I spoke briefly with Kelly Mize and Brian Ellacott of Invacare yesterday about the company’s decision to move the manufacturing of its Solara line of manual wheelchairs to an existing facility in Reynosa, Mexico.
Mize, a spokeswoman, and Ellacott, vice president and general manager of Invacare North American Commercial Operations, reiterated much of what was in the mainstream media last week about the move:
That the facility in Mexico, called Invamex, already manufactures manual wheelchairs.
That the move is part of the company’s long-term manufacturing strategy.
That there will be no job losses. Employees at the Elyria facility who are working on the Solara line will train the employees at Invamex and then will be transitioned to other roles.
Mize and Ellacott did say a few things that I thought were interesting: That “Invamex makes more manual wheelchairs than the rest of the company combined” and that the company now plans to focus Invamex on manufacturing manual wheelchairs and Elyria on manufacturing power wheelchairs. This will allow Invacare to “focus on getting quality systems in place” in Elyria.
We don’t always have the time (or, honestly, the wherewithal) to listen to every earnings conference call by every public company in the HME industry. But when we do, it’s almost always worthwhile.
This week, ResMed had its earnings conference call for the second quarter ended Dec. 31, 2011. The company’s earning looked something like this: It reported $332.7 million in revenue, a 9% increase compared to the same quarter in 2010. It reported a net income of $62.9 million, an 8% increase.
Also of note in the company’s earnings: ResMed reported research and development expenditures of $27.2 million for the quarter ended Dec. 31, a 24% increase compared to the same period in 2010.
Additionally, ResMed reported $647.5 million in revenue for the six months ended Dec. 31, a 10% increase compared to the same period in 2010. It reported a net income of $113.4 million, a 2% decrease.
Some of the more interesting discussions during these calls, whoever, come during the Q&A portion with investors at the end. Here are a few highlights:
Big spenders on R&D
ResMed officials explained that the company is making a push in the ventilator market (“they’re not cheap to produce”) and in the health informatics market. They called these two markets the company’s “two main gigs” in this area.
About that CEO succession plan…
ResMed officials explained that the search to replace Peter Farrell as CEO continues. The company is working with an outside recruiter and a consultant, but they’re not “rushing along” and they don’t expect to make an announcement in the near future.
The future is HST
ResMed officials expect the market for home sleep testing (HST) to double this year in the Americas, which means the market for auto-setting CPAP devices could also double. They say payers are “getting antsy” for sleep labs and others to adopt the technology, because it will save them money, to the tune of $1,000 per test. “We’re trying to put that story together and drive HST as part of that,” said Mick Farrell, president of ResMed Americas.
Expecting the worst, hoping for the best
ResMed officials have put together a team to look at a 2.3% annual excise tax on medical devices that’s scheduled to go info effect Jan. 1, 2013. They’re working on the assumption that it’s going to go through, but they say, “there’s a lot of water to flow under that bridge.”
Peter Farrell concluded the call by saying: “We continue to be excited about the future prospects for us. We’re in the right space. It’s preventative, improves quality of life and reduces healthcare costs.”
It was only a few hours into my work day on Monday when an home medical equipment provider emailed me about our story in our HME News Wire on Prof. Peter Cramton crunching an impressive amount of Medicare data and coming up with the following conclusions:
That there has been a significant drop in the number of HME providers in each product category as a result of competitive bidding;
That there has also been a significant drop in the number of submitted claims in each product category and in each bid area as a result of the program; and
That there have been negative health outcomes in each bid area as a result of the program.
The email from the HME provider said:
Don’t you think this is exactly what Medicare wants? They will spin this number to Congress and take credit for the program’s success. Sorry to take such a dim view of things, but this fits the MO of CMS.
Dim view is right.
I mean, isn’t this the kind of data that proves competitive bidding is bad news for small businesses (fewer HME providers), Medicare beneficiaries (reduced access to HME products and services) and the state of health care (increased rates of everything from hospitals stays to deaths)?
It is—and, unfortunately, as this HME provider intimates, it isn’t.
Let me put it another way: It is for Cramton and HME stakeholders—and it isn’t for CMS officials.
I’m sure CMS officials see this data in a different light. They think it proves competitive bidding is good news for government (working with fewer providers means fewer administrative burdens and costs) and taxpayers (fewer claims mean fewer expenditures).
But what about Cramton’s third conclusion: That there have been negative health outcomes in each bid area as a result of the program?
