Smart Talk: Making up for lost profits

Thursday, June 30, 2005

Q. Based on Medicare's recent reimbursement cuts, my oxygen business (85% of revenues) is now generating 12% less profit. What can I do to make up for lost profitability?
A. The answer begins with proactively managing expenses and continues with diversification of your business lines.
During periods of declining revenue, you must aggressively manage the expense side of your business. Your goal should be to reduce expenses and cost of goods sold. For some providers, it may mean totally reengineering your business to do more with less in order to maintain overall profit margins.
- Begin confronting declining profitability by diversifying your payor mix and seeking out more profitable business lines.
- If your business is predominantly to Medicare patients, it will explain why Medicare reimbursement cuts hit directly on your bottom line. Focus your marketing efforts on non-Medicare business such as third party payors and private pay patients.
- Another option is to begin to diversify your product and service offerings. Oxygen is only one of many healthcare products and services provided to patients at home. One of the hottest segments of the healthcare industry is home infusion and specialty pharmacy. With the specialty drug pipeline overflowing with new infusible agents, the home infusion and specialty pharmacy segments are growing strong.
Be proactive as the market changes. Manage your business for long term survival and profitability. It is important that you don't sit idle while the industry around you continues to evolve.

-- Jonathan Sadock can be reached at Paragon Ventures: 800-719-1555