HME excellence: The best and brightest get their due

Thursday, February 28, 2002

Enron aside, no companies have endured as much federal scrutiny in recent times as those who operate in home medical equipment supply. Squeezed between the punitive measures of the Balanced Budget Act of 1997 and the investigative zeal of the FBI and Office of Inspector General are regular folks who just want to make a decent living.

Moreover, the preponderance of accusatory fraud stories in the general media further obscures the fact that not only are there honest, respectable HME providers out there, but that there are companies doing an outstanding job in the homecare field. So the staff at HME News, along with Medtrade and AAHomecare, have decided that recognizing superior performance is an idea whose time has not only arrived, but is long, long overdue.

The HME Excellence Awards, slated to premiere at the 2002 Medtrade Show, are designed to put these superlative companies on display for all to see. The "Homees," if you will, will be presented to companies our distinguished panel of judges have determined show unsurpassed quality in their respective categories. Awards will be classified as follows: Best Home Medical Equipment Provider, Best Home Respiratory Provider and Best Re/hab Technology Supplier.

Judging the entries for the inaugural contest are industry figures who have earned esteem in their various fields of expertise. Serving on the HME Excellence Awards panel are: Wallace Weeks, president of Melbourne, Fla.-based The Weeks Group (accounting); Dexter Braff, president of Pittsburgh-based The Braff Group (mergers and acquisitions); Floyd Boyer, surveyor with the Raleigh, N. C.-based Accreditation Commission for Health Care (quality control); Cara Bachenheimer, counsel with the Washington-based law firm Epstein, Becker & Green (legal/regulatory); Louis Feuer, president of Miami-based Dynamic Seminars and Consulting (customer service); and Jerry Jones, former CEO of Lake Forest, Calif.-based Apria (management/operations).

Projecting a positive image

A review of the judging criteria with panel members found that HME excellence can be quantified from several indicators, including demonstrable financial performance, customer satisfaction, regulatory compliance, professional certification and community involvement. Significantly, a wholesome public image and forthright reputation is at least as important as solid financials, the judges agreed.

"Patients need to see the provider as someone who is a positive force in their lives," Bachenheimer said. "Financial criteria is important, but patient satisfaction is, too. If the patient's not satisfied, no one is."

Accurately gauging patient satisfaction goes beyond just measuring the quantity of patients coming through the door, adds Feuer.

"Just because you have a lot of customers doesn't mean you have a quality organization," he said. "You have to test it, run focus groups and conduct polls. Customer longevity is certainly a key. That kind of loyalty says a lot."

Whether you call it patient satisfaction or customer retention, this facet of the business should be incorporated into systemic quality and assurance standards, Jones said.

"Q and A means standards of dress, customer service, patient care and clinical policies, clinical documentation and a crisis plan," he said. "If (a company) performs well during a flood or a snowstorm, all the better. These are things that need to be written downand measured against."

Providers also need to combat the perception of greediness that has long shrouded the industry, the judges said. The best way to demonstrate good ethics and benevolence, they recommend, is to affiliate with trade associations and local civic groups.

"You've got to put something back into the community," Weeks insisted. "You have to be active in an association like AAHomecare and be involved with a local organization like your chamber of commerce."

It is also constructive to affiliate with other non-profit healthcare organizations, such as the local hospital, American Cancer Society and the Muscular Dystrophy Association, Jones said.

Profit: a dirty word?

Of course, a company's financial performance weighs heavily when evaluating excellence. But just raking in dollars isn't an automatic qualification and, in fact, is a characteristic of the bad seeds that stain the industry's image, judges say.

"There are many variables," Jones said. "You can be a successful provider, but some of the most successful have been abusers of Medicare and Medicaid. Whenever I see a company provide one product in a specialized way, I'm suspicious."

The government gets suspicious, too, Bachenheimer added.

"Spikes in billing patterns will trigger an audit," she said. "There may be a legitimate reason for the spike. Overall though, making a lot of money doesn't necessarily mean it's a good company."

Sales and profit growth rate figures vary in determining excellence, but judges cited double-digit percentages as a benchmark.

"A good rate of sales growth is 150% of the rate that your market is growing," Weeks said. "It has to be relative. If you're in New York City, where the population is declining at 1% a year, don't expect a 20% growth rate. Perhaps 10% would be more realistic - but that rate is 1.5 times faster than the market you serve."

Jones said he considers 10% year-to-year growth to be significant. He also suggested that earnings before interest, taxes, depreciation and amortization (EBITDA) be at least 20% annually.

"When you look at financials, a lot of companies are less than that," he said. "But how much money they earn is not as important as profitability. HME lends itself well to checkbook management - manage the cash and everything else takes care of itself."

When it comes to profit margin, Weeks calls 10% "top quartile." And though it sounds modest, it is reflective of the disparity between healthcare segments, he said.

"Mobility dealers and custom re/hab suppliers will have to work like heck to reach that level while a company that focuses on oxygen might see it as low," Weeks said. "What is lofty for one is modest for another."

The "P" word - profit - seems to be a dirty word to government agencies monitoring the homecare industry, many providers complain. So it's fair to ask whether there is a profit "ceiling" that successful companies should stay below. In the judges' minds there isn't, but they maintain that companies should be careful nonetheless.

"I don't see a dilemma with higher margins," Weeks said. "But if a company charges too much, it is pricing higher than the value it delivers. The marketplace will respond by moving away."
Taking control

One key element that separates the top performers from the rest of the pack is control, Jones maintains. That means effectively managing accounts receivables, assets, service mix and cash flow, he said.

"What makes a business profitable is clearly defining what they want to offer," Jones said in reference to service mix. "Clinical policies are important. Define how you take care of the patient."

Good companies also have a mission statement, a business plan and a strategy that drives their decision-making strategies, he said.

In essence, companies need to be fastidious about what is happening in all areas of the business at all times, Feuer said.

"Track and monitor all aspects of your business, from revenues to sales to service to delivery," he said. "Monitor your accounts receivable closely - you need that money in order to provide good service."

A corporate compliance program is another "must," Bachenheimer said.

"It sends a message to the government that you're making every effort to do everything correctly," she said.

The program should be handled by a designated compliance officer and should offer guidance to employees about which procedures are acceptable and which ones are not. It should also provide a way for employees to comfortably report suspected violations, she said.

The state of standards

Over the past two decades, HME has evolved from an untamed frontier to an established civilization. Have professional standards followed suit? The judges say yes, but that the industry needs to be more proactive in continuing to raise the bar.

"When I started working with the industry in 1993, the standards had begun to evolve and since then it has accelerated," Weeks said. "The industry is much more highly evolved in standards of all types. Have we arrived yet? No, but we're getting closer."

Feuer believes that the industry has an obstinate dislike for progress that must change if standards are to reach a high level.

"Yes the standards are changing, but the industry isn't initiating the change," he said. "The marketplace is initiating it. We aren't setting the standards for ourselves because we are reactors, not initiators."

Accreditation has also helped boost standards, yet the judges say they understand provider concerns with the high costs associated with it. HME