Maintain profitablity despite changes

Monday, November 23, 2015

Facilitating the highest quality of care for patients remains the central focus of HME providers. The harsh reality of a changing market brings forth added pressures to retain a profitable business, while also delivering on a commitment to provide the best care and service. The forces at work are many. The impact of competitive bidding continues to result in decreased reimbursement and, not surprisingly, commercial payers have followed suit. HME providers are expected to accept substantially lower reimbursement rates while continuing to provide the same level of patient care. How are providers to maintain any level of profitability in this declining reimbursement landscape, while upholding their quality of care? While there’s no easy way to resolve this dilemma, there are specific questions to consider when managing your HME business.
Do you really know your costs?
Providers should have a clear understanding of their costs and profitability. If a piece of equipment costs $100, but reimbursement is only $125, can you afford to service and bill for the equipment for less than $25? If you are not profitable on that product, consider your other choices, such as choosing a payer that may have a higher reimbursement or asking a manufacturer for better pricing. However, don’t depend on the manufacturer to offer better pricing—many manufacturers have experienced reduced margins, too. Usually the only way a manufacturer will be able to help is if you commit to that manufacturer and do not spread purchases over multiple
How can you optimize your reimbursement?
Once you know your cost structure, it’s equally important to identify options to optimize your reimbursement. Begin by examining all payer product mixes to determine which ones make the most sense for your business. If the current way of doing business is not profitable, be willing to walk away and start considering alternative payer sources. Some providers may hesitate to look at non-traditional payers as these options may come with a higher co-pay, deductible, or co-insurance for the patient. However, alternative payer options such as PPOs, third-party administrators (TPAs), and benefits managers often offer higher reimbursement rates, or perhaps, no co-pay.
How can you get your stakeholders on your side?
It is challenging to run a business if payment is less than the cost of providing the product and service. No matter what, providers should always communicate clearly with their stakeholders, including patients, physicians/referral sources, and payers. If you choose to go with a payer option that provides higher reimbursement but also has a higher co-pay and/or deductible, your team should be able to effectively explain that to the patient, and be able to collect the patient’s payment portion up front.
Many providers are confronted with the same questions day after day: Can we maintain sustainability with our current method of doing business? Will everyone understand if we are unable to service a patient because reimbursement is below our cost? Will the patient be taken care of? The single most important action by a provider before answering these questions is to educate themselves. Knowing the cost of delivery, set-up, billing, and overall operational costs is imperative when it comes to making business decisions that affect profitability. Finally, it is more important than ever to be completely clear in communications with patients in today’s more challenging HME environment.
Rhonda Hines is vice president of The MED Group.