Editor's Note

Knowing Your Value

Round Two is scary, but don't permit fear to color your strategic planning.

• By David Kopf
• Oct 01, 2013

As I write this column, the prevailing sentiment in the industry is one of fear, uncertainty and doubt — the bad old FUD factor. I wrote about this back in 2008 (see the May 2008 Editor’s Note, page 6), when Round One was first ramping up, but it’s worth revisiting, because I think FUD is negatively impacting providers’ strategic planning for the next year and beyond.

For those unfamiliar with the term FUD, the concept has been around for decades — as far back as the 1920s — but the modern understanding of fear, uncertainty and doubt is traced to computer architect Gene Amdahl who helped develop a number of computing systems for IBM Corp. in the 1950s and 1960s. Amdahl left IBM to start his own computer firm, Amdahl Corp., and used FUD to describe IBM’s sales approach to dissuading customers from buying his systems.

Today, FUD perfectly describes how providers are currently viewing their situation. Make no mistake there is good reason for this — competitive bidding Round Two, CMS’s continuing escalation of its audits, and face-to-face requirements for a wide variety of DME claims would give anyone pause about how this business is supposed to work. The is fear over how their businesses can last. There is uncertainty about what kind of revenues will be out there. And there is doubt that provider businesses can survive without Medicare comprising the lion’s share of their revenues.

Don’t Panic

But before we all run screaming for the emergency exits, let’s take a deep breath and consider whether all this FUD is necessary.

For starters, where there is FUD there is usually someone capitalizing on it. In this case, it is equity investment firms that are capitalizing on providers’ worries. Equity investors know that providers want to cash out, and there are some HME business owners who are willing to sell businesses they spent their whole lives developing for just pennies on the dollar. That is disheartening to say the least.

But it is also frustrating, because those sellers are ignoring (and perhaps willfully so) an important question: why are these investors interested in buying their businesses? Are buyers really that foolish that they are buying into a sector that is doomed? No. Remember, these are enterprises that buy businesses, grow them and then sell them for a profit a few years later. Why would they buy a business that has no prospects? They wouldn’t.

Those buyers are very clear headedly monitoring a couple prevailing trends: they know that providing care in the home is the cheapest way to provide healthcare, and doing so often yields better patient outcomes. These buyers also recognize that the demographics of the United States will demand this kind of care. America is getting older and refuses to live its life from a hospital bed.

And those investment firms buying HMEs know one more thing: that competitive bidding is probably going to tumble under its own weight of poor access; reimbursement so low it doesn’t make business sense; and a pressure to buy substandard DME that could lead to questionable care. That scenario creates an unsustainable situation that is bound to collapse like the house of cards it is. And when it does, patients will complain, Congress will listen, and CMS will be forced to come to the bargaining table. And that’s if, in the meantime, the industry doesn’t secure passage of H.R. 1717, which would replace competitive bidding with the Market Pricing Program.

What does this mean? That while competitive bidding is fostering a significant level of fear, uncertainty and doubt in the industry, providers should never lose site of the fact that their businesses and the HME industry possess incredible value both as businesses and elements within the spectrum of U.S. healthcare. Never lose sight of your true value.

This article originally appeared in the October 2013 issue of HME Business.