Don't be afraid—be smart
A few years ago, we worked with a company that was struggling. They were slumping under the weight of reimbursement changes and operating inefficiently. Thankfully, the leadership realized that something had to give and changes needed to be made to find a way back to success. They needed to focus on core competencies and streamline operations to position themselves for the present and the future. If they didn't make substantive changes, they would fail.
That company was Invacare.
When reimbursement was high, it was easy to remain profitable in spite of less than efficient business practices. Invacare learned the value of efficiency in 2006, and the same principals apply today. Regardless of what happens in Congress or with the dark cloud of competitive bidding gathering, and no matter if you win or lose your bids, now is the time to take a long, hard look at your business and what you can do to make it stronger. Consider that you now have a new business and have to treat it as such.
That's easy to say, in theory, but what do we mean? The nature of today's market means that having a business plan is no longer optional, and those who have one will succeed. Even the best would struggle with these circumstances.
The first step is putting pen to paper. Pinpoint where you are weak and where you are strong, and make choices. Break down your strengths and weaknesses more specifically: personnel, logistics, inventory, marketing, sales and on and on, and look for ways to maximize your strengths.
Key to this process, just as in Invacare's case, is to partner with the manufacturer/supplier that is able to offer the products and services you need to be able to implement this plan. There are a lot of options out there to aid your business. If you haven't already embraced non-delivery oxygen, there is no better time. The economics are just too compelling and, while there is some upfront investment, the long-term benefits are unmatched. Search the market for software and technology to help you streamline and maximize efficiencies. Use a company to help collect your outstanding co-pays.
As the market changes, focus on what you can control. Improve your retail presence and capture more cash business. Use your existing customer database to generate cross-selling opportunities with additional products--if a customer has this, that customer might need that. Broaden your scope to products outside of the bidding realm, like complex rehab and custom manual wheelchairs. In essence, look for additional revenue opportunities everywhere.
All of these components are essential, but nothing is more important than financing. Overnight, bid winners and losers can become credit risks and your local bank is not going to be the partner it once was. Thankfully, there are resources within our industry to assist with financing and to help drive you toward your financial goals. You should build relationships with your credit managers and show them the viability of your business, with or without competitive bidding. Understand and develop short and long-term plans for cash flow, debt, equity ratios--know your financial strengths and look for ways to fill the gaps you see. Cash is king and, at the end of the day, you run a business and need to be profitable.
According to a statement sent by more than 160 economists to the House Ways and Means Committee, Health Subcommittee, there are fundamental flaws to CMS's implementation of the "competitive" bidding program. There is a decisive majority in the House of Representatives that believe this program is broken. Invacare will continue to push Dr. Donald Berwick, administrator of CMS, and Kathleen Sebelius, secretary of Health and Human Services, to investigate our concerns. We will continue to be a bullhorn on the Hill, but there are no guarantees except that reimbursement will come down one way or another. Nine markets are certain and 91 more are scheduled for Round 2 of the program. Providers in the next bid areas have two years to change their business and should use this time wisely, and those not affected directly are certain to feel the pinch in other ways. A sound business model is the only answer, but the good news is that is within your control.
These are difficult times, but also an opportunity to be better. Our industry trends are positive, with doctors at the Cleveland Clinic forecasting life expectancies of 110 years. The baby boomer population is set to boost demand for our products on the horizon. One day, Congress will recognize that home care is the trifecta of health care--everyone dreams of going home, home care has better patient outcomes and it is more cost-effective than institutional care.
The answer to the current state of the industry is to focus on your core business and the steps you need to take to get a good grasp on where you stand and where you are going. Don't be afraid--be smart. The providers that take this approach will be the ones that find even greater success. hme
Mal Mixon is chairman of the board of Invacare, and Carl Will is senior vice president of global commercial operations of Invacare.