There seems to be less room for CMS to “spin” this, because, in the most direct way, it’s about people. People receiving a sub-standard level of care due to an ill-designed program.
This is why a few HME stakeholders have told me that this data, in particular, more than any of the other data, will be what pierces through the politics on the Hill, because, at the end of the day, lawmakers are beholden to the people, or so they should be.
So to this HME provider with the “dim view” I’d say: This data-driven approach to gauging the impact of competitive bidding is huge, whatever the spin may be, because lawmakers like data, as evidenced by the way they grasp and never let go of OIG and GAO reports that say, for example, that Medicare pays four times acquisition cost for power wheelchairs.
The big question now is: What is this new data to them?
We’ll publish some of the results of the survey in an HR Special Report. Additionally, we’ll have a handful of articles, commentaries and Q&As with HR managers, educators and consultants. Check out the line-up:
A survey overview by HR expert Ana McGary.
An article quoting The VGM Group’s Greg Schmitz on making education part of your company’s and your employees’ bigger picture.
A Q&A with Merits’ Michele Faulkner on being an HR manager at a smaller company.
ActiveForever’s Erika Feinberg on new training methods that incorporate fully integrated media.
Consultant Kelly Franko on surveying employees for company improvement.
UroMed’s Lisa Wells and consultant Carrie Robinson on extending benefits beyond paychecks.
Sales expert Michael Sperduti on incentive programs that improve morale and drive growth.
Take the survey before Feb. 1. And keep an eye on your inbox, because we’ll be sending out an email when you can access the HR Special Report.
To say that providers are living, eating and breathing competitive bidding right now is probably an understatement. By extension, we are, too.
There pretty much isn’t a day that goes by that we don’t get an email from at least one provider asking us a question about competitive bidding or, more frequently, making a point to us about competitive bidding.
A provider emailed Managing Editor Theresa today about a deadline that is quickly approaching that he says few providers know about. Here’s the deal, according to the provider:
Providers who plan to participate in the program must submit a credit report, and they must submit said credit report “within 90 days prior” to the opening of the bid window. Well, the bid window is scheduled to open Jan. 30. That’s the week after next. The provider called the CBIC to confirm that this is the case. It is.
“That means that if a company does not pull their credit report before Jan. 30 (assuming that the bid window actually opens on that date) then they may be disqualified,” he wrote.
Last week, Editor Liz (that’s me!) got an email from a provider who had recently attended a competitive bidding seminar and learned that capacity has everything to do with how the bid rate turns out. Here’s the deal, according to the provider:
Providers must tell CMS what percentage of the bid area they can cover, with the most being 20%. When CMS looks at the pool of bids it receives, its goal is to reach 120% capacity to cover for contingencies. If all providers tell CMS they can cover 20% of the bid area, the agency will award the bid to the six lowest bidders (6×20=120) and average their bids to determine the bid rate. If those six lowest bidders bid $10, $11, $12, $13, $14 and $15, the average bid will be $12.50. But if all providers tell CMS they can cover 1% of the bid area, the agency will have to award the bid to 120 bidders, and the average bid will be spread across 120 bids instead of six.
“Is this huge or what?” the provider wrote. “The only argument I heard against offering 1% is that by offering 20% you drive the competition out, but at what cost?”
HME News can’t possibly follow up on all of the intricacies of competitive bidding (see first example) and it definitely can’t give advice on how to bid (see second example), but I thought these two items were good food for thought.
Over the course of the last few months, we’ve received several emails from readers that The Scooter Store has been laying off employees. This was news to us. We thought The Scooter Store was in growth mode and that the company was hungry for ATPs.
We reached out to The Scooter Store in late December to ask the company if this was the case, and here’s what Mike Pfister, an executive vice president, had to say:
“The power mobility business has seasonal cycles and the last few months of the year and the first few months of the new year are always slower than the rest of the year. For that reason, we implemented a seasonal employee program this spring that resulted in over a hundred new sales associates whose employment would be tied to the seasonal buying patterns. For the last two months, we have been reducing the size of our sales staff as seasonal buying is slowing down, consistent with the strategies that were put in place in the spring and consistent with the expectations we set for those employees when hired. That is the only program we have related to staffing at this time beyond normal staffing changes that all business experience due to geographic shifts or internal productivity efforts.”
No layoffs. Just a seasonal employee program? Naturally, we had some followup questions. Questions like:
Can you quantify “slow”? Are we talking about a 5% reduction in business or a 25% reduction in business?
