Financial survey seeks to find HME pulse

Saturday, May 31, 2008

Last year at this time, the HME News/SRA Financial Survey went out, soliciting financial performance indicators that, ultimately, told a remarkable story about what was happening to HME businesses.

More than 550 providers completed the intensive survey, and this is what we learned: One-third of HME suppliers lost revenue or enjoyed no gains over the previous fiscal year.

“I wonder if we are going to see a substantive increase in this percentage this year?” asked Tim Pontius, a director at Steven Richards and Associates and a former AAHomecare chairman, who built the survey. “ If so, I think a lot of those companies are really going to struggle if they lost the competitive bid and/or when the oxygen caps hit in January.”

This month, the second annual financial survey makes the rounds, dispatched from the HME News bureau. At the HME Business Summit in Cincinnati Sept. 14-16, Pontius will once again reveal the findings and interpret the results to an audience that’s been growing by 20% per year since the Summit’s founding in 2005.

“We kicked off the Summit with Tim’s survey last year, and we’re doing it again this year because we mean to get right down to business,” said Rick Rector, publisher of HME News. “As a one-time HME CEO, Tim speaks from the driver’s seat. He knows what our attendees want to hear and what they need to hear.”

In this year’s survey, the slate of questions has been supplemented by a range of questions that poll the impact of competitive bidding and capped oxygen. One of the intriguing new queries about competitive bidding ponders how losers will approach their business in a particular category. Will suppliers a) Hang on by reducing operational costs; b) Pursue new areas of medical equipment sales or rental; c) Exit the business or do something else?

On the subject of capped oxygen, the survey queries how suppliers will offset losses brought on by the loss of revenue. Will they increase other sales, reduce operating costs or do something else?

“With the new questions starting to focus on the impact of competitive bidding, I think most companies would want to participate because we are going to be trending some very useful information over the next two years,” said Pontius.

Although substantial numbers of HME suppliers have threatened to walk away from Medicare business in recent years, given declining reimbursement, the imminence of competitive bidding and other factors, the 2007 survey found that few suppliers actually follow through on the intention.

“While our goals may be to get away from reliance on Medicare dollars, is it because we have yet to start putting words into action, or have market circumstances simply prevented us from passing on existing Medicare referral business?” said Pontius.

Similarly, the 2007 survey revealed that a surprising number of HME suppliers were deriving revenue from hospital beds, despite the line’s low profit margins.

“We have been advocating the concept for the past few years that access issues are going to be predominant for beneficiaries, but this would indicate it is not,” said Pontius. “Where do we get to a point of dropping non-profitable lines?”