A couple of weeks ago, an “old home care rep” named George Soutiere sent me a tribute to his good friend Chuck Fierce. I never knew Chuck, who passed away last fall, but I suspect a lot of folks in the HME industry probably did. Here’s the tribute George emailed me.
A Tribute to Chuck Fierce:
October 27th of 2009 — The California Home Care community lost a valued friend. Chuck passed away after a short illness in Los Alamitos, California.
Chuck spent his whole career in the medical market in southern California. His career spanned 43 years starting in 1966 opening the 1st home care store for Dilday Ambulance in Long Beach, CA. In 1974 he joined Invacare Corp as a field sales rep and followed as western regional manager in 1976.
In 1980 he purchased the assets of AllCare Medical in Whittier, CA and operated that company until 1984 when he and Barry McKinley purchased the rep group Daniels Medical Sales and represented many of the major home care manufacturers in the 13 western states region.
In 1991 Chuck and Mike Parker of Phoenix Arizona started Parker-Fierce Marketing and continued great success until 2006 when Chuck and his son Casey and a wife Martha started Fierce Marketing a manufacturer’s representative company in Los Alamitos and covered all of California, Arizona and Hawaii.
Chuck was a true pioneer in the home care development in California and always put his customer ahead of any other activity. He truly serviced his clients every need. Casey Fierce and his loving wife Martha will carry on a truly successful company in his absence. Chuck will always be remembered as a true pioneer in home health care in California.
Be warned: This story could get your blood boiling and ruin your weekend.
A provider called me up the other day with another horror story about the NSC. As you no doubt know, a bunch of HME providers voluntarily revoked their supplier numbers last fall, when it became apparent they would not be accredited by the Oct. 1, 2009.
They did that expecting that the NSC would reinstate their numbers once they became accredited. Unfortunately, like the provider who called me, they have no idea when the NSC will reinstate their numbers.
Here’s what this provider, I’ll call him Mr. Blue, had to say:
“I called the NSC yesterday because it had been three weeks since I filed my reactivation, and I was told the application has not even been looked at. I was going to contact my congressman so I decided to do a follow up call with the NSC and ask them what the timeframe was for being reactivated. And according to the woman at NSC, Medicare has put a gag order on the NSC and will not allow them to discuss timeframes, backlogs, anything with anyone.”
“I told the women, ‘You mean that Medicare is coming in and telling you that you cannot provide any information?’ She said that, ‘As it relates to the this, we cannot.
“I said, ‘Who is the person that my reactivation has been assigned to?’ And she said, ‘We don’t know. It is still just sitting there.’”
This kind of inattentive, unconcerned government behavior doesn’t surprise Mr. Blue.
“I worked for the VA for 10 years, and the reason I quit is because my supervisor said to me, ‘Why are you getting upset? You’ll still get your paycheck in two weeks, don’t worry about this stuff.’ I decided I did not want to go through life like that.”
HME providers have recently peppered industry consultant Wallace Weeks with questions related to how they can best diversify their product and payer mix.
“They have been looking at cash sales supposedly for years, but they seem to be more earnest about those kinds of transactions now,” Weeks said.
The only problem, he added, is that for some, it might be too late to reap the benefits of diversification. Here’s why.
Say an HME provider generates $2 million a year in sales. Because Medicare is becoming less and less profitable, he decides to reduce his dependence on Medicare from 40% to 20%. To do that, without giving up any Medicare business, he has to dilute his Medicare business by adding $2 million worth of other business.
“That’s a staggering amount and you can’t generate that kind of change in 12 or 18 months,” Weeks said. “There are a lot of financial issues that can be fixed in a company if you have 18 months, but diversification is not one of them.”
For most providers, meaningful diversification requires two to four years, he said.
And just how diversified should most providers be?
“My recommendation is to have a small enough portion from any payer so that no payer can kill you,” Weeks said.
And what if a provider decides to focus on a particular product and/or payer?
