Products & Technology

The Delivery Management Maze

How can providers find a pathway to increased performance and profitability?

• By David Kopf
• May 01, 2011

Remember Pac Man? If you had any loose change in the 1980s, chances are memories of the video game sensation are indelibly marked on your brain. Feeding countless quarters into the machines so that you could steer a little yellow ball through a maze to gobble up tiny pixels on the screen practically became the national pasttime. Players progressed through one electronic labyrinth after another while dodging digital ghosts that threatened to them with video game doom.

Strangely, Pac Man is a perfect metaphor for the puzzle providers face when it comes to delivery management. One of the major portions of HME business overhead, running delivery and repair fl eets and their supporting operations is not only confusing, it is costly. This is especially true given today’s funding environment.

Providers are facing a number of staggering cuts to their Medicare funding — and in some cases an entire up-ending of their business models:

• HMEs in Round One of competitive bidding are feeling the staggering effects of losing a portion of their business, or, in the case of winners, trying to somehow serve whole new patient populations at the drop of a hat — and at an average 32 percent cut to their funding.
• Mobility providers are having to completely overhaul their standard power mobility businesses in the wake of the elimination of the first month purchase option. Where they once could fully fund a chair from the outset, now they must rent it for 13 months.
• Pre- and post-payment audits for Medicare claims have thrown providers’ entire bottom lines into doubt. Who knows if three weeks from now, an HME will have to suffer having a year-old claim recouped and then fight to get it back? Moreover, providers have had to contend with the fact that increased documentation requirements needed to minimize any possible audit complications have strained some referral partner relationships.
• While the 36-month rental cap on oxygen services has been in place for some time and there is no indication that the oxygen benefit will be overhauled, respiratory providers are still fine tuning their business models to contend with the loss in revenue and requirement to serve patients beyond the 36th month’s compensation cut-off.

Those are four very solid reasons why providers need to find as many new efficiencies and surgically remove as much overhead from their businesses as possible. Any dollar that can be saved is a dollar that perpetually goes back to the bottom line, and that dollar is immune from the vagaries of Medicare’s policy whims.

Needless to say, when cutting costs, it’s best to look at the largest cost centers within a business, and after inventory and human resources costs, delivery operations rank as a major overhead element within many providers’ finances. There are multiple costs associated with a delivery operations:

• The cost of drivers and dispatch staff.
• The cost of the vehicles and their maintenance.
• Fuel costs, which are once again skyrocketing (regular gas is averaging $3.80 and ranging as high as $4.50 a gallon at press time, according to the American Automobile Association).
• The cost of the inventory stored in the trucks.
• The additional insurance, registration and other costs required with owning and operating a vehicle fleet.

Moreover, operating a proper HME delivery operation doesn’t just mean covering each day’s deliveries, but providing extra vehicle and driver coverage so that the HME business can respond to and address emergency or urgent patient requests that crop up in a day.

So, no matter how you slice it, delivery operations represent considerable overhead, and in a cost-conscious funding environment, they represent considerable opportunity to implement new efficiencies and drive unnecessary costs out of the business. The question is whether or not providers are aware of that fact and acting on it.

“Delivery management tends to be low on the priority list for providers when they’re looking more at efficiencies in the billing process and what have you,” says R. Michael Clark, director of operations for Definitive Homecare Solutions Ltd., which makes CPR+, an HME software solution that includes delivery management technology. “But we’re seeing strong demand for our [delivery] solution. Once providers are alerted to the benefits possible with technology, they are very, very interested.”

“We see HMEs that get it,” says. Bob Wagner, president of HME GPS, which provides HME GPS tracking systems and services to HME providers. (Wagner is also president and owner of an HME business, Wagner Medical Supply.) “They say, ‘Oh my gosh, this isn’t an expense, but helps me saves money and make more money. And we’re also seeing a lot of shopping, too; folks that are looking at us and other systems.”