What do they mean by sales associates? Are we talking about customer service reps or are we talking about ATPs?
Are they saying that more than 100 sales associates have been hired to work exclusively as part of the seasonal program? Or were formerly full-time employees hired as seasonal sales associates?
Under this new program, does the size of the traditional sales staff remain the same? Or is it bigger/smaller?
What are the “normal staffing changes that all businesses experience due to geographic shifts or internal productivity efforts”? What staffing changes have been made?
Unfortunately, The Scooter Store declined to comment further. Mark Leita, vice president, external affairs and government relations, said:
“As in any well run business, we are constantly working to align costs with revenues. In 2010, we experimented with a seasonal work program that provided employees the flexibility to work more hours during busy months and fewer during slower business months. All other information requested is considered proprietary.”
It’s never a good feeling when we send our January issue to the printers in mid-December and it has three stories about a new power mobility device demonstration, including a front-page story, and CMS decides on Dec. 29 to postpone said demo. I mean, it was good news for the industry, but bad news for HME News.
Upon learning the news, Theresa Flaherty said rhetorically: “Don’t mind all of those stories on the PMD demo in our January issue. They’re now obsolete.”
They are—and they aren’t.
CMS still plans to move forward with the demo. But it has realized, based on the number of comments it received, that it had better take more time to think about how it wants to implement the demo. There may have been a hint that this was coming during a teleconference shortly after CMS’s announcement. Officials were asked why they couldn’t also start prior authorizations on Jan. 1, and they said their systems weren’t ready to do that. They planned to buy themselves up to six months by starting off with something their systems were ready to do (prepayment reviews).
Of course, in CMS’s eyes, prepayment reviews aren’t just a warm up for prior authorizations. The agency believes this double-whammy is key to lowering a 75% error rate for PMD claims. CMS, not to mention the Obama administration and countless lawmakers, are hell bent on reducing fraud, and what taxpayer in his or her right mind can blame them?
If prepayment reviews remain part of the demo, however, it will be much to the chagrin of the HME industry, which would like CMS to drop them completely.
I guess there’s no harm in shooting for the moon, but past experience with flawed CMS programs would indicate this strategy rarely works. For years now, the industry has worked tirelessly yet unsuccessfully to eliminate competitive bidding; only last year did it begin working to modify the program instead. The verdict’s still out, but it wasn’t until the industry starting talking modification instead of elimination that it has been taken seriously by some.
With that in mind, the HME industry might be better off if it took this delay in the demo as an opportunity to lobby CMS to reshape prepayment reviews, not drop them. The industry is already taking a more constructive approach to prior authorizations: It wants CMS to keep those, but allow providers, not physicians, to submit requests, and allow physicians to use templates to submit documentation.
So how can the HME industry take a more constructive approach to prepayment reviews? Should it lobby CMS to conduct reviews on a certain percentage of claims, instead of 100% of claims? Should it lobby CMS to complete reviews within a certain amount of time to minimize the impact on cash flow and access?
Think I’ve gone off the deep end? We’ve had more than one reader email us to say that the demo isn’t such a bad move. One of our readers emailed me: “This program would be good for everyone, including patients, dealers and Medicare. We are idiots for fighting every proposed program that comes down the pike.”
CMS says it will give 30 days notice before it implements the demo. Whenever that happens, we’re crossing our fingers that it aligns with our publishing schedule.
They’re all Republicans, and they’re all running for office, that’s what.
With the Iowa caucuses tonight, I thought it would be appropriate to share this Q&A with Patrick Naeger, a home medical equipment provider in Missouri who’s running for a state Senate seat.
This Q&A will appear in the February issue:
HME provider Patrick Naeger has been banned from the Missouri House of Representatives, so now he’s running for the state Senate. Naeger, executive vice president of Healthcare Equipment & Supply Co., was a representative for eight years, from 1995-2002, until term limits forced him out of Jefferson City. “But the fire has still been burning in my belly,” he said. So in December, he threw his hat in the ring for a newly created 3rd District Senate seat. Here’s what Naeger had to say about why being a provider makes him a good candidate and more.
HME News: Republican or Democrat?
Patrick Naeger: Republican. I’m profoundly conservative. I think conservatives are more energized than they’ve ever been because of what’s coming out of Washington and this administration. I think 2012 is going to be the year of the conservative revolution.
HME: What did you accomplish in the House and what do you hope to accomplish in the Senate?
