'Niche and get rich'

Sunday, December 31, 2006

With significant changes to Medicare reimbursement over the past few years, many providers have been reassessing their business models. Brad Schmidt's one of those providers. But while numerous providers have decided to diversify their product mix, Schmidt, COO of Red Ball Medical Supply in Shreveport, La., has decided to do the opposite.
In the past few months, Red Ball has scaled back newer product lines like diabetes supplies and focused more on its core business: oxygen. The way Schmidt sees it, the recent 36-month cap on Medicare oxygen reimbursement means providers should spend more time--not less--trying to keep oxygen as part of their product mix.
"It's not a good time to be reactionary and jump into new markets that you don't know about," he said. "It's time to do the best that you can at what you know how to do."
Red Ball has shaved the number of diabetes patients it serves to about 30. The company still provides existing patients with supplies, but it no longer adds new patients.
Red Ball's rebel ways don't stop there. The company has no plans to emphasize retail sales, either.
"I don't think, at least in our market, that customers are ready to go 'shopping' in our store," Schmidt said. "They still expect their equipment to be delivered, and they still expect someone else to pay for it."
While industry consultant Jack Evans applauds Red Ball for "focusing on an expertise," he strongly believes providers, especially those who provide oxygen, should supplement their income by diversifying their product mix and ramping up retail sales. But another industry consultant isn't so sure Red Ball's headed down the wrong path.
"Niche and get rich," said Vince Crew. "It means doing less--but doing it better. For every provider saying, 'We're going to bail,' there should be another provider saying, 'We think we can make it work."