Business Solutions

Building New Profit Centers

Expanding into compression goods and orthopedic products.

• By Joseph Duffy
• May 01, 2011

In an industry shaken by cuts, caps and competitive bidding, providers are revisiting their entrepreneurial roots to uncover ways of bringing in more non-reimbursement business.

As the scales dramatically shift from a mostly reimbursement business to one where retail is needed to help keep the doors open, HME providers search for the perfect mix of retail and Medicare reimbursement. Every day the call to embrace a more aggressive retail model grows louder as reimbursement levels decline.

Through the gloom, providers must keep in mind that patients are also feeling the effects of dwindling reimbursement and are gaining an increased understanding that to achieve a higher quality of life, patients’ paths to health may start in their own pocket. Successful providers say it’s an idea that patients are beginning to accept.

An attractive possible profit center for providers to explore is compression products and orthopedic goods. Orthopedic goods are still strong reimbursable products with excellent add-on sales opportunities, where compression products are excellent retail sellers for providers.

It’s hard to pin down the percentage of compression and orthopedic product revenue a successful provider can expect, but Eric Lorenz, SVP and general manager, DJO Global, of Dr. Comfort, says the category can represent as high as 20 percent of revenue in large areas when properly marketed and managed.

“In our experience some of our dealers derive on average about 25 percent to 30 percent of their revenue from selling braces, supports and compression hosiery,” says Lev Tripolsky, president and CEO of ITA-MED Co.

HME Business magazine tapped experts in this niche to help you decide if this product mix, which serves a large patient population and doesn’t require a steep learning curve, would create a viable revenue stream for you.

Why Carrying Compression and Orthopedic Products Makes Sense When it comes to compression and orthopedic products, baby boomers are a key demographic, and selling products that have a huge customer base can have a high rate of success.

“Carrying compression hosiery and orthopedic sift goods can be a major revenue stream for HME dealers,” says Tripolsky. “As the population ages and older people are staying physically active longer, more and more people need some type of supports and braces to help maintain an active lifestyles, and to prevent and treat minor injuries. Statistically about 50 percent to 60 percent of adults have various degrees of venous insufficiencies, the most common and known problem: varicose veins. This problem is often hereditary, but also is caused by carrying heavy loads, sitting or standing in the same position without movement, long air travel and being pregnant. To help prevent or stop varicose veins, it’s very important to wear graduated compression stockings. So the market potential and the need for those products are enormous.”

Tom Musone, director of marketing for Juzo, says that another important reason to carry compression products is the increase in understanding of the disease states the products help treat, such as venous disease and lymphedema. He points out that March was DVT Awareness Month and that there was much attention given to famous tennis pro Serena Williams, who developed a blood clot and received emergency treatment for a pulmonary embolism. He’s also seen an increase in programs to educate the medical community about the seriousness of these conditions.

“Hosiery has a vast target population, and as an added bonus, compression hosiery is a lucrative cash market,” says Cindy Ciardo, BOC Orthotist, CEO of Knueppel HealthCare Services, Inc. “Medicare, for the most part, does not cover hosiery, (only below knee for 30-40mmHg and 40-50mmHg with an open ulcer) and many managed care plans are cutting back on hosiery benefits.”

Unlike compression products, orthopedic goods often meet the criteria for reimbursement. The retail possibility with orthopedic products can come from add-on sales.

“Orthopedics are more often covered than not when prescribed and medically necessary,” says Ciardo. “With anything else, some allowables are good and some not so much. But overall, it’s a good profit area. There are many items you can easily sell that dovetail to increase your profits. For example, when lumbar or cervical supports are prescribed, sell positioning pillows and cushions, heating pads, pain analgesics and reaching aids. For knee braces, sell heating pads, pain analgesics and knee wedges.”

Ron Bar, Ph.D., president of Orthofeet, says orthopedic products such as therapeutic shoes and diabetic insoles are covered by qualified Medicare for patients with diabetes.

“Patients are eligible for one pair of shoes and three pairs of insoles annually, offering providers over $200 net margin per patient,” says Bar. “Diabetic socks are not covered by Medicare, but offer a great profit center because of the special need of diabetic patients for special protective socks.”

