HME retail: Super-size me

Sunday, April 30, 2006

YARMOUTH, Maine - Two providers plan to break ground on super-sized locations this spring to make room for a business that they believe holds the key to their future: retail.
Western Healthcare Industries plans to sink $4 million into a 21,000-square-foot-building in Jackson, Calif. Mobiltek Medical has its sights set on building a 27,500-square-foot-location in Whiteland, Ind.
Both providers plan to set aside thousands of square feet for showrooms to highlight their retail products: Western Healthcare, 3,000 square feet; and Mobiltek, 8,000 square feet.
Their decision to place bets on retail, especially with competitive bidding and other Medicare reimbursement changes on the horizon, doesn't surprise Jack Evans, an industry consultant often called upon by HMEs to design or revamp their locations.
"I get at least one call a week from providers who are moving or expanding, and they ask me whether they should make room for more retail," said Evans, president of Global Media Marketing in Malibu, Calif. "I think HMEs are scared. They want to diversify."
Evans encourages providers to boost their retail business: "If you're one third retail, you have a great cash flow coming in, instead of waiting 60 to 90 days for reimbursement," he said.
At Western Healthcare, retail already makes up 30% of the company's business mix, but that's not enough, said CEO Vince DeStigter.
"We're about 44% Medicare, and that's too much," he said. "Retail has been what's kept us going all these years."
For Mobiltek, retail will be a newer concept. Currently, it makes up only a small percentage of the company's business mix, but the new location will, hopefully, turn that around, said Jim Hall, owner.
"We're 70% (Veterans Affairs) contracts," he said. "By middle summer to late fall, we want to be 50% VA. We don't want those contracts to control our business."
Large showrooms allow providers to increase product visibility and improve shopping experiences, Evans said. (DeStigter said he's been so cramped for space in his current 2,000-square-foot location that he's been putting wheelchairs out on the street.)
"So many drug stores are selling medical equipment now, and providers know if they only made their products more visible, more people would buy HME from them instead," Evans said.