Time to look outside Medicare's safety zone

Friday, March 31, 2006

The HME industry has declared the final Medicare straw several times over the past 20 years--the first coming after implementation of DRGs in the mid-1980s, then after the Six Point Plan a few years later, next after BBA '97 and most recently after MMA '03. All of them proved to be hollow declarations. Each time, providers regrouped and steadfastly maintained their disproportionately high dependence on the federal entitlement program for their business income.
Even among those who have diversified into different business segments like retail, the pull of Medicare is irresistibly strong. To underscore this unrelenting dedication to the program, a "secret shopper" relates a recent experience with an HME retailer:
"I drove up to the store in a Cadillac, wore very stylish clothes and did everything possible to show that I had money to spend," the source said. "I said I was shopping for a bath bench for my mother and that money was no object. Given the opportunity to sell the highest-margin bath bench in the store, the owner recommended the one that was reimbursed by Medicare. When I asked about the more expensive model, I was again steered to the one that was Medicare reimbursable."
Manufacturers concede that disengaging from the Medicare comfort zone is a scary proposition for many in the HME community. But with yet another round of severe funding cuts lined up in the CMS queue, it may at last be time for providers to get serious about finding other sources of revenue.
For those who are ready to look at the retail option, bath safety products provide one of the easiest entry points into that arena. With relatively low investment costs, high cash sales potential and an exploding consumer need, bath safety items are tailor-made for novice retailers, vendors say.
"There's always been more to sell in this business than what government welfare will pay for and there are actually people in (bath safety retailing) making great money doing just that," said Stephen McLean, sales manager for Orange, Calif.-based Eagle Health Supplies. "All it takes is a desire to rise above the Medicare/Medicaid mentality."
The first--and perhaps the most pressing--challenge in bath safety retailing is creating awareness, said Greg Bosco, director of merchandising and marketing for Holliston, Mass.-based Invacare Supply Group.
"The issue isn't selling the products--it's letting the public know you exist," he said. "People can live two blocks away from your store and not know it's there because they haven't needed the products."
Generating publicity doesn't have to be an expensive proposition either, Bosco said. Potential word-of-mouth referral sources include urgent care facilities, retirement communities, civic organizations and churches. Consider Yellow Pages advertising and direct mail. Invacare Supply Group offers a quarterly direct mail program that includes a four-page, full-color circular promoting HME retail items.
"What we've done is develop a mailing that can be customized for each client directed to the zip code of their choosing," Bosco said. "At 8.5 cents per piece, the cost is less than $1,000 for a mailing of 10,000."
Direct mailings to clinical professionals is also an effective marketing tool, added Fred Garber, director of sales and marketing for Medford, Mass.-based Mobility Transfer.
"Include information about how you offer services the mass merchandisers can't provide, such as product expertise, assembly and installation," he said.
Jeff Zartman, national sales manager for Columbus, Ind.-based Cosco, elaborates:
"Focus your promotional efforts on services, selection and personal assistance," he said. "HME providers are experts in the medical equipment arena and as such they provide the consumer with a valuable shopping experience. A customer is able to walk in and get personal attention, as opposed to a mass market retailer where customers are left to fend for themselves."
Even the best advertising tactics require a certain degree of patience as demonstrated by one of the foremost authorities on the subject - Anheuser Busch, said Wes Hopper, national sales manager for Carson, Calif.-based Nova Ortho-Med.
"[The St. Louis, Mo.-based brewer] conducted a survey that shows it costs anywhere from $2,000 to $4,000 to get a new customer in the door," Hopper said. "Included in those costs are all advertising-related expenses, right down to the lights for the store sign. And the returns aren't as high as you'd expect - the survey shows only five out of every 1,000 mailers have impact and radio ads during peak drive time might only bring in 10 people if you advertised every day for a month."
Product sales, of course, are the real key to success in the bath safety business and it starts by establishing a dialogue with the prospective customer, Garber said.
"Let the customer talk," he stressed. "By listening to what they have to say, you can match them up with the best products to fit their needs. If they have back problems, offer a seat or bench with back support. Do they have problems getting in and out of the shower? Standing up from the toilet? The whole idea is to match up the proper piece of equipment with the patient's situation."
Another problem vendors see with fledgling HME retailers - besides being tethered to Medicare - is complacency with making a single sale. Those who are satisfied with a small sale won't last in the business, Hopper said.
"I started out in shoe sales when I was 16 and at that time I learned that the money wasn't in selling the shoes, but in selling the laces," he said. "If someone comes in and just buys a bath bench for $35, you've lost your shirt. Find ways to sell them other products to go with it. And make sure they have a pleasant buying experience because if they do, there's a 70% chance they'll be a repeat customer."
Indeed, the object is to "turn a $50 sale into a $200 sale," Garber agreed.
"If they have trouble getting out of the bath, ask if they have the same problem with the toilet," he said. "While you have them, show them safety rails and grab bars. Show them how you have a variety of products to solve their problems."