Ciardo adds, “Medicare does cover most orthopedics if the brace or support is not ‘soft,’ meaning it has metal stays or some other rigid support. For example, a pull-on neoprene knee support without metal hinges would not be covered, but the same thing with hinges would.”

For shoes, Medicare created the Therapeutic Shoe Bill to help prevent foot problems and to reduce the enormous cost of treating patients with open wounds or amputations. According to Bar, accredited HME providers can participate in the Therapeutic Shoe Bill, and bill Medicare.

Learning About Compression and Orthopedic Products

Successful sellers of compression and orthopedic products are providers who are thoroughly trained and knowledgeable about the products and the diseases they help to treat. Ciardo suggests that to gain the confidence of referral sources when dealing with orthopedic products, consider certification by ABCOP or BOC.

“The level of expertise required to supply orthopedic products vary from state to state,” says Paul Barattiero, C.Ped., vice president of sales, Orthofeet. “At minimum, providers should attend a course provided by the manufacturer and then follow up with an ABC/NCOPE-approved course qualifying them to fit the devices. All of the quality manufacturers offer courses to the suppliers that satisfy the educational requirements. They then need to fulfill the patient care hours requirement and then pass the board test.”

Regarding compression products, Tripolsky says that providers need to have a basic understanding of how graduated
compression works and how to recommend various types of hosiery to customers. ITA-MED offers educational information about the compression products they carry on their website, product literature and training DVDs. His company, like others, provides training and answers any specific questions via phone or e-mail.

“These product categories requires a moderate level of expertise and training, usually provided effectively by product vendor and suppliers, along with prescribing medical professionals,” says Lorenz. “Often, the training needed can be obtained online, through materials created by vendors, numerous publications and articles.”

Jennifer Miller, senior product manager, BSN Medical Inc., says the provider’s staff should be comfortable fitting and talking about the products they carry. It also helps if they understand basic selling principles so they can upsell where possible. A good vendor should provide staff training, whether online or directly by a qualified sales representative.

Bar points out that there are seminars available from companies that provide diabetic shoes and insoles and that there are a variety of schools that certify providers as Certified Shoe Fitters.

Having an understanding in the differences between the two types of products helps providers decide if one or both categories are a good fit for their customers and business.

Perhaps Musone sums it up best for either product category.

“A passion to help patients is crucial,” says Musone. “The more you’re willing to understand and get educated on all of the necessary compression tools that are used to treat venous disease and lymphedema you will increase patient compliance and success.”

Working Through Inventory and Stock Issues

Knowing which products to carry and how many to have in stock certainly lends to creating a favorable customer experience. But it’s not always easy, especially if you are new to carrying compression and orthopedic goods. Our experts suggest the following basic guidelines regarding product inventory:

In terms of compression hosiery, Tripolsky recommends that dealers carry at least light and medium levels of compression, which means under 20 mmHg. This should include travel socks (light compression 10 -15 mmHg, unisex models), and pantyhose, thigh highs, knee-highs for women and men’s socks. Carry at least two of the most popular colors: beige and black. In orthopedic supports, carry at least three types of back supports: industrial work belts, sport belts and general lumbosacral support belts. Carry at least one type of posture corrector for adults and kids, hernia support, abdominal binder, and at least two types of knee, ankle, wrist and elbow braces.

According to Bar, regarding therapeutic shoes and diabetic insoles, there is no need for any stock. All that’s needed is a shoe display with a variety of samples. The shoes and insoles are shipped per the patient’s needs.

Lorenz suggests that the primary product categories most often needed for daily stocking requirements for orthopedic supports at various levels include devices such as wrist, ankle, knee, back, posture, elbow, hernia, hot and cold treatment, arm slings, night splints, cast shoes and wraps. Products that are larger and can be stocked in single nits or ordered as needed include serious knee braces, and diabetic or ortho-walker boots. Vendor service levels and space drive inventory requirements, but usually carrying two to three per size per style will suffice.

Musone says that patients want to walk in a HME store and walk out with the product. His company sales representatives are trained to identify the appropriate stock order with correct sizing, colors and styles that would best fit with the provider’s demographics. Look to your product’s manufacturer as an expert in stocking your store in relation to your particular demographic.

