Whether you call them buying groups (BGs), member service organizations (MSOs), or group purchasing organizations (GPOs), they matter most in tough times.

Medtrade Fall is over and the second round of competitive bidding seems inevitable—although legislative monkey wrenches could still ease the pain. While CMS has not set a timetable, the next 70 metropolitan statistical areas (MSAs) will likely be announced soon—and a whole new audience will begin the countdown. Is it time to explore membership in a buying group? Can buying groups help you survive competitive bidding? We asked two of the big guys about the new and evolving roles of buying groups.

HME Today: How can buying groups use the experiences of competitive bidding (round one) to help members in round two?

Ron Bendell, president of VGM & Associates, Waterloo, Iowa: Representatives from member service organizations (MSOs) who are working closely with their members should have learned a great deal. We have a team of people reading the regulations, talking to other industry experts, and getting the answers on how to successfully participate in the bidding process. The experience we've gained from round one with many of our members will allow us to be even more valuable to our round two bidders.

Ron Bendell

First and foremost, we have a "real world" understanding of competitive bidding. Not only do we understand the rules and regulations, but also the bidding process itself. As an MSO, it's our job to use the information we've gathered to answer the questions and point our members toward a path of success. We received hundreds of calls from members who found the Competitive Bidding Implementation Contractor (CBIC) help line to be unwilling to give a straight answer. Our experts will always provide the answer that our member is looking for and needs. If we don't have the answer, we'll find it.

Another way in which MSOs can be a valuable asset is through product research. Many round one bidders spent 100+ hours researching product names and model numbers. In many cases, this time is spent researching products that the provider has never supplied. With VGM's resources, which provide this information up front, members are able to save a tremendous amount of valuable time. Product experts within the company understand how tedious this process can be, and are more than happy to assist.

We also supply information and tools to help our members reduce business operation costs, from information on activity-based accounting to streamlining processes. HME providers must eliminate the "fat" in their organizations to get costs in line.

Finally, we can assist in decision making. Many VGM members qualify as small suppliers per CMS' final rule. Small suppliers have the option to bid as an individual, use subcontracting resources, or become a member of a network. Larger VGM members also are looking for other providers to set up subcontracting arrangements to provide products and services that they are not offering, or in areas they may not cover at this time. Because the decision-making process can be overwhelming to many providers, the experience and expertise of VGM can help our members make an educated decision when it comes to bidding.

We conducted eight nationwide competitive bidding (NCB) seminars around the country earlier this year. We'll be conducting 17 NCB round two seminars in the first 5 months of 2008.

Donald E. Clayback

Donald E. Clayback, senior vice president, Networks, for The MED Group, Buffalo, NY: Let's start by recognizing that round one participants paid significant dues, and hopefully paved the way for a smoother round two. These round one companies definitely deserve an expression of thanks and condolences from the rest of the industry. At MED, during round one, we focused exclusively on our members who were directly impacted in the 10 competitive bidding areas (CBAs). We offered in-depth assistance in a variety of forms. We held a 2-day hands-on bid preparation workshop, developed an exclusive online product database and bidding tool, held weekly conference calls throughout the bidding period, and provided other consultation throughout the entire process.

Based on the feedback we received, members found these extremely helpful. While we received positive comments from our members, the experiences and the programs we used also give us a great foundation to build on. For round two, we will be offering expanded and enhanced tools and programs for our members based on what we found worked well in round one.

The areas covered will include analysis, training, workshops, product information, activity-based costing applications, online bidding worksheets, and subcontractor utilization. These will again be targeted directly to our members in the impacted CBAs. Our focus and goal will be ensuring MED members submit informed bids and are successful in being part of the final winning bidders' pool.

HME Today: How has the role of buying groups evolved over the last few years, and what do you think the future holds?

Bendell: The role has changed dramatically. The traditional buying group that simply provides the group purchasing function would not be providing the necessary tools to be more successful in today's business environment. The term "buying group" is no longer an accurate description of what we offer at VGM. We call ourselves an MSO because our business is to help members be more competitive and profitable. We offer a long list of services, only one of which is purchasing contracts with vendors

Pricing in our industry has become extremely volatile. As an MSO, we work to make sure that our members are receiving pricing that allows them to be competitive. Equally as important, we take into consideration the manufacturer/distributor who is participating in our purchasing programs. They need to see that VGM is doing everything we can to ensure that our members are viable businesses. In this marketplace, both HME providers and manufacturers/distributors must be successful. One is not exclusive of the other.

