Live blogging from HME Business Summit: Top providers share successes, failures
The panelists: Scott Lloyd of Extrakare, Tammy Zelenko of AdvaCare and Doug Westerdahl of Monroe Wheelchair.
On business plans
Lloyd: He uses a business plan as an ultimate managerial crutch. If a member of his staff says, "We need another driver," he says, "We agree, we'll add another driver next quarter, like it says in the plan." He uses it to guide decisions and really as a crutch on what he's going to do and when he's going to do it. He does a business plan each year. He spends about 40 hours per year on the business plan. He writes it with number of people in mind - partners, bankers, vendors, etc. He tries to make it look like an annual report from a public company. He includes a business narrative.
On business plans vs. benchmarks
Lloyd: Benchmarks are different from business plans. Benchmarks are used for long-term goals. They need to be customized to your business. Oxygen and rehab, for example, have very different benchmarks. They should be updated, but infrequently. They need to be changed when there are major structural changes, like the rental cap and 9.5% reimbursement reduction.
On competitive bidding
Zelenko: She says it's sort of like a Clint Eastwood movie - the good, the bad, the ugly. She's in the Pittsburgh MSA. In Round 1, she used activity based costing. She worked with manufacturers to look at cost structure and buying power. Those were good exercises. She created spread sheet after spread sheet and spent months looking at them. In Round 1, when it came time to push button, she felt confident. She felt the prices that she put down she could make a profit at and get the bid. She got the bids in Round 1. In Round 1.2, she wasn't confident because she knew that the providers that didn't win bids in Round 1 would bid low. She got one contract for walkers and rejected it. She was depressed. She went to a Tom Petty concert and he sang, "I won't back down." It was a turning point. She started thinking short term. Because the competitive bidding contracts are for three years, she started thinking, how could she get through the next three years. When visiting a hospital recently, she was asked if they did CPM machines. She told the referral source, "Well, we've been thinking about it." She hadn't but she knows she needs to keep an open mind and diversify her product mix.
On open-book management
Westerdahl: It's from John Case's book. Until six months ago, he hadn't heard of it. He's implemented it at his company. The basic concept: To teach people to understand the numbers; give them the chance to move the numbers that they can affect; give them key indicators; and give them incentives to move the numbers. There are three steps to implement this kind of program: nail down the financials that you want to measure and share; train employees; and implement a profit-sharing/bonus program. Some of the financial indicators that he has shared with staff include sales, gross profit, overhead costs and DSO.
On revenues and expenses
Lloyd: He's found all the Medicare Advantage plans in his area. He found that there were plans that he hadn't heard of. He added them to line cards. Additionally, he went to each of the plans to make sure he had contracted status with them. Medicare has required that all of the advantage plans to credential providers by Jan. 1, 2011.
Zelenko: Refinance. You need to look at long term debt and see what you can borrow for and see what you can re-structure.
Westerdahl: You have to invest in advertising and not just one and out. He's been doing it for a number of years and he's really branded the company's name. He has a jingle. People know the name and jingle. He spends about $9,000 a month on advertising in the Rochester market. He does about $120,000 in sales per month as a result of that.