Consultant gives up on HME providers: "They don't want to help themselves."

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?