“When you put all your eggs in one basket, whatever it is that could be a threat to that basket, you have to see it as soon as it is on the horizon and act then. You can’t wait until it is at the door.”
I’m “working” from home today. I don’t usually do that, but last week my wife and I took the kids on vacation to Arizona, and I caught the worst cold (or maybe it is the plague) of my life. That seems like some kind of perverse joke, doesn’t it? Go on vacation to a warm climate to escape Maine’s frigid winter and get very sick.
Anyways, as I was lying on the couch this morning doped up on Tylenol, Sudafed and Robitussin (cough suppressant and expectorant), reading through back issues of Newsweek, I ran across an article by Robert J. Samuelson, the magazine’s resident economic curmudgeon. It doesn’t matter what is going on in the world (a bull market, low interest rates, growing exports, etc.), Samuelson always manages to see the glass as half empty. And when the news is bad, look out! That’s when he is at his best, sowing seeds of gloom and doom that make you want to hide under the covers.
He can be a bummer, but he’s also usually right.
In this particular article, Samuelson extrapolates Greece’s precarious financial condition to the rest of Europe and to the United States. Greece has piled up mountains of debt, mostly by over-committing to social programs, and could very well default on its debt payments. Every advanced society, Samuelson writes, faces a similar problem: “burgeoning costs as populations age, an over reliance on debt financing and pressures to reduce borrowing that create parallel pressures to cut welfare spending. High debt and the welfare state are at odds.”
As I read Samuelson’s Greek Tragedy, I thought about the HME industry—really, all healthcare providers. Everyone has been lobbying and working like crazy to minimize the impact of healthcare reform. But in the long run, this work will only buy providers time—time to change their business models to accommodate a new era of austerity. In some cases, lobbying may preserve the status quo a bit longer, but if you accept what Samuelson is saying, deep cuts to Medicare, Medicaid and Social Security are inevitable.
All this reminded me of a line from “Lord of the Rings.” In a particular perilous moment, when all looks lost, the good wizard Gandalf and the hobbit Frodo Baggins, have this short exchange:
Frodo: “I wish none of this had happened.”
Gandalf: “So do all who live to see such times, but that is not for them to decide. All we have to decide is what to do with the time that is given us.”
Fast forward from Middle Earth to 2010. At a recent industry event, I talked to a provider who about four years ago invested heavily in non-delivery oxygen technology. Since then, he’s reduced his delivery costs 62%. He also just opened a new location. Given the challenges the industry has faced recently, he seemed a little sheepish about his great success. “I would not say this out loud,” he said, “but business is great.”
I’d say this guy made good use of the time given him.
The moral of this story is, I think, that the changing healthcare market does not have to signal the end of your world—just the end of the world as you know it.
I had an energetic conversation recently with a guy who called to bend my ear on out-of-control health care spending in the United States and the home medical equipment industry.
I won’t give this person’s identity away, but while he is not part of the HME industry, he has a ton of health care expertise and is someone worth listening to. I like talking to “outsiders” because they often look at HME issues in a different way or confirm what we already suspect. Both perspectives are valuable.
Here are some excerpts from our conversation:
— “HMEs are catering to an older Medicare reimbursed clientele. I think the real action in the future is going to be in the younger clientele, supplying technologies for use in the home that facilitate home management of chronic conditions or early diagnoses and self treatment.”
— “As an industry, HME has to have an answer and value proposition where people are focused on wellness, prevention, home monitoring. Is there a way for HME to reach out and be part of that solution rather than be focused on the elderly?”
— “I walked into a DME suppler for the first time a couple of years ago, and it had that weird, hinkey kind of feeling. If felt kind of old, and walking in here to get a CPAP machine it felt like I just crossed over to being a old person.”
— “Medicare is $37 trillion in the hole. If I’m a DME provider with 40% of my business in Medicare, what do I do?”