Naeger: When most people think of a state legislator, they think of all the laws and bills that you introduce and you pass, but I think what really matters is all of the little things. It’s all of the things that you can do for the constituents, like make government more accessible and more taxpayer friendly, and hold government more accountable. That’s what I take a lot of pride in.
HME: Why does being an HME provider make you a good candidate for the Senate?
Naeger: We have terrible and challenging financial times ahead of us. Unlike the federal government, the Missouri government needs to balance its budget, so the state needs people who understand budgets, who can make payroll, and who know how to create efficiencies to save money. To be in the HME industry today, you need to be able to do all of those things and more.
HME: You’ve got a lot of work ahead of you—running a business and running a campaign.
Naeger: There’s a lot at stake. I truly believe that my children and grandchildren are not going to have the same opportunities that I was afforded, and I think it’s imperative to do something to change that. It may sound corny, but I talk to people every day who feel the same way. Our government is out of control and we need some common sense folks.
HME: What’s the political climate for HME in Missouri?
Naeger: We’ve wrangled over cuts, like in other states, but we have a bright spot in Missouri. At least Medicaid here pays attention to stakeholders. I’m living proof of that because I head up, at the pleasure of the Medicaid director, a DME subcommittee. We’ve been able to fight some of these budget cuts and to bring change that wasn’t so draconian. We’ve made the best of it.
HME: What do you look forward to about the possibility of being a senator vs. a representative?
Naeger: The House was a wonderful training ground for me. In my third and fourth terms, I was in leadership positions; in my last term, I was the No. 2 Republican. It was great, but you’re one of 163. We were able to make a huge difference and I found it be rewarding, but the Senate is a big step. You’re one of 34. It’s a whole different animal.
When you’re back at work after the New Year, and you’re looking for something to take your mind off things for a few minutes while you eat lunch, check out HME News TV.
I just put together the schedule for January and February, and it’s a good one. There are ideas for new ways to make money (get into home sleep testing for non-Medicare payers) and new ways to do business (eliminate non-value-added activities and use patients as couriers for documentation).
Of course, it wouldn’t be HME News TV without interviews about competitive bidding, and we have that covered, too, with John Shirvinsky of PAMS and Brett Katzman of Kennesaw State University, and Wayne Grau of The MED Group.
You might even want to print out this blog and tack it to your cube or office wall as a reminder to tune in.
Enjoy.
Jan. 11 Dave Kazynski, VGM Homelink: Get into home sleep testing without the hassle
Jan. 18 John Shirvinsky and Brett Katzman, PAMS and Kennesaw State University: Find out why MPP is the ‘best system’ for bidding
Jan. 25 Kirsten DeLay, Pride Mobility Products: Adapt, innovate and diversify through challenges
Feb. 1 Wayne Grau, The Med Group: Understand landmines of the bid program
Feb. 8 Joe Lewarski, Invacare: Eliminate non-value-added activities in respiratory therapy
Feb. 15 Andrea Stark, MiraVista: Use patients as couriers for documentation
Feb. 22 Wayne van Halem, van Halem Group: Use compliance program to help ward off audits
Feb. 29 Michelle Gunn, NRRTS: Show lawmakers they’re better off with us than without us
Said agreement, called a consent decree, could possibly cease certain operations at Invacare’s corporate headquarters and wheelchair manufacturing facility in Elyria, Ohio.
At last count, there were at least half a dozen law firms that made such announcements: Harwood Feffer; Rigrodsky & Long; Faruqi & Faruqi; Levi & Korsinsky; Bronstein, Gewirtz & Grossman; Kahn, Swick & Foti.
All of said law firms used similar wording in their press releases:
“(Insert name of law firm here) is investigating potential claims against the board of directors of Invacare concerning the company’s failure to comply with the federal regulations in its wheelchair manufacturing business. Our investigative concerns whether the board of directors has breached its fiduciary duties, mismanaged the company and/or wasted corporate assets at the expense of shareholders.”
They all want to talk to said shareholders about their “rights and interests with regard to this matter.”
I asked Lara Mahoney, Invacare’s director of investor relations and corporate communications, about this and she said these kinds of announcements are “fairly typical” for publicly traded companies whose stocks suffer a dramatic decline. Invacare saw its stock price drop from $20.58 to $14.70 on Dec. 8. It’s $15.49 as we speak.
So what do investors and shareholders think about all of this?
“I have been on the phone with different investors and shareholders, and what we’ve been talking to them about is that we’re taking the situation seriously and that we’ve hired outside consultants to help,” she said. “We’ve been available to answer their questions.”