A One-Two Punch

Delivery management systems represent a major evolution from traditional provider delivery operations. Even in this age of GPS-enabled smart phones, many providers manage their deliveries and plan their routes using print outs of the days orders and a white board to organize the team. Then the drivers are tracked through phone or radio check-ins and updates. That manual method is time-consuming and doesn’t provide a good idea of what is actually happening in the field.

Fortunately, there are better solutions out there to help providers manage their delivery operations and resources. The two main technologies behind delivery management solutions are GPS tracking and route planning/optimization software.

GPS tracking lets providers track their vehicles while they are out in the field. A GPS device is installed in the vehicle, or a GPS-enabled smart phone or similar device is carried with the driver. For instance, in HME GPS’s system, GPS units are installed in a company’s delivery vehicle. There is also a portable GPS unit that can be carried with clinicians and other traveling staff in their personal vehicles. These units are tracked by HME GPS and its parent company OnBoard Communications, and the HME business logs into the system to see their vehicles and track them. The provider can see a variety of information about each vehicle, such as its current and average speed and mileage.

It’s important to note that GPS systems that are connected to the vehicle give the most accurate picture about that vehicle’s status as they are constantly on, in comparison to a portable or phone-based device, which travels with the staff member, rather than the truck or car, Wagner notes. Route planning and optimization software takes the day’s orders and the available drivers and vehicles and maps out the quickest, most efficient delivery routes. In some cases, a small provider might be able to use an offtheshelf route planning system, such as Microsoft streets and trips to plan their daily deliveries, if they don’t have very many, but a larger provider, and certainly a multi-location or regional provider will need a more dedicated system that can work with the provider’s database of orders and generate complex routes for a larger-scale delivery operation, Wagner says.

“There are providers that have a thousand orders and need to put them in a database in order to tell them that ‘these 15 orders go to driver A, these 16 orders go to driver B, etc.,’” he says. HME GPS current doesn’t offer a routing system, but is in the process of looking at various routing solutions and vendors to use as its front end routing solution to HME GPS system.

Benefits of Delivery Management

So, combining GPS and route planning and optimization, delivery manage-ment technology has some obvious benefits. For starters, one of the key benefits is increased productivity per vehicle, per driver.

“When you have software that determines what’s the most effective way to hit orders on your way out and on your way back while respecting the time windows, that really helps drivers spend the minimum time behind the wheel and spend the minimum gas mileage,” says Ken Accardi, CTO of Ankota Inc., which makes HME delivery management systems.

“If you can take a half-hour stop and make it 20 minutes because we’re not dallying,” Wagner says. “If you can send one driver into an area or two. There are a number of ways that driver is more productive.”

Part of that could be that, essentially, management is sitting in the truck with the driver at all times. Instead of being free range, so to speak, the driver stays conscious of his or her work responsibilities and priorities. Moreover, he or she is focused on maintaining his or her efficiency as a driver.

“As soon as we put these systems in, we see a gain in productivity,” Wagner says. “If you can get an extra stop or two a day out of a van that clearly is the largest gain.”

Another key gain that comes from increased delivery productivity is a drop in required staff, in terms of drivers, route planning and fleet management.

“That’s really the whole name of the game,” Clark says. “You can decrease staff hours. Route planning is a very cumbersome and time-consuming process when you are handling all your route planning for the day manually.”

Another key gain is in customer service. Improved deliveries mean happy patients and partners.

“Delivery management presents a unique opportunity for providers, because it is one of the areas where, with technology, they can focus entirely on costs savings, but at the same time they’re going to wind up with better customer service as a result,” Clark explains.

When a provider incorporates technology such as route planning and GPS tracking, it automatically enjoys the cost savings from decreased staff time, improved fuel mileage and similar benefits. But that’s not all; a provider’s customer service reps can respond much more quickly to issues such as patients calling in to the provider wondering where their driver is.

“The [CSRs] have access to that information at their fingertips when they’re using GPS tracking that displays where drivers are in the course of their route,” Clark explains.