— “If Medicare goes in and gets a commode, how much does it pay? If you ask the person to pay out of pocket for the whole thing, what would be the price they’d pick? They would not pick a price close to the full price. This should highlight for everybody that we’ve got a fundamental mismatch in the value proposition. Everyone is fine if they are spending other people’s money, but they are fundamentally getting a product that they do not value at its cost. That is unsustainable.”
— “How many Hoverounds would they sell if people had to pay for them out of pocket? ‘It’s free to you. We’ll process all the paper work.’ It just makes me angry. Because I know my children are paying for that, and my children have no voice in this. The AARP is the second largest employer in Washington D.C. We are screwed.”
— “I was so damn happy when the reform thing went belly up with Brown getting elected in Massachusetts. Not that we don’t need to change something and have reform, but we don’t need to reform access. We don’t need to add 30 million or 40 million people to a fiscally unsound program. We need to go back and solve the cost problem, It’s all about cost.”
At some point in this country, people are going to rise up against senior citizens. The gray hairs won’t be attacked or thrown into jail, but they will be thrown dirty looks, and the AARP will be viewed at as a detriment to the long-term health and prosperity of the United States. Unless something drastic happens, that day is coming.
In Monday’s New York Times, columnist David Brooks, in an article titled “The Geezer’s Crusade,” cited these disturbing statistics:
- According to Julia Isaacs of the Brookings Institution, the federal government now spends $7 on the elderly for each $1 it spends on children.
- In 2009, for the first time in American history, every single penny of federal tax revenue went to pay for mandatory spending programs, according to Eugene Steuerle of the Urban Institute. As more money goes to pay off promises made mostly to the old, the young have less control.
- For decades, federal spending has hovered around 20 percent of G.D.P. By 2019, it is forecast to be at 25 percent and rising. The higher tax rates implied by that spending will mean less growth and fewer opportunities. Already, pension costs in many states are squeezing education spending.
You see what Brooks is getting at, right? There’s just no way that as a country we can continue to take from the young and give to the old. That’s not just plain wrong–it’s criminal. It’s also a recipe for disaster. Does anyone really believe that if we continue to saddle our young people with this kind of growing financial debt that their future–the future of the United States–will be anything but bleak?
To fix this situation, the United States is going to have to swallow some strong medicine.
The worse part about all this is that if Washington had a spine, politicians could have taken steps long ago to head of this day off reckoning.
This backlash against our seniors is already happening. I hear people regularly say how crazy it is to spend a ton of money on old people just to keep them alive for an extra year or two. Right now these grumblings are not widespread, but I sense that this attitude is growing.
When we’re forced to choose between our young and our seniors, it really is a sorry state of affairs.
The number of active DMEPOS suppliers who bill Medicare dropped from 106,707 on Sept. 1, 2009 to 92,629 on Dec. 1, 2009. That’s a 13.2% reduction, and most likely reflects the number of providers who gave up their supplier numbers rather than become accredited by Medicare’s Sept. 30, 2009 deadline.
HME News solicited the data from CMS in early December via a Freedom of Information Act (FOIA) request. Industry watchers surmised that thousands of providers would give up their supplier numbers rather than become accredited. This CMS data confirms that suspicion.
I think we can be reasonably confident that most of the newly inactive supplier numbers belonged to HMEs and not pharmacies. That’s because pharmacies had until Jan. 1, 2010 to become accredited.
Here’s the change in active DMEPOS supplier numbers by region between Sept. 1 2009 and Dec. 1, 2009:
Jurisdiction A: 22,318 to 19,275 (-13.6%)
Jurisdiction B: 21,791 to 19,077 (-12.5%)
Jurisdiction C: 39,094 to 34,038 (-12.9%)
Jurisdiction D: 23,504 to 20,239 (-13.9%).
Nationally: 106,797 to 92,629 (-13.2%)
Of these providers, here’s the number that voluntarily terminated their numbers before the Sept. 30 deadline. Providers in this group most likely plan to reinstate their supplier numbers once they become accredited.
