High provider DSOs worry manufacturers

Thursday, March 31, 2005

CHICAGO -- Long the most susceptible facet of an already cash-sensitive business, some in the industry are concerned that once MMA restrictions begin in earnest, a virus of inflamed provider DSOs will infect everyone up the supply chain.
As Doug Francis, executive vice president of Port Washington, N.Y.-based Drive Medical notes: "When providers sneeze, we get the flu."
Manufacturers are already acting preemptively to help providers keep their DSOs at manageable levels. Extended credit, financing and flexible payment arrangements are all options vendors are providing with increasing regularity. Investing in information technology to facilitate electronic billing and automate operations is also a strategy that industry experts are recommending to hasten collections.
So far vendors like Francis report that their accounts receivables have been immune to whatever DSO lethargy may be out there.
"We're not feeling any symptoms right now, but we're paying close attention to it by listening to provider's concerns," he said.
Likewise, Mundelein, Ill.-based Medline Industries has remained insulated and is actively promoting programs to help providers stretch their payments, said Dave Jacobs, president of Medline's durable medical equipment division.
"Interest in different financing options has grown significantly in the past year and the range of what we offer has grown as well," he said. "They are all designed to help providers match their inflows and outflows."
Among the options Medline extends to providers is a "six months same as cash" program based on credit qualifications for significant purchases. The manufacturer will finance the provider interest-free for six months or roll it into a lease. Consignment sales, where providers only pay for what they sell, has also become a popular option.
A flexible payment plan for scooters is still another way providers can buy time, Jacobs said.
"For those who buy three scooters or more, we give them a two-month skip and allow them to pay the balance in four equal payments over four months," he said. "This gives them time to sell the product before they have to pay."
If a choke point exists in the supply chain right now, it rests with rehab providers, who have long been challenged by funding issues with Medicaid, Medicare and private insurance, said Ted Raquet, vice president of power chair sales for Exeter, Pa.-based Pride Mobility's Quantum Rehab division.
"Professionals working in advanced rehab would previously spend a great deal of time on evaluations and little on paperwork, but now the situation is reversed," he said. "The snag isn't with getting the money, it's with getting the prior authorization."
Because keeping inventory is cost-intensive, Pride is touting its just-in-time delivery service so that providers can minimize the amount of money they tie up in products, Raquet said.
"We've got five distribution centers and in most instances we can ship the best-selling models in two or three days so they don't have to keep much stock on hand," he said. "We can customize this service to each provider's unique situation."
Indeed, providers should take advantage of their suppliers' logistical expertise, agreed Avi Weiss, director of home healthcare for Springfield, Ill.-based distributor HD Smith.
"Play with my money -- not yours," he said. "We are the provider's partner in controlling cash flow and inventory. Instead of buying 12 walkers that will sit on the shelf for weeks, buy enough for one week."