Providers: Demands on manufacturers go way beyond costs

Sunday, February 24, 2008

YARMOUTH, Maine - When it comes to HME providers, several manufacturers said recently that they have begun to notice some significant changes in behavior. It's not all about product cost anymore and with good reason.

"I think they realize that there is not a lot of room any more for us to lower cost--in fact, our costs are going up," said Dave Jacobs, Medline's vice president of DME. "They know that the way they have done business in the past is not the way they are going to be able to do it in the future, given the changes that are being forced upon the industry."

In the past, when faced with a reimbursement cut, providers generally demanded that manufacturers absorb some, if not all, of the pain by lowering prices. With that strategy pretty much dead, many providers have begun to seek more fertile relationships with manufacturers.

"They are looking for some expertise and field support on how to change their business model," said Larry De La Haba, Graham-Field's senior vice president of homecare. "They want to know what can we do to help with advertising. They want more retail products, retail packaging and planograms for their showrooms. They want help selling diagnostic products to physicians and help increasing sales to nursing homes."

Providers have begun to rely on manufacturers to offer solutions that help offset rising freight costs, Jacobs said, and for industry news and information that show where the market may be headed.

Providers also want innovative, more versatile products that allow them to do more with less inventory.

"If we have a walker and they have a walker and ours has a 350-pound capacity, and theirs has a 250-pound capacity and our prices are similar, we are going to get that business," said Jeffrey Schwartz, Drive Medical's executive vice president.

Additionally, manufacturers--Invacare and Pride Mobility, for example--have begun to make headway convincing providers that a rock-bottom acquisition price does not always equate to the lowest life-time cost. With warranty repairs running $150 to $250, it often behooves a provider to spend a little more upfront for a quality product to reduce repairs and other back-end costs, they say.

"We've encouraged providers to research and choose the most highly capable manufacturer," said Ted Raquet, Pride's vice president of domestic sales. "There are a lot of things that factor into providing superior value beyond just cost."