Satisfying Your Customers

After you’ve decided that compression and/or orthopedic products are for you, its time to construct your sales plan. And the first step is making sure you meet your customers’ expectations.

“Customer service is paramount,” says Ciardo. “Individual attention, custom measuring and fitting, and thorough instruction for the application, removal, and care of their hosiery are the personal touches that will set you apart from the competition and help guarantee your success.” Ciardo also suggests:

• Have a liberal return policy. Most of the manufacturers have a satisfaction guarantee and will support you if you need to take back a pair of stockings from a dissatisfied customer.
• Always employ good listening skills to determine the customers’ needs, and to effectively resolve problems and overcome objections.
• Offer options whenever possible, which allow the customer to make a choice instead of feeling powerless in the decision-making process.
• Provide product information and related educational materials, which help reinforce your commitment to educating the consumer. These explanations and personal demonstrations will go a long way toward earning the customer’s trust, and will promote the customer’s understanding, acceptance and compliance — all being important steps to obtaining repeat sales.

To help educate patients, Lorenz suggests obtaining and distributing vendor support materials (usually provided at no charge) and material supplies to local medical professional support partners (prescribers). Other ways to reach customers is by holding in-store clinics (which vendors can support), home mailers and newsletters.

Barattiero sums up the importance of great patient relations: “Always treat patients with dignity and respect, taking time to listen to patient concerns,” he says. “The providers should take sufficient time to educate the patient on use, wearing procedures, break-in period, warranty terms, and what constitutes proper fit of the device. They should receive acknowledgment where possible. Providers should give the patient an easy-to-read and understand handout explaining all that they discussed.”

Marketing Compression and Orthopedic Products

Although marketing compression products and orthopedic goods is integral to your success, it doesn’t have to hurt your bottom-line. Musone points out that companies such as his offer providers point-of-purchase signage and displays to help promote products. “I also like to tie into national awareness months about topics such as DVT, breast cancer and diabetes, which helps increase disease state awareness and compression garment solutions,” he says.

Regardless of the product you’re marketing, Barattiero reminds providers to advertise with discretion. He suggests using a marketing effort that also adds value for the customer, such as free foot screenings, free blood sugar tests and hosting a healthy leg and feet day in-store.

Ciardo offers these marketing suggestions for compression products:

• Host in-store promotions like leg health days.
• Advertise semi-annual sales by direct mail and by circulating sale flyers to referral sources.
• Use client reminder cards to notify customers when they should re-order.
• Offer discount cards to healthcare professionals.
• Use VIP cards to reward customers with a free pair of stockings after so many purchases.
• Provide free hosiery wash or lingerie bags with purchase.
• Reward customers who recommend your company with a small gift or discount on their next purchase.

“Merchandising is also important to promote increased sales,” Ciardo says. “It is important to differentiate between medical and over-the-counter compression hosiery. Keep the medical grade hosiery (above 18mmHg) in the stockroom to emphasize the need for proper fitting and professional expertise, but conversely position the OTC hosiery on the retail floor to cross-sell with complementary products. The same is true with orthopedic products like arthritis supports; OTC knee, ankle, wrist and elbow supports; pillows and cushions; and ADLs. Place these items in a high-traffic area. Use pictures and exhibits to communicate the need for and value of compression hosiery. Prominently display product literature and educational resources, emphasizing your commitment to patient education.”

Finally, make sure your marketing efforts are keeping and creating customer for life.

“It is extremely important for a provider to position themselves as a resource to their customers,” Musone says. “Be a valuable resource by taking the time to understand what is most important to the patient. Is it Comfort? Style? Cost? Aesthetics? All of the above? Once you find out what is most important to the patient you will be able to match their need with the right product.”

Compliance is one of the biggest challenges providers face, Musone adds. By taking the time to match the right product with the right patient, a provider will be more likely to stay compliant.

“Remember, a garment sitting in a drawer isn’t doing anyone any good,” he says. “Part of being a resource to your customers is also taking the time to help them understand how to take care of their garments, as well as donning and doffing techniques. By taking an extra five or 10 minutes, you will build customer loyalty which equates to repeat business and referrals.”

This article originally appeared in the May 2011 issue of HME Business.