Oxygen: A Sampling of Strategies

• By Deborah Cooper
• Nov 01, 2006

Providers have enacted strategies from the simple to the sophisticated in their efforts to maintain viable businesses. Creativity, in-depth analysis and a fresh perspective have produced the following insights:

Employees Are a Goldmine
Inspiring employees to stick around for the long run has really paid off for Patrick Hanna, of B&K Home Medical Services. “One of the things we have going is that we have very low turnover – that’s a cost people should be aware of. This relates to HR, policies, a fair compensation system, benefits, and how you manage and treat employees.” Don’t take employees for granted because, “there’s a lot of value in trying to work with your team. It’s about appreciating the people you do have and not being too quick to dismiss them. Work on weak areas where needed. Employees need to buy into your vision and appreciate being part of it. Try not to give them reasons to want to leave, but instead keep them productive and motivated.”

Another provider, Michael Kuller, of Allstar Oxygen, has focused on getting the most out of his personnel by enlisting their help in the cost-conserving process. “Last year, we put together a spreadsheet of every oxygen patient we serviced that month. We looked at the manifest to review the number of deliveries, we looked at the number of tanks received, what each cost and how many pounds of oxygen we provided. We looked at what it costs to service each individual oxygen patient. We were losing money on some customers, visiting too often, taking too many tanks and not managing them in a cost-effective manner. The challenge we gave to the drivers was to figure out a way to not lose money on the patient. We asked, what can we do to make those numbers positive? So, for example, the patients on liquid oxygen all have combo systems, but a number of patients were not using the concentrator, they were using the liquid all the time. We gave the technicians two months to get them turned around. And the patients we couldn’t turn into positives we transferred to a different company,” explains Kuller.

Put Cash Sales Within Customers’ Reach
Bill Kleiman, VP, AirCare Home Medical, is one of those people who sees the glass half full, not half empty, because, as he says himself, “I’m probably one of the few people that sees a lot of opportunity in the [proposed 36-month] rental cap. There’s a related opportunity with portable oxygen concentrators and cash sales.” Kleiman has already assisted customers who enjoy the independence of portable systems to become owners outright. To them, it makes good sense and Kleiman’s company helps the client by providing financing, which allows them to make payments. “If I need to get around town I will pay $20-30K to buy a car. If I need oxygen to live on, how could I not invest $3-5K for a unit that will make me more independent? Many [customers] are discovering this is the way to go. We’ve seen families come together to help a family member with the financing involved. It’s very important and that’s where I see a huge opportunity.”
Overall, Kleiman believes this trend will only become stronger and urges other HME businesses to think outside of the Medicare box: “The time has come for us all to stop looking at ourselves as dependent on Medicare. Cash is going to be more important for survival.”

Kleiman is not alone in his strategy. “There’s a whole new generation of dealers coming to the marketplace,” agrees Jim Byington, sales and marketing manager, Mountain Aire Medical Equipment. “The dealer of the future will be much more retail oriented.” He suggests that dealers ask themselves what other things they can sell along with oxygen. He believes that in the future, providers will find it necessary to develop more of a retail and customer service mentality and that this transition is already underway in the marketplace.

A Supplier’s Point of View: Uncover Your Hidden Costs
Jim Byington, sales and marketing manager, Mountain Aire Medical Equipment, has been involved with the oxygen business since 1973. Mountain Aire Medical was started 17 years ago as a provider of accessories to the home oxygen provider, with a specialty focus on safety and compliance products.

RM: Which costs are easily overlooked?
JB: Many times providers don’t fully load their database with all the intricate things they do and the costs associated with servicing the patient and their supply of that medical oxygen. I spent several years providing equipment to patients and doing Medicare billing and doing follow-up and those are all costs that don’t seem to get identified. Ask yourself, “What is the cost of generating a Medicare bill and waiting for the money?” That kind of cost is not really measured.

RM: How can businesses manage their inventory costs?
Another type of cost that some providers don’t put a value on is the available inventory; the cost associated with having inventory on the shelf waiting for the patient. Many home care dealers are learning to utilize their rental inventory, which is an asset and that’s a lot smarter. A couple of years ago if a patient wanted a piece of equipment the dealer would buy it. Now, if they have something that will work on most patients they will use it. They are no longer so brand oriented.

RM: Is accreditation adding another burden?
There are costs associated with meeting the credentialing requirements, such as the labor involved, having the manual and doing follow-up. Fortunately, most good companies are already within the window of operating under the accreditation standards.

This article originally appeared in the Respiratory Management Nov/Dec 2006 issue of HME Business.