M&M Medical’s Kinskey quits hassle, rides off into sunset

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Saturday, May 31, 2003

Dave Kinskey admits that he may have been a tad naïve when he bought M&M Medical in December 1988. As a guy raised Catholic, he’d been schooled in doing good from an early age. So when dad sold his Wyoming convenience store chain in the late ‘80s, where Dave worked as corporate counsel, Kinskey the son looked into HME. The demographics indicated it might provide a living as well as an opportunity - and this sounds corny, he admits - to render good services to humanity. “I thought I’d be on the side of the angels, but it turned out you are just a Medicare bad guy. That’s how you end up being regarded. Certainly not by our patients - but by the government.” Kinskey bought San Jose, Calif.-based M&M after answering a “For sale” ad in an industry publication. In November, he sold the company to Lincare. During his HME career, Kinskey embraced managed care, talked it up at industry events, but ultimately rejected it. Last month, HME News talked with Kinskey about his years in the industry and particularly about managed care.

HME: First off, why did you sell your business? Was it simply a business decision?

Dave Kinskey: No. I love the industry. I love taking care of patients. I had a great crew of people, and the actual delivery and operations side of home care is a blast. But over time I got to do less and less of that. The job became hassling with large, powerful and sometimes abusive HMOs for payments, and dealing with the Medicare-Medicaid paper chase. After nearly 15 years it lost its allure.

HME: M&M started out as a traditional HME focusing on Medicare oxygen and rental DME, but then you switched to a managed care focus. Why?

Kinskey: In California in 1993-94, seniors were signing up right and left with the Medicare HMO plans, which ended up with a huge proportion of the market. If you were sitting with a bunch of traditional Medicare patients and you didn’t sign up with these Medicare HMO plans, you’d be picking up your equipment and someone else would be delivering, and you’d have a warehouse full of equipment. This was at a time when seniors could sign up with one of these Medicare HMO plans and get a $2,000 to $5,000 a year prescription drug benefit for less than they were paying for their Medicare copays. It looked like managed care was going to wipe out the traditional Medicare business. That was in California. It never got that hot anywhere else in the country.

HME: Where did managed care go wrong?

Kinskey: The big HMOs had all the money, and they would distribute capitation checks to the medical groups and the hospitals. The medical groups and hospitals would distribute capitation checks to the homecare companies. All that works as long as there is enough money to go around. But when the big HMOs consolidated down to a handful, and their model is to screw every last dime out of the healthcare delivery system, then the pressure is on for the hospitals and doctors to slash and burn, too.

HME : How did that affect you?

Kinskey: Reimbursement went down, payments got slower. Risk arrangements were in constant turmoil. A third of California medical groups went bankrupt in a two-year time period. Patients also felt the pinch as drug benefits were slashed. Fewer seniors signed up from HMOs, and more started going back to traditional Medicare.

HME: So then you turned back toward a traditional Medicare business model. You rejected the one-stop-shop offering MCOs required and focused on home respiratory therapy and a few other profitable lines. How did you make that transition?

Kinskey: It’s training folks to focus almost exclusively on the needs of the respiratory patients without irking the referral sources who are used to calling you not just for their oxygen but with other types of referrals, too. It’s analyzing contracts to select out those that you don’t want to deal with and those you want to retain. That process took place over several years, and I had help from my sister, who has extensive HME experience. She observed that it is tougher to change a company’s product and service offerings than to start a company from scratch. Very true, not just for large companies but for relatively small companies like M&M, too.

HME: There’s now talk in Washington about privatizing Medicare, and that could mean more emphasis on Medicare HMOs. Any advice for providers when it comes to managed care?

Kinskey: My only advice would be for folks to learn from the mistakes of this round of managed care.

HME: And what were those mistakes?

Kinskey: The fact that these HMOs have these one-sided contracts is the killer. They dictate the terms of payment, if they are going to pay at all. As a small dealer you have no bargaining leverage. Recently, in California, we’ve seen a new model where a hospital chain has successfully combined with medical groups to negotiate collectively with large HMOs. I don’t know if there is a similar model that could work with HME dealers. Many HMEs are the ones who put the “independent” in the phrase “independent business person.” HME

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