Inventory management for today's HME provider

Friday, June 21, 2013

When the topic of inventory is brought up within DME circles, the talk is often around the notion of “counting widgets” when, in reality, managing inventory is about much more than that. It is this very narrow view that dominates the DME industry and is its Achilles’ heel. Inventory management is about five equally important processes: ordering, recurring or replenishing orders, storage, delivery and billing. 

It all starts with the barcode. There is a reason that Walmart, Best Buy, 7-Eleven and every manager of inventory uses a barcode reader—because it is the only way to truly manage their inventory. With barcode-driven software, you will automatically know what has been dispensed and what needs to be ordered or re-ordered. If you are still physically looking in a warehouse to determine what you have or don’t have in stock, you will never survive.

For years, distributors have been cutting deals on products they want out of their warehouses, transferring the burden to the DME provider who will never have the volume of business to move that kind of inventory. Product sitting on providers’ shelves is cash. DME providers are already “cash poor”—so it is imperative that they look within to find more operating capital. The concept of replenishment or “just-in-time” ordering is fairly new to DME providers. It requires a paradigm shift: Replenish products as they are sold. DME providers must embrace the cost-effective process of “drop shipping” product and, thus, eliminating the storage/warehouse model as it is an archaic financial albatross. 

Consider the DME providers who rent equipment. How efficient is the current system for managing ins and outs? Depreciation values? Service maintenance? How do owners currently track their return on investment (ROI)? The vast majority of businesses are still using manual data entry, often in makeshift spreadsheets and note cards. Today, a barcode-driven inventory software integrates all of these important details into the provider’s daily tasks. One single software can manage the job of many, resulting in lowered overhead costs and a significant reduction in human error. DME providers are losing money every day because they don’t have any idea where their costs are and therefore cannot make financially sound decisions. Keeping paper-and-pencil records or worse, importing and exporting data from spreadsheets, is not only inefficient, it puts you at-risk for audits and HIPAA non-compliance. 

The other critical process is delivery. One of the biggest obstacles for successful claim filing and payment is clarity about what happens at curbside between the driver and the patient. Signature capture on iPhones/iPads at curbside takes human error out of the equation. For the modest investment of $30 per driver for a 3GS iPhone or higher at Walmart or Best Buy, the return in capital is enormous. Most DME providers are accustomed to spending up to $2,000 per driver for a curbside digital delivery device. The digital signature replaces the need to scan and fax loose paper or decipher handwritten notes. This method also keeps the transmission of patient information HIPAA-compliant. Many businesses are still working under the impression that Medicare requires hard copies or original signatures. This is simply untrue. Medicare will accept electronic signatures and there is still the opportunity to give the patient a paper copy of his/her receipts while the rest can be done via e-fax or digital transmission. 

The final stage in this cyclical process is billing. Ironically, the billing process truly begins at intake. Unless DME providers check eligibility, same/similar, Part A, remaining deductible and PECOS, they cannot expect to see payment in most cases. These identifying factors determine, at the onset of the transaction, whether or not you will be paid for dispensing an item. Margins have shrunk so much that no one can afford to give away product and “hope” to get paid someday. Instead, DME providers must use the data that is available to them and set up a different relationship with the patient—one where costs are estimated upfront and the responsibility for payment is transferred from the business to the patient. This is a painful reality for many DME providers who are sympathetic to the financial burden this presents to the patient. However, if they wish to stay in business, they must make this critical change.

With their livelihoods on the line, prudent DME providers will educate themselves about the software innovations described here if they want to survive in today’s marketplace.

Janet Hay is a Los Angeles-based freelance copywriter and communications consultant who works with Bonafide Management Systems. She can be reached at