Provider Strategy:

Standard Power: Are You in the Game?

Rental-ready providers will survive changes.

• By Joe Chesna
• Oct 01, 2011

The year began with some uncertainty and a good deal of concern for the direction the standard power segment of the industry was moving. We are now 10 months into Medicare’s mandatory capped rental environment and many providers are still working hard to shape their business models to succeed in a new environment. Some providers remainunsure about what the rental market can offer and are still adapting.

A multitude of new rental specific products and services coupled with the rapidly expanding senior demographics provide excellent opportunities to the rental ready provider, but there are things to consider if you want to get in the game to win.

Understand What Makes a Product Rental Ready

The biggest factor to your success in the rental environment is the standard power products you select. It is essential that you understand the importance of the overall lifetime cost of the product versus the product acquisition costs.

Under Medicare’s capped rental system, labor and operational costs are not included in the acquisition cost. A provider is responsible for maintenance, repair and/or replacement of equipment a beneficiary is renting. Now more than ever, product quality and durability should be the driving factor in your product choice. There is nothing to be gained by purchasing an inferior product at a low initial cost. In fact, trying to save money on the front end will in all likelihood cost you dearly in the long run.

The rental environment is a harsh one to products in the field. This makes quality even more important. The five-year useful lifetime of the equipment begins when a beneficiary receives the unit, and is not based on the age of the equipment. Once the beneficiary owns the equipment, following 13 months of continuous use, repairs to the unit may be reimbursable by the Medicare program and beneficiary. However, repair costs that exceed the replacement cost of the chair will not be paid. If a power wheelchair will not last for the entire reasonable useful lifetime, the supplier is required to replace the equipment at no cost to the beneficiary or the Medicare program. Select products that have features to protect your investment and that offer easy, cost effective refurbishment to stay ahead of the curve. Partner with a manufacturer that can deliver high quality products with features like additional armor or shielding to at-risk areas of the powerchair and refurbishment kits at good value. This will allow you to make the most of both your product acquisition costs and the critical overall lifetime cost of the product.

The goal is to maintain a product in the field for the longest period of time possible while minimizing service costs.

The Right Support Services

It takes more than just the right products to survive and succeed in the rental environment. You need to work with manufacturers that offer complete rental ready business solutions that help you maintain your cash flow and protect your bottom line.

Look for a manufacturer that can offer multiple financing options geared specifically for the rental market. Options should be reasonably priced, easy to obtain and allow for the additional purchasing power you will need to keep growing.

Service options are also crucial. The rental ready manufacturer should provide optional labor contracts and fee for service options to help keep your rental fleet in peak shape.

To succeed in the rental environment you need to operate at maximum efficiency. Work with your manufacturing partner to assess your needs in a variety of areas from product planning to marketing. Take full advantage of the services they offer to get the most out of your partnership.

Above All Evolve Your Business

CMS’s implementation of a mandatory capped rental for standard power wheelchairs presented one of the largest changes our industry has ever seen. To succeed you must look at your operation and make equally large changes.

You must have your Customer Service Department well versed in the verification of need, eligibility and use of the rental product. Your Billing& Collections Department must be adapted to new monthly billing and collections processes. Your Delivery & Repairs Department should be prepared for maintenance, repair and replacement during the rental cycle and set up toefficiently retrieve, refurbish and re-issue products.

Look for ways to continue to build capital. Make the commitment to retail sales. Retail presents the single best opportunity to augment your income. Expand your product offering to include cash sales items. Sell complete mobility solutions by proving ramps and vehicle lifts and take advantage of cross-selling opportunities. Maintain a well stocked showroom that prominently displays cash sales items and retail accessories. Enlist your delivery and set-up staff to help spread the word about your retail offerings. Use hangtags and handouts to display other items your clients may benefit from.

Diversifying payer sources to include Medicaid, private insurance, managed care and workman’s compensation is an exceptional way to supplement Medicare regulated payment. Build a reputation among referral sources in your area as the company that understands and cares about the patient through open houses and community involvement.

Use efficient and effective marketing techniques to attract new business. Think strongly about advertising, you may be shocked at how cost effective TV and radio advertising can be due to the current economy. Data mine your client base to identify new opportunities and repeat sales. Measure your results and know your competition.

The elimination of the first month purchase option did present challenges. However, it seems that once again the industry has been resilient enough to weather the storm and create opportunity out of adversity. The game has certainly changed but by changing with it and understanding the rules of the new environment, you’ll not only be able to stay in it, you can play to win.

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