the Smiths have bothered? The answer is yes. "Accreditation gives you a marketing advantage—more private payors are refusing to even consider contracting with DME/HME providers who are not accredited," says Luther. "But more importantly, accreditation results in you becoming a better company. It's just something that makes good business sense."

Rich Smith is a contributing writer for HME Today.

It All Starts With Motivation

by Ty Bello

You've done it. You submitted your bid for the competitive bidding process, and now you have a business to run, customers to serve, and a team to keep motivated. How does added stress and uncertainty weigh on your team?

As a member of the first round of MSAs, you were under the gun. Over the past few months, you have dedicated time and resources that would otherwise have been used to service your business and customers. Thus, your team has worked overtime to fill the gaps and avoid service issues.

During this time you reviewed data (only to question if the data was correct); you then prepared as best you could to submit your bid. Never before has such an easy task such as pushing the submit button been so difficult.

With all that anxiety, there are a few basic interventions that need to be a top priority for you and your team:

• Listen to your team members (not just their words because actions do often speak louder).
• Conduct one-on-one meetings. Team members often view your preoccupation with market conditions as a disinterest in dealing with them and their concerns. These meetings will be a great time for you to share your thoughts about the present and the future.
• Concentrate on building credibility for coming prosperity. If you focus on listening and the one-on-ones, you will be building credibility for the future of your business.
• Develop a strategic plan. Your team is looking for security, and they want to see the options for their future and the future of your business.

Ty Bello

There may be a "straw that breaks the camel's back"—but it is after an accumulation of events. Employee turnover is a process that can take days, weeks, months, or even years until the actual decision to leave occurs. The employees begin to disengage and think about leaving when one or more of four fundamental human needs are not being met: the need for trust; the need to have hope; the need to feel a sense of worth; and the need to feel competent.

Ultimately, we may not fully realize what round two of competitive bidding will look like, but that is no excuse to wait. We are an industry of productivity, not activity. So let's get productive. After the bid is awarded, why not contact individuals or companies who won the bid? Try to see if you can take a field trip and better understand what they went through. As you prepare for your bid, prepare your team. You will both be better for it.

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Ty Bello, RCC, is president and founder of Team@Work. He can be reached via e-mail: .