While skimming The New York Times this morning, I learned that Lawrence Garfinkled died last Thursday. That wouldn’t have meant anything to me except that the headline caught my attention: “Lawrence Garfinkel, Dies at 88; Fought Smoking.”
Because the HME industry is so heavily invested in respiratory therapy, any thing related to smoking—the cause of most respiratory ailments—interests me.
Garfinkel’s obit got me thinking about my own experiences with smoking.
I never smoked regularly, but as a kid I used to every now and then steal a cigarette or two from my mother’s or father’s pack. Stealing from my father was easy. He left his cigarettes on the counter with a pile of change and his keys. When no one was in the room, I’d tap out a couple of butts from his pack and quickly exit the house, meet up with a friend or two, and go smoke them in the woods that bordered our neighborhood. To steal from my mother required a little more stealth, and created much more anxiety. She kept her cigarettes in her pocketbook, and it required a little more time to open the snap, pull out the pack, snag a few butts, put the pack back, snap the snap closed and then get the hell out of Dodge.
Whether stealing cigarettes from my mother or my father, the trick was to estimate how many I could take and not be caught (I never was). I would not steal from a pack that was nearly full or empty. I felt most secure stealing from a pack with 13 or 14 cigarettes left because a missing butt or two would not be conspicuous.
Sometimes, instead of stealing from a pack of cigarettes, I would sneak into my father’s jeep or my mother’s station wagon, and fish out some stubbed out butts from the ashtray. Neither of my parents smoked their butts down to the filter, but they didn’t leave too much tobacco either. So finding a half-smoked cigarette felt like hitting the motherload. My friends and I much preferred my father’s butts, which unlike my mother’s, were not tattooed with lipstick.
Occasionally, our neighborhood bully, Neil Booth, his hulking figure only a few feet away, would terrorize me into walking the neighborhood in search of smoke-able butts on the ground. Neil was a regular smoker by the time he was 10. He and a bunch of older kids often bought cigarettes at 3 cents apiece from Bud Stoddard, an old man on our street who could get away with this kind of commerce back in the late 1960s. As I think back on it now, Bud probably had COPD. His chest wheezed and rattled with every breath, and he regularly spit yellow, gooey phlegm balls out over his porch railing. Sometimes one would hit the railing, and like a banana slug, slide down a post to the porch floor.
For whatever reason, while I dabbled with smoking, it never hooked me. In part, I think, that’s because I looked up to my father, who gave up the habit when he was about 30. Unfortunately, a few years later he developed terminal skin cancer and, with nothing to lose, began lighting up again.
My mother smoked until she was 55, but has been tobacco free for 15 years. She is a little on the nervous side and cigarettes helped bring her some peace. It took a lot of courage for her to quit—she wanted to set a good example for her grand kids—and I admire her for doing so.
Okay. I admit it: I watch American Idol. And the most memorable moment so far this season has been 62-year-old Gen. Larry Platt, singing his original composition, “Pants on the Ground.” This infectious and very funny little ditty has been viewed more than 4 million times on YouTube.
Now you can see an HME cover version, created by Mark E. Smith, Pride Mobility’s Consumer Research Manager.
“In living with a disability, and in my professional roles, I’ve learned that mixing humor and disability goes a long way toward overall awareness and acceptance,” Smith said. “And, when one ties humor and disability in with pop-culture, as we have with this video, it creates an immediate connection between the mainstream and those with disabilities in very positive ways.”
Do you remember Lynn Everard? He worked in the HME industry as a consultant back in the late 1990s. I always enjoyed talking to Lynn. He was articulate and smart. But one day he up and left the industry, frustrated because HME providers failed to show much interest in his specialty: activity based costing (ABC).
Lynn came to mind the other day while I was talking to another industry type. This guy, sounding a little like Lynn, said he’d just about had it with HME providers, who have yet to show much interest in his retail product. I won’t divulge any more about this product, but I do think it’s got great potential to drive cash business. To me, it seems like a no-brainer (as did Lynn’s believe in ABC), but I’m not a provider.
