An industry in cultural transition

Thursday, November 30, 2006

What does a business do when faced with shrinking reimbursement, increased regulation, competitive bidding, eroding margins and poor cash flow? The answer is obvious: That business has to reinvent itself. And that's what today's leading HME providers are doing. They are transforming their business models and themselves. They are moving away from the traditional Independent Entrepreneur model with its mindset of total self reliance. Instead of always developing their own operating methods and making decisions on an ad hoc basis, they are becoming Systems Thinking Collaborators.
Systems Thinking refers to a new approach to business where every aspect of the business is broken down and examined for relevance and efficiency. Each critical function, such as reimbursement, financial management, operations, purchasing and clinical services, is broken down by process. For example, in reimbursement, the processes include intake, order documentation, billing and collections, and cash posting. Once the key processes are identified, they are viewed from several perspectives. First, the work is flow-charted to see what activities are employed to support the processes. Here you look for redundancies and overlapping efforts. This is where collaboration begins, as the comparison of your workflow with others in the same business often identifies opportunities for improvement.
Next, the performance of each of the processes is measured from both quantitative and qualitative standpoints. To show the difference in these two measures, consider the process of order intake. It could have as its quantitative measure "dollars authorized for billing per FTE" and as its qualitative measure "percentage denied due to mistakes at intake." While each of these metrics are valuable, if viewed alone they could give a false impression. For example, a company may show outstanding results in terms of dollars per FTE, but with closer examination, that company may make far too many mistakes at intake, resulting in work being repeated. When these measurements are used in combination, they give a more complete view of the efficiency and cost effectiveness of the intake process.
Once the measurement of these processes is completed, goals must be set for improvement and performance regularly tracked. While continuous incremental improvement against internally generated standards is good and even admirable, without collaboration it's a bit limiting. By comparing operating results with others, opportunities for quantum leaps in performance can be identified. If you want to get beyond the exchange of assertions and anecdotal remarks to effective collaboration around systems improvement, you've got to have truly comparable data. This requires a standard set of definitions and measurement criteria.
Armed with this sort of internally generated and externally comparable information, the Systems Thinking HME business person makes decisions based on dependable metrics. These decisions drive operational improvements that increase productivity and profitability.
The collaboration aspect of the new model implies both a hard-nosed analysis of what the company does well and where it can use help. This is a shift in thinking that means a transition away from looking to do it all alone, and instead using the strength of other "partners" to augment a company's efforts. Examples include working collaboratively with supplier partners on cost control initiatives that maintain margins for both parties. It could also mean not working alone in supply contract negotiations but relying on your buying group partner to develop the contracts, purchasing tools and services to improve margins on product and inventory management. The list is almost endless, but the key is adopting a philosophy of working collaboratively with the other key parties in the industry and leveraging what they each do best. By accepting help in these areas, the HME provider is then able to focus on the core of the business, marketing to referral sources and serving the consumer. Isn't this the reason most HME providers got into the business in the first place--because they wanted to help meet the homecare product needs of their customers?