Where do we stand?

Monday, April 30, 2007

In the weeks before CMS released the final rule on national competitive bidding (and for several months after it cut reimbursement for home oxygen therapy and power mobility devices), providers around the country were audibly anxious. Some said they were making moves--big and small--to adapt to the changes. Others said they were regretting moves. And still others said they weren't making moves at all. Here are a few of their stories:
Circling the wagons
WestMed Rehab in Rapid City, S.D., sold its orthopedics and prosthetics business to Hanger Orthopedic Group in February. CEO Tim Pedersen said: "There's a great sense of circling the wagons in the industry right now. You want to focus on your core strengths and divest those parts that don't bring instant returns." Even though O&P generated 18% of WestMed's revenues--"a fairly good chunk," Pedersen said--it ate up a disproportionate share of the company's payroll. "Let's just say orthotists and prosthetists are well paid," he said. If other providers aren't looking to "trim fat," they should be, Pedersen said.
Party anyone?
Ehlers Health Supply in Stockton, Calif., plans to consolidate its HME business and the family's party rental business into one building to cut back on rent and insurance. "You'll walk in and have balloons and table rentals on the right and nebulizers on the left," said owner Mark Ehlers. "It's unfortunate, but it's a sign of the times." In Stockton, building spaces go for $250 to $350 per square foot; Ehlers Health Supply currently occupies a 6,000-square-foot building. Additionally, the company has let go a handful of customer service representatives and drivers, and cut back on advertising. "My volume is growing 5% to 10% or more each year, but we're struggling to make what we made 10 years ago," Ehlers said.
Small things matter
At Pennyrile Home Medical in Cadiz, Ky., no expense goes unscrutinized. Although the company has managed to keep up staff levels, it has looked at every possible avenue to cut overhead--even adjusting the thermostat down a couple of degrees. "You add $10 here and $50 here and you have a $1,000 in savings a year," said owner David Chestnut. The company has also tried to consolidate trips back-and-forth to its three locations and consolidate purchases to take advantage of free freight. "Letting staff go--that's a last resort," he said. "Once you do that, it's hard to reduce the services you provide."
Stretched thin
The Topsham, Maine-based Majors Mobility opened a second branch in July to increase its market share and prepare for national competitive bidding. Several months later, however, CMS slashed reimbursement for power mobility devices. "Had I known the cuts would be so severe--20% to 35% instead of 8% to 10%--I would have rethought things," said President Tyrrell Hunter. "Timing is everything, and now we're stretched a little thin." Hunter bristles when people say providers need to increase efficiency to reduce costs and increase profits. "I don't know how much more efficient we can be, especially when we spend more time than ever chasing paperwork and educating referral sources (due to new coverage criteria for PMDs)," she said. "I feel like CMS has gone way overboard."
Sitting tight
Consolidated Medical in Newburgh, N.Y., swapped its DOS-based software platform for a Windows-based platform recently, but in most other areas the company has decided not to make changes until it knows more about NCB. "It's a tough time right now to make short-term and long-term goals," said President Doug Crana. "We're scared to hire additional sales reps--we don't know if we'll be able to keep them for any length of time." In general, Consolidated's sitting tight, Crana said. "We're not sure where we stand because of the near future," he said.