Over the years, we have recognized the needs of providers that specialize in specific areas of the industry. At VGM, this has developed into additional networks such as US Rehab, Nationwide Respiratory, the Home Nursing Network of America (HNNA), Orthotic and Prosthetic Group of America (OPGA), and the POINT Network.

Within each of these areas, it is our mission to identify business opportunities and assist in deciding whether these opportunities fit. A recent example of this is our wound care and bariatric program. We're educating members about the opportunities that exist in this growing segment.

We also feel that other services such as government relations are necessary. Our industry does not enjoy a positive perception in the eyes of those who control reimbursement. The industry as a whole needs to educate beneficiaries and politicians about the value that we provide. Along with other industry stakeholders such as Invacare, Respironics, AAHomecare, and NCART, we have been working to raise awareness of the benefits of home care, and reduce the concerns over fraud and abuse. Our government relations vice president, John Gallagher, spends 60% of his time traveling to educate members about grassroot efforts, and to talk to beneficiaries and Congress about the benefits of home care.

Technology, e-business solutions, paperless office solutions, GPS vehicle tracking, order entry, inventory, and billing software—these are all areas where cost savings can be achieved. There have been great advances in the past few years that will allow providers to run a more efficient and lower cost operation. VGM Technologies offer a wide variety of these solutions.

Other benefits include online- and seminar-based educational programs; insurance contracting; liability insurance; financial services; Internet solutions (VGM Forbin); traveling patient assistance (FreedomLink); marketing material development; product research; and industry consulting services. As you can see, it's not just about purchasing contracts.

Clayback: This year The MED Group is celebrating its 40th anniversary. MED was started by five HME business owners who came together to help each other's businesses grow. Over these 40 years, while the industry has certainly undergone significant change, MED's focus has remained the same. We have continued to evolve and develop additional programs for our members based on their changing needs.

Our operating motto is "partnering to enhance our members' success," and this encompasses a broad range of areas. While we offer excellent contracts with the industry's leading manufacturers, we also have expanded to offer a wide variety of business services. Our HR program, EmTrak, covers the hiring and evaluating of personnel; our MED University provides customized staff training and education; and our rehab, respiratory, and repair networks provide great networking opportunities for members to interact and learn from each other. Our winning business model program offers benchmarking and process improvement possibilities.

Business will not be getting any easier as we move into the future. Companies will be required to be more efficient and smarter. Current MED programs, along with those in the works, will help position HME companies to meet these challenges. The future holds real opportunities for The MED Group to provide even greater benefits to HME providers in an ever-changing marketplace.

HME Today: Among HME providers who are not members of a buying group, what is the biggest misconception about buying group membership?

Bendell: That is easy to answer. The biggest misconception is that you don't need a buying group because you already get great pricing. There are other products, programs, and services that will help you be more competitive and better informed, and in turn help the bottom line.

Clayback: Some HME companies may look at "buying groups" as just a way to save on acquisition costs. Nothing could be further from the truth. The MED Group is really a business solutions organization. While competitive acquisition costs through leading industry manufacturers are a key part of our offerings, that's only one aspect. Additional membership benefits offer programs that provide tools and assistance in all the key areas of an HME business. These areas include personnel, finances, management, reimbursement, regulatory, legislative, contracting, and more. Membership also brings great networking opportunities with other successful HME providers on a national and regional level. With all that's going on and lies ahead, an HME provider needs to take advantage of being part of a larger group.

HME Today: What gives you optimism for the future of the industry?

Bendell: There is a lot of gloom and doom out there right now. While I don't deny that severe challenges are facing us right now, I believe that the future is bright for the industry. Many of us have lived through (and prospered) other major reimbursement upheavals that were going to "ruin this industry." I refer to the changes from rental to purchase, and then to the six-point plan (capped rental) of the 1980s and 1990s. Each was a major change and had an effect on the industry that we all learned to navigate successfully.

Many VGM providers I speak to are currently making and implementing plans to take advantage of opportunities that will be created in the near future. The bottom line is that with the aging of the Baby Boomer generation, there will be a huge number of people who WILL NEED and WILL FIND A WAY to get the products and services we provide. They will need competent, quality providers to meet their needs and desires. Their needs are and will be met by the best service provider—the independent HME provider.

Clayback: There is no denying the growing demographics and need for a robust HME marketplace. The value of being taken care of in the home will not diminish as we move into the future. While there are certainly challenges in our industry, a challenging environment is part of most business sectors in the country today. The market is only going to grow, and with it will come business opportunities for companies that are positioned to take advantage of it. There will be plenty of opportunity for well-run and well-managed HME providers.