Dinosaur Sue gets stay of execution

Friday, October 31, 2008

Last year, I wrote to you about Sue, the most complete T-Rex fossil ever discovered. My grandchildren still talk about Sue, and to me, she continues to serve as an important reminder that no matter how invincible we may think we are, we will meet our downfall if we fail to adapt to our environment.

July 15, 2008, was an exhilarating day for the HME industry. For a moment, I felt invincible again. Through the incredible teamwork of AAHomecare, providers, state HME associations, manufacturers and beneficiaries, we achieved a two-year delay in national competitive bidding.
It was a huge sigh of relief for the industry. Having been hit with so much turmoil and change over the last few years, this was a refreshing victory. I even let Cara Bachenheimer go on vacation.

But relaxation time is over.

Now that we’ve taken that deep breath, we need to get back to reality. As of now, NCB has only been delayed. It should still be considered a serious threat to the health of the HME industry. The providers in the first 10 MSAs had a near-death experience, and realized first-hand that the existing version of national competitive bidding would have been a disaster. It would have eliminated 75% of the providers in those regions. For the 25% who won the bid, it was a Trojan victory. They would have had to provide product at crushing reimbursement cuts averaging 26.5% (reimbursement of mail order diabetic supplies was cut by a staggering 46%).

Three of those MSAs were in my backyard. Invacare’s worldwide headquarters is located in Elyria, Ohio. This was in the middle of one of the MSAs (Cleveland), and within driving distance of two others (Cincinnati and Pittsburgh). We saw providers falling apart-sharing their experiences with us through tears of frustration and grief in losing family-owned companies that had been around for generations. They lived through the nightmare.

So now that NCB has been delayed, are we going to let it happen again? Are we going to stick our heads back in the sand? We need to put our best foot forward and set goals for our industry. We must take on the following challenges:

- Work with the government to strengthen criteria for getting a provider number and make sure this criteria is properly enforced. Fraud continues to be an issue in our industry. We still see the articles in the newspapers and within our own trade publications. We need to spearhead change. We need to partner with the government to combat fraud and abuse. We need to ensure that all providers meet the Sept. 30, 2009, accreditation deadline. No one understands this industry the way that we do, so we should be working constructively with CMS and Congress to establish auditing procedures that will eliminate fraud in our industry.

- Work with the government to modify national competitive bidding or provide an alternative approach. We must work with CMS to ensure the best policy is put in place.

- Launch a permanent industry-wide public relations campaign. We need to champion the success stories of our industry. Studies show that homecare patients recover faster and have lower infection rates than hospital patients. Home care is the solution to rising healthcare costs, and we need to give this solution visibility to the public. This message needs to be loud and clear to both the media and policymakers.

- The perception in Washington, D.C., is that the HME industry is overpaid. We need to work with the government to develop a payment plan, so that both parties are satisfied. This is particularly true for oxygen. Once again, it is important to communicate that the HME industry is not a network of dealers supplying product. Rather, providers are service-oriented businesses whose primary goal is to meet the needs of the beneficiary.

As we tackle these issues in Washington, D.C., it is more important than ever that providers operate healthy, lean businesses. No matter what we accomplish on Capitol Hill the days of high reimbursement are gone. Continue to consider the following as you evaluate your business model:

- Outsourcing: Are there elements of your business that could be outsourced? Are you making money on equipment repair and service or should you explore other alternatives?

- Formularies: By standardizing your product line, you will save on training, parts inventory and service expense.

- Infallible business systems: Are you using up-to-date software solutions to track your inventory and other potential cash pitfalls for operations?

- Optimizing resources: Are you spending your time and money on what you do well? Are you focused on the areas of your business that present the greatest profit opportunities? Have you considered cutting out waste, including deliveries and customer visits when a non-delivery model will do?

Invacare itself continues to focus on how we can become more efficient. We have a long way to go before we achieve an acceptable level of profitability for our shareholders. I’ve learned that change is a journey. It’s not something that happens overnight. Regardless, this industry has come a long way, but let’s continue to work together for the benefit of the beneficiaries we serve and our businesses. If the HME industry doesn’t continue to evolve and change, the two-year stay of execution won’t mean anything.

Mal Mixon is chairman and CEO of Invacare in Elyria, Ohio.