You will have to change
The DME industry is dealing with many issues, but Medicare competitive bidding remains the biggest threat to the health of our industry. While The MED Group continues to advocate for repeal through support of H.R. 1041, we recognize the importance of helping our member partners prepare for the bidding process and the new business environment that competitive bidding will bring to our industry. Even though our efforts remain focused on eliminating competitive bidding, we understand the importance of prudent planning, thus preparing our businesses to operate in the most efficient and profitable manner.
The bigger question is what are providers doing to prepare their companies to compete in the new environment if competitive bidding cannot be eliminated or significantly modified by the summer of 2013? MED has been working to understand what Round 1 companies did to prepare for competitive bidding to share that information with our members competing in Round 2. Here are key recommendations:
You will have to change your operations--this does not occur overnight. Achieving success will require 24 months of planning, implementation and execution.
Members realized they would be doing many of the same activities under competitive bidding but at much lower reimbursement. The members had to do it better, more efficiently, and for less revenue.
Maximize cash flow
Focus on cash flow and collections, coupled with strategic investments in efficiency and productivity tools. These investments were made early in the process to ensure that the tools were fully implemented by the time competitive bidding started.
Focus on skills that impact customers
Outsource functions or change operational models to focus on products and services that bring value to customers. Options include outsourcing portions of billing and supply fulfillment; and implementing a limited delivery model for oxygen and other products. This allows for more attention on customer service, quality patient care and caregiver experience.
Engage outside sources
Realize you cannot get where you need to be by yourself. Work with group purchasing organizations, outside consultants and others to learn how to effectively change the organization.
This initiative is too big for a single person. Forming a good team with people from different parts of the company helped to create buy-in and also opened up new ideas and processes. The most important aspect: Full support and direction from senior management. Senior management must lead and push this initiative to legitimize the importance of what the changes mean to the company both today and into the future.
Evaluate all product categories and referral sources
Conduct a full evaluation (financial, resource allocation) of the product lines offered to customers. Evaluate the referral sources to see which ones required high levels of service with limited profitability. Product lines or referral sources that met the new requirements were implemented or enhanced and those that did not were eliminated.
Partner with manufacturers
Get away from the "deal of the day" manufacturers and focus on developing partnerships with manufacturers that provide the best overall value not necessarily the cheapest price. Value manufacturers that offer consumer marketing capabilities, financing, and outside direct sales teams to assist with training that helps to maximize productivity and earn an acceptable margin.
As one member told me, the one thing that is certain regardless of the outcome of competitive bidding: Providers need to evaluate all aspects of the operation and change accordingly to compete in whatever environment exists in the future.
Wayne Grau is vice president of contracting, business services and government affairs for The MED Group.