Tools and Tips: Reimbursement

The Medicare Modernization Act will bring many changes to the industry over the next several years. Providers will need to find ways to increase their profitability in order to offset the reductions in reimbursement rates and other changes that will lower profitability. There are many ways to increase profitability, two of them?sales growth and productivity improvement?I will speak of specifically here.

There are various ways to increase your sales growth and improve productivity, thereby increasing the profitability of your company. The strategies to grow your sales are Precision Targeting, Differentiation and being Easy To Do Business With (ETDBW). The strategies to improve productivity are Measuring/Managing Productivity, getting the Best Customer and Streamlining Processes. If you adopt any or all of these strategies you will see an increase in your profitability.

1. Precision Targeting.

Precision targeting allows you to target specific areas that you are likely to get good results from based on your sales history and market data. By focusing on the right areas you will increase sales growth. Begin with a best results analysis in which you will acquire sales data on existing customers. The data you collect should inform you about customers, zip codes, products, expenditures, dates of service and referring physicians. Analyze this data and determine what your best customers have in common with each other. Where are they located? What products do they typically buy? How much do they spend? What is their service activity? Who referred the customer to you?

From this data you will uncover common characteristics associated with the best results your company has recorded. Use this information to target areas in which the market is similar in demographics and statistics. In doing so you will target markets that you are most likely to yield desired results from. Combine this with an analysis of media outlets and physicians in the area that are most closely aligned with your historical data. You will have uncovered places in your market that have the most potential to bring you greater sales. Then come up with a marketing plan to perform a maintenance level of marketing with your top customers and a concentrated level of marketing to those areas you uncovered with the most sales potential.

2. Differentiation.

Differentiating your company from the other providers will increase your company's sales. Differentiation is aimed at producing a valuable product or service that is considered to be unique industry wide. You will be separating yourself from your competition. The first step in differentiation is identifying positioning themes for your company. Come up with all of the possible ideas to differentiate yourself while creating value for your customers. Quality and response time are two sure routes to create customer value. The second step is to filter each alternative. Make sure it is meaningful to your customers. Make sure it is feasible given your company's core competencies and the customer perceptions of your company. Be sure that the positioning theme is superior or unique and that it is difficult for your competition to match. Following the filtration phase, you will choose the position that suits your organization best, and generates the most enthusiasm and commitment from your team. Lastly, develop the metrics needed in order to successfully implement the position and develop a way to track your results. You need to report exact numbers and statistics to your referral sources, customers, and potential customers.

3. Easy To Do Business With.

Being a provider who is ETDBW will cause your sales to increase. Referral sources will be compelled to keep referring to you because it is an easy, non labor intensive process. It is important to know what your referral sources find valuable. It is also important to find out how well your referral sources think you are doing, and what you could be doing differently to make things easier for them. To get these answers go straight to the source.

The first step is to identify what you need to know. Start by defining any problems or bottlenecks your company is experiencing. If you have a CMN backlog and are having problems collecting signed CMNs from doctors, you would research how to improve the CMN collection process. The second step is to identify the people who are likely to know the answers to your questions. In this case it is the person actually handling the CMN in the doctor's office that you need to talk to since they are responsible for getting the doctor to sign it. Lastly, frame a small number of key questions to get the information you need. If your objective is to learn how to make the CMN process easier for the doctor, your questions could be the following:

1. What is the best way to deliver a CMN to your office?

2. How soon after an order is taken would you like the CMN delivered?

3. What is our company doing now that is making the process of collecting a CMN easier for you?

4. What is our company doing now that is making the process of collecting a CMN difficult for you?

Take the information you gathered and make changes as needed. Remember, this is what your customers or referral sources want from you. If you listen to them and do what they are telling you to, then you will see an increase in your sales.

4. Measuring/Managing Productivity.

Measuring and managing your productivity will largely increase your profitability. You should begin by calculating your productivity. Productivity is equal to sales divided by full time equivalent employment. Set a company objective to increase your productivity by a certain percentage. You could set a target to increase productivity by 10 percent or even 20 percent. In the upcoming months calculate your productivity and measure it against the starting productivity number to track your progress.

There are two sources of improvement for productivity, throughput and quality. Throughput is how many items are produced per unit of time. Quality is how much of the output meets the customers' expectations. You should measure both throughput and quality to manage productivity effectively. Your throughput numbers could be increasing and things might look like they are improving, while quality could be decreasing. If you do not measure quality along with throughput, the numbers become meaningless. These measures should be tracked at a job level. For example, if you are measuring the accounts payable department you want to measure each accounts payable representative. If your accounts payable department is set up in teams and it is more practical to measure and manage them that way it is acceptable. You can measure by team or even department if it is more practical. Measure, manage and coach your employees to increase their productivity. If an employee is constantly below the target throughput and quality measures then you need to train them more, or move them to another position within the company that is better suited for them. If an employee is consistently above the target throughput and quality measures ask them how they are doing so well and share their knowledge with other employees.

5. Choosing The Best Customer.

Choosing the best customer, not just the next customer, is sure to increase your profitability. The best customer is one who fits your company's capabilities and therefore facilitates efficient processing. Customers who require exceptions to processes, or redesigned processes will lower your productivity?thus lowering your profitability. Take a look at your company and determine what you do best. Maybe you will decide to no longer be all things to all people. You could then be a niche provider and have a limited product line, such as respiratory services. Develop an assessment tool so your company has a standard way of determining if you want to accept a referral. Keep in mind you will want to make exceptions for some referrals if they are coming from a preferred source and meet other criteria. You assessment tool should include provisions for exceptions to be made so there is a company standard. If you choose to not accept a referral you should then recommend one or more providers who have a history of providing quality service.

6. Streamline Processes.

Streamlining business processes will improve your productivity tremendously. This suggests attention to the detail of a process that might lead to improved performance and quality. The idea is to get the smoothest flow with the least amount of effort. Start by removing any unnecessary administrative tasks and paperwork. Remove any duplicate activities that are performed at different parts of a process. Simplify the process as much as possible and standardize it. Select one way of doing an activity and have all employees do the activity the same way at all times. It is also smart to partner up with processes that you are highly dependent on. If the output of your process is dependent on the quality of the inputs from another process, then you will want to work together to ensure the highest quality possible. The overall performance of your process will improve when your inputs improve. Automation will also help with streamlining a process. Apply tools, equipment and computers to routine activities to free up employees to do other activities.

Set a goal within your company to focus on growing sales and increasing productivity. Then choose at lease one of the three strategies for each and work towards achieving your goal. There are many options you can choose from, and each will result in positive changes within your organization. You will see an increase in your profitability and you will enjoy the benefits of a stronger company.

This article originally appeared in the March 2005 issue of HME Business.

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