Respiratory Retail

Rethinking Retail

As oxygen providers seek to reinvigorate their revenues, they are giving a second thought to the value cash customers bring to the table.

• By Joseph Duffy
• Oct 01, 2014

HME respiratory providers trying to survive in an industry of caps, cuts and competitive bidding are working to re-define their operations and find new revenue streams.

“Relying primarily on Medicare is no longer in vogue due to a myriad of issues, including but not limited to, audits and competitive bidding,” said Miriam Lieber, President, Lieber Consulting LLC. “Providers are no longer shying away from private pay business as the customer continues to pay more and more of the bill. Whether buying a second concentrator (portable, of course) or a stair glide or lift for a power chair, layaway plans and significant private pay bills are becoming more routine. After all, if the customer is required to foot more of the bill, they want to know what they are buying and are potentially willing to buy items that they wouldn’t have cared about in the past. Finally, website sales are growing and outside the box products are generating interest. From on-line bill pay portals to attractive and interactive website tools, customers are more apt to use the Internet, especially if they are already accustomed to shopping on line. So, thinking outside the box, even if it helps create minimal additional revenue, is clearly more the norm and will only continue to bring positive change to HME businesses.”

HME Business magazine interviewed three respiratory providers who are reaching out to retail customers. And it’s making a difference to their bottom-line.

Karen Butterton, Chief Strategy Officer, Barnes Healthcare Services.

The Affordable Care Act (ACA) is diametrically changing healthcare. To stay in front of the changes, a RT/DME company requires strategy. That strategy needs to encompass sales, business development, new business lines, new programs, etc. It is also imperative to ‘hedge’ our risks and minimize them by diversifying all aspects of the post-acute-care business units. It is critical to have this dedication; otherwise, the ACA will pass us by. It’s not about competitive bidding; it’s about alignment with Value Base Purchasing objectives and the Medical Homes core measurements. We have to have the answers to some of the pressing problems the hospitals and ACOs are facing and position accordingly.

We are diversifying our product portfolio. The goal is to leverage the care continuum and as a post-acute provider, close the gap. The ACA is changing the way we do business today. We must ‘phoenix’ ourselves and become the ‘provider of choice’ to Accountable Care Organizations (ACOs), payers, large specialty practices, HHAs, etc.

We also have diversified our marketing efforts as part of our strategy in extending our complex chronic care services across settings, including sub-acute facilities such as LTAC, SNF and Transitional Care Rehab Centers. In addition we continue to strengthen our partnerships with commercial payers, Integrated Healthcare Systems and ACOs.

Recognizing the current challenges in increasing healthcare costs and impact of the Patient Protection and Affordable Care Act, we have developed new products and solutions leveraging our multi-discipline clinicians to effectively manage the high risk, complex chronic patient throughout the care continuum.

• To address the challenges related to increase readmissions, length of stay and related costs, Barnes Healthcare has implemented “Healthy at Home” a Telehealth readmission reduction program.
• “Healthy at Home” is a clinical process management solution to reduce readmissions for complex DRG’s (CHF, AMI, Pneumonia, COPD, Respiratory Failure, Diabetes)
• Continuity and coordination across the care continuum resulting in reduced healthcare costs.
• Patient Centric Program 3 E’s to Success — Educate, Empower and Engage. Our patients become more educated and empowered about self-care and healthy behaviors, enabling them to be more engaged in their health management, which helps improve patient compliance and self-care, leading to better health and quality of life.
• Daily remote monitoring offers relief to patients and their families.
• Successful transition and recovery of patients from hospital to home.
• Proven outcomes and improved quality of life

In the last 10 to12 months, we have seen significant growth due to this program. Jeff Park, our Director of Business Development, has been instrumental in driving the opportunities for BHCS and generating partnerships and contracts with ACOs, hospitals, self-insured hospital systems and payers.

