Tracking equipment: Profitability depends on it

Tuesday, January 31, 2006

YARMOUTH, Maine - With lawmakers doing their best to eliminate the capped rental option for DME and to cap oxygen reimbursement, providers who track how long equipment stays in the field have a yardstick by which they can measure profitability.
Nearly 75% of 64 respondents who responded to December's HME News Poll track how long equipment remains in the field.
"Tracking is essential to determine the average time of payback on equipment and supplies," wrote in John Galvin, director of Kent Home Medical Equipment, in Warwick, R.I. "This information is one component used to determine the profitability of an item when comparing it to a third-party payer rate."
It is that profitability that providers fear will disappear under the latest reimbursement hit.
The average number of months equipment remains in the field, according to poll respondents: hospital beds, 28.5; CPAP, 32.6; BiPap, 30.8; standard wheelchairs, 26.5; lightweight wheelchairs, 26.2; and oxygen concentrators, 26.
The proposal to eliminate the cap rental option for DME would transfer equipment ownership to beneficiaries after 13 months of rental. It also eliminates service and maintenance fees.
"I would say the majority of our hospital beds are out there the full 13 months if they choose to purchase, which most do," wrote Joanna Harrington, owner of Harrington Home Medical in Kennewick, Wash.
If lawmakers have their way, Medicare oxygen reimbursement will be capped at 36 months and equipment ownership will transfer to beneficiaries at the same time.
"We track for filter changes and manufacturer warranty routine maintenance on oxygen equipment," wrote in Alta Kuzov, manager at Air Options Respiratory Care in Montrose, Colo.
Concern abounds that eliminating capped rental will lead to increased demand for cheaper products to boost provider margins, but for now, respondents said, they still prefer quality. Equipment that doesn't make the grade just doesn't cut it, they say.
"We believe in aesthetic equipment as well as functional equipment, and replace accordingly," wrote one provider. "Some companies use junk and we simply will not."
Buddy Stanley, the service warehouse manager at Community Homecare Services in Richlands, Va., tracks his equipment daily.
"This helps us to determine if we should continue with this manufacturer or should go with someone else," he wrote.