In a larger organization, the alternative would be much more time consuming. In a manual delivery management scenario, the patient would call the CSR; the CSR would put the customer on hold; the CSR would call the dispatcher; the dispatcher would call the driver; the dispatcher would let the CSR know; and then the CSR informs the patient. Obviously, that’s not exactly an ideal methodology where customer service is concerned.

“When you display this information through GPS tracking and make it available throughout your organization, the CSR knows exactly what’s happening with that customer’s delivery at any moment in time,” Clark says. While fuel costs are a key cost related to delivery, staffing is also an important consideration when it comes to delivery-related cost-cutting, Clark says.

“Route optimization is useful and certainly can cut gas costs,” he explains. “But when it really comes down to numbers of full-time employees that have to be involved in route planning that can decrease or at least partially decrease is a far greater savings than the actual hard costs of fuel.” And any increased delivery efficiencies can greatly benefit referral partner relationships. As deliveries become quicker and more efficient, key partners will notice the improvement. And it doesn’t hurt for the provider to toot its horn a bit, either.

“I think in approaching referral sources, being able to actual quantify response times for new deliveries in the field and giving them a glimpse of how to achieve those is a great selling point for HME providers,” Clark says.

There’s also a cash flow benefit to implementing delivery management technology. When a provider is able to complete deliveries and indicate them in real time via a hand-held device, the provider has a delivery that is instantly billable.

“Rather than waiting for drivers to return with paper that goes to the billing department, you can bill instantly after you drop off equipment or supplies,” Clark notes.

And in the case of a truck breaking down, or an emergency request, delivery management systems provide the flexibility that helps the provider respond that much more rapidly, Acardi says.

“We have tools where you can say, ‘Show me all the orders left for this truck,’ and with a couple clicks reassign the orders over to another driver, and the system will recalculate the route for that driver,” Acardi says.

Implementation Considerations

There are various considerations a provider needs to factor in when implementing a delivery management system within their business. Deciding on the solution that best fits the business is probably the best place to start.

There are multiple options:

• For starters, a provider could go with a simple, “off-the-shelf” GPS tracking system that isn’t necessarily designed with HME providers in mind.
• A software system, separate from the HME’s billing and business management software system, that providers route planning and optimization features with GPS.
• A GPS tracking system that is designed for HMEs and can be integrated with their systems, or a GPS tracking system that is a part of their HME systems (or an additional feature module that can be added onto the system).
• A route planning system that is designed for HMEs that can be integrated into their HME software, or that is already a part of it.

Integration into HME software systems and business processes is a critical concern, Clark says. HME deliveries can differ from other businesses.

“Unlike other businesses that will use route optimization software for, say, package delivery, HME providers frequently have same day orders from referrals where patients will need supplies or medical equipment that same day,” Clark says. “This means they have to have the ability to be able to divert a driver in the field to a new delivery. (They’ll keep some level of rolling stock to accommodate that.

“With a route management and GPS system integrated with a provider’s billing and business management system, staff can actually send those deliveries that they’ve already keyed into their ordering and billing system, and have those received in the filed,” Clark continues.

Of course, the older a provider’s billing and management system is, the more challenging the integration will be.

“If they have a more modern system, it’s probably very easy for us to take the orders electronically, whereas if they have an older system, we might need to ask them to be a little more creative with us on how we can get that out of it,” Acardi says. “But there’s pretty much always a way we can get integration done.”

Not much time is required in the training of staff to use delivery management systems, but there is change management to consider. Implementing a system that cuts down on the man hours needed represents some tricky business in terms of preparing staff, but it is also important to remember that staff aren’t necessarily downsized. Often, they are redeployed into other areas of the HME business, where they can be used to greater benefit.

“It’s going to let the business grow and refocus its energies elsewhere, when they are able to save staff hours needed for one function of the business,” Clark says.

So, to prepare staff for the implementation of a delivery management system, Clark says providers should focus on explaining the benefits the system will bring to the business and the staff. Getting some staff to hang up their white boards and dry erase markers and move over to the computer can represent a tricky transition for some staff, but as long as staff can see the benefits and are willing to pursue them, the move to using delivery management technology goes smoothly.

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