Below, I’m rerunning the exit interview I had with Lynn in October 2000. That was so long ago that HME News did not even have a Web site! If we had, I’d include the link here and not the story.
Hindsight is 20/20, but it is clear now that Lynn was onto something. Providers who know their costs are much better off today than those who do not.
– Mike Moran
Consultant gives up on HME industry
COCONUT CREEK, Fla. — After giving it his best shot for the past six years, HME business consultant Lynn Everard, a frequent speaker at Medtrade and a regular presence at other industry events, has called it quits. The reason? Providers haven’t embraced his areas of expertise: supply chain management and activity based costing (ABC), a cost analysis method that allows a company to determine the cost of all its business activities. ABC is key, Everard maintains, if a provider wants to know what he can and can’t afford to continue doing. Everard now plans to target long-term care and medical distribution, with a special emphasis on e-commerce. “I can’t do it anymore,” Everard told HME News during a recent interview in which he had some harsh words for HME providers. “I hope that they’ll succeed, but I can’t help them. They don’t want to help themselves.” HME News: No offense, but a lot of people might say that your comments sound a little like sour grapes? Lynn Everard: I have been hesitant to say anything for that reason. What I say isn’t going to change anything. These people aren’t looking for solutions. They are looking for excuses. Everyone knows that Medicare was originally created as an entitlement programs for senior citizens. I don’t think Washington ever intended it to be an entitlement program for healthcare providers. But I see most people acting as if what’s really going on is that they are losing their entitlement. HME: Sounds like you think the industry spends too much time and energy on Medicare reimbursement issues. LE: I do. I think working on reimbursement issues is really working against themselves. Providers don’t have any control over reimbursement. If you are worried about the government, make your business so you are not dependent on the government. They send all this money to Washington and it gets spent and what do they have show for it? HME: What about increases in the CPI and other give-backs the industry has won since BBA ‘97? LE: Big deal. What’s happened is that this industry has become an industry of victims. And we’re victims because we are losing our entitlement. The reason everyone got so upset about competitive bidding is because they were going to have to compete for business. They don’t want to do that. Well, hey, that’s how it is in the rest of the world. Get used to it. HME: What’s your recipe for success? LE: Most of these companies, if they implemented activity based costing, they’d know what contracts worked and which ones don’t, and they could get out of the ones that don’t instead of believing that if they just get enough revenue they’ll be (OK). It doesn’t work. They ought to look at the cost of everything, not just the cost of the product. The cost of the product is almost insignificant compared to the cost of managing that product from one end of the acquisition cycle to the other. If you look at what’s happening in the rest of the world, supply chain management is becoming the number one method that companies are using to shore up their profit margins. HME: What happens if providers don’t do this? LE: They will no longer be able to operate and they will close or be acquired. HME: Where else do you think providers err? LE: They thrive on the notion of giving the best customer service. It doesn’t matter if it is efficient customer service just as long as it is perceived to be good — whatever that is.
HME: Are you suggesting that providers de-emphasize service?
LE: No. I’m suggesting that service be tied to determining need. Right now service is based upon how can we make someone happy. And of course who they are trying to make happy generally floats back and forth between the patient, the payer and the physician. And they are trying to make them all happy at the same time. They are not getting paid to make them happy all at the same time. HME: What’s the bottom line to all you’ve said? LE: The bottom line is that there are going to be successful companies but the only person who can fix your business is you. The government can’t do it. It’s not their job. It’s not AAHomecare’s responsibility to do it, no matter how many dollars in dues you send them. It is your responsibility. You either fix it or you get out. I’ve told a number of people over the past six months that they should be less worried about reimbursement and more worried about what Apria’s doing to create a business model that you can’t compete with no matter what your reimbursement is. That is the critical question. It’s not the reimbursement. It’s what’s your business model?