David Baxter, President, Medical Necessities

The new revenue stream that we have worked on since Jan 2013 (pre-competitive bidding) We have worked with Sleep Solutions and Services (S3; www.s3sleepcoach.com) to help develop programs to reach our resupply patients to help limit our exposure to Medicare. Currently only 20 percent of our PAP business is Medicare and the rest is from private insurance. By developing a comprehensive resupply program, we have achieved the following benefits:

• We have grown our resupply business from $80,000 a month to $325,000 a month in 18 months.
• This has helped lessen our Medicare dependency by over 10 percent in the past 12 months.
• Our average sales order for PAP supply was $180 per order.
• Our collection percentage in comparison to the first six months of last year was 89 percent, compared to 96.5 percent for all insurance billing. We feel strongly that the reason behind this is that replacement supplies once submitted to insurance are billed promptly in comparison to fighting for initial delivery of equipment.
• Since January 2013 our reorder rate for replacement supplies have grown from 22 percent to 56 percent.
• We are achieving over 30 percent net profits with this side of our business.

Overall the program has been a success and we are excited about the future of our PAP replacement program. S3 has worked great for us and continues to make enhancements to the platform. All of our PAP replacement patients are managed by a live person but outreach involves much more than live calls. We also offer email, text, and mobile apps to communicate to patients about replacing their supplies.

With all the continued cuts, reimbursement and instability of the industry, we feel like our replacement program will keep us viable going forward.

Justin Blanchard, CEO, Assured Medical Supply Inc.

…We are driving new revenue streams by reaching out to retail customers, private payer sources and residential nursing. Our greatest growth in revenue streams has come on the heels of the competitive bidding award. Our company’s main focus has always been oxygen/respiratory patients, but we carry bent metal so the orders would not be siphoned off to a provider who could provide a one-stop atmosphere.

Once the bids were announced and we won oxygen, and nothing else, we dumped everything else. For us, just doing the oxygen has been a blessing. We are not raking in big bucks with Medicare. We quickly found out that a winning bid did not mean they would pay your claims as prescribed by the law, and if we waited for Medicare to pay, we would be waiting too long. Our respiratory model today is the same as it was 12 years ago, which is non-delivery.

We studied our products, created comparison tables and learned everything we could about the equipment we sell. We even purchased specialized testing equipment that allows us to test what the manufacturers say their equipment does versus our own research. At this point I can say we know more about most portable concentrators, portable filling systems, and conserving regulators than most of the manufacturer’s reps do. We will ask question about the way a piece of equipment works that the reps will have to get answered by their technical department. We really focus on educating the patient about portable oxygen solutions and then letting the patient educate us on their wants, needs and desires. Back to basics right? Listen to the customer? We ask detailed enough questions about the patient’s needs that we can tailor a solution for each patient.

I like to tell patients that finding the right portable solution is like finding the right pair of shoes. It is not one size fits all. With portable concentrators, for example, of 16 different units I can think of, a setting of 2 can have the patient receiving anywhere from 12 to 36 mL of oxygen. When we can assess the patient’s needs and understand our equipment functions, we can point the patient to the right unit or units that should meet their needs. Then we will try the patient on those machines and let them decide which is best based on their performance.

Oxygen patients have oxygen friends, and we have had patients come from different states just to see us and get the perfect solution for them. Patients have doctors, and as a result, we have been speaking at hospitals, pulmonary rehab groups, and nursing facilities about portable oxygen solutions. We were getting a lot of prescriptions for travel oxygen, where a patient will need the oxygen only during the flight.

Doctors write scripts for 2.0 LPM continuous, which does not work with most POCs that only do pulse. We use that as an opportunity to educate the doctors about POCs and how they operate, and in many cases will let the doctor keep a POC in the office for their altitude testing. That way, when we get a prescription for travel, patients have been correctly titrated on a POC and there is no guess work on what they need.

We do carry some bent metal now, but cash, and as close to retail as we can get. Many patients do not want to hassle with trying to get things covered with Medicare now. We compete with online companies that sell portable concentrators at drop-your-shorts pricing, and when a customer quotes me the price he or she got, I’ll tell them to go ahead. Ours is closer to retail because you get service, knowledge, selection and experience when you purchase from us. You won’t get any type of service from an online company. Most customer will purchase from us.

Revenues for private pay rental and sales of our POCs have helped bridge the gap from the insurance revenue drops since competitive bidding. Margins are still so tight in this industry now that it is hard to measure success in dollar terms like many years ago. We like to measure success in knowing we provided the best product for a person, which, in turn, will lead to a better quality of life. That is the kind of reward we appreciate the most.

This article originally appeared in the October 2014 Respiratory Management issue of HME Business.