Top 10 ways to grow top-line profitability

Friday, February 24, 2012

Competitive bidding is either a threat or an opportunity--it depends on whether you see the glass as half empty or half full, and how you prepare and respond to this inevitability. In light of competitive bidding and all of the news it has generated, here are 10 surefire ways you can grow your top-line profitably.

Focus on profits, not revenue

Before we get started on growing the top line, let's remember that the trick is bringing in profitable business. The problem in HME is that we have had some profitable lines that have traditionally built our businesses, but now the profit in those lines is under siege. So the first step is figuring out if these lines will continue to be profitable for your business. That is why ABC or activity-based cost accounting is important--make sure you know which lines are profitable and which ones aren't, which customers are profitable and which ones aren't, and which payers are profitable and which ones aren't.

Seek exclusive contract arrangements with payers

What? Yes, managed care payers. You remember them; we ignored them in the 1980s then had to work out deals with them in the 1990s. And to stay in this game, refocus on them; get exclusive arrangements with HMOs, TPAs, self-insured employers, medical groups at risk, hospitals at risk, and accountable care organizations or ACOs. To get an exclusive deal, you need more than a geographic area that matches that of their members and a rock-bottom price. Think about an outcome. There are two types of outcomes: business and clinical. Pick one and develop a strategy.

Review and adjust compensation plans

Do this for your sales reps, your employees and your managers. Well, really, you have to look at all compensation: bases, bonuses, commissions, expenses, healthcare insurance. How does this grow your top line? Pay your managers on revenue achievement that meets or exceeds plans. Put incentives in place to grow the top line. Incentive plans should be reviewed at least annually. And remember that not all compensation is monetary. Weave the right non-monetary rewards into your incentives and watch the top line grow.

Ensure that you have a top-notch sales team

I like to hire "A" players. Money spent on a top player is an investment with huge rewards. Wouldn't you rather pay out $150,000 a year for a rep that is bringing in $10 million of business? Or would you rather pay out $60,000 a year on a rep bringing you less than $250,000? Get over the sticker shock and realize the long-term gain. In addition, train them and give them an A-plus sales management system with cloud reporting. Make life easy for them--it is hard enough out in the field.

Create a sustainable competitive advantage

If your reps don't have something different to sell, then they might as well stay home. A competitive advantage is built one of two ways. The first is superior services like customer and clinical services that are better or different than your competitors. The second is superior resources like investing more money into a territory through advertising or sales time. What is your competitive advantage? Figure it out and develop it for every type of customer--doctor, discharge planner, payer.

Look at your garden of products and prune them

Get out of silly, unprofitable businesses. Focus on and be a great player in a product or service line that works. Sears and KMart are closing more stores. Walmart is winning. However, Banana Republic has it all figured it out. Be like Banana Republic and focus on a particular type of customer with a particular type of product and service. 

Have a CPO, that is a chief profitability officer

This is a senior manager in your organization who is solely focused on profitability. Make it their job to review profitability and develop profitable programs. You don't get what you expect; you get what you inspect. The discussion must change from top-line revenues to bottom-line profits. If you grow your business 20% per year and yet your expenses grow 25% per year, you will have serious financial problems. Focus on growing profits.

Consider dropping Medicare and/or Medicaid

Wow. Focus on cash and MCOs or just MCOs or just cash. Why be in unprofitable business lines? If CMS goes through with the proposed physician cuts, docs will drop Medicare patients like hot potatoes. Why are you still in these service lines? Only be there if you can reorder your service-line costs to produce a profit.

Consider brand new service lines

What about an adult sitting service, an errand running service, or novel product lines tied to educational programs? It's time to be creative. What business are you really in and what can you do to build a great new product line?

Know the numbers, the data, the customers. Know it all. Analyze it all. Think about it in new ways. Pay attention to all the details of your business. hme

Chris Sizemore is principal with Cherney and Associates of Brentwood, Tenn. Reach him at