Your success depends on your marketing

Here's a guide on how to ease the tightening vice of Medicare on HME profits
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Monday, March 27, 2017

The aging of America has created an enormous demographic of consumers that have strong desire to enjoy life to the fullest—and they’re empowered to do it. Advancements in technology and accessibility have yielded devices and equipment that keep people mobile, active and healthy for longer than ever before. That has resulted in tremendous demand for HME.

In most businesses, strong demand equates to increasing profits and competition; but as HME providers know, the healthcare sector doesn’t work that way. It’s anything but a free market because a monopoly is calling most, or all, of the shots: Medicare. In the face of skyrocketing demand, many HME providers are struggling to pick up the scraps from a payer that is driving reimbursements to rock bottom levels.

Despite Medicare policies that can skim profits away from HME providers, savvy players are learning to tap into the immense market demand in different ways. Three trends sweeping the industry are changing how HME providers must look at their business models:

If you can’t beat them, join them: selling out

Competitive bidding puts HME providers in a constant state of battling to offer the lowest price. If it sounds like a race to the bottom, it is. Cuts in quality, cuts to margins, and cuts in service conspire to erode the qualities that make companies great. Often, it means whoever can create the lowest expenses and is willing to accept the lowest margins wins. Call it the Wal-martization of home medical equipment.

That’s bad news, but the economies of scale that fuel price and margin drops are making smaller HME providers attractive targets. That has created a robust seller’s market, as industry juggernauts grow hungrier for competitors to gobble up. HME providers that don’t have the resources, agility, or will to compete anymore can cash out and call it a day.

Shift reimbursement responsibility to patients

HME providers have a history of acting like medical providers when it comes to filing insurance. They often fulfill patient orders with Medicare information and then file claims on behalf of patients and get reimbursed directly. Withering reimbursement rates introduce great risk when expenses cannot be fully recovered and is leading some HME providers to rethink offering this service. The process has also become so complex that many HME providers feel like they have to partner with expensive outsourced companies to handle claims.

Some HME providers are finding relief by shifting this responsibility to consumers. They only accept full-cash payments for products and then the responsibility to file paperwork and get reimbursed by Medicare falls squarely on the policyholders. Your customers can obtain claims forms to file their own claims on the Medicare.gov site. Be mindful of the fact that they need to list every service and product separately and you should never guarantee they’ll get reimbursed. Payment delays, denials and reduced reimbursements are now risks absorbed entirely by customers. It’s great for HME providers, but there’s just one problem: Consumers hate it. Until it becomes standard industry practice, it pretty much guarantees many consumers will simply refuse to do business with you.

Boost margins with “caretailing”

If selling out or inconveniencing customers isn’t for you, fear not—you can leverage the referral aspect of Medicare to fuel higher margin sales. Basing topline revenue on Medicare reimbursements alone is a losing proposition; instead, think of Medicare as a loss leader or doorbuster on Black Friday. It gets people in the door, but you really want them to buy higher-margin items or services.

Many patients desire much more than the often basic products Medicare covers. HME providers have opportunities to offer upgraded merchandise that make their lives easier, less painful, or more convenient. Whether it comes in the form of upgraded equipment or complementary items that make covered products function better, the Medicare purchase is just the lead. The real profit comes from those upgrades that cost extra, but deliver more value and improve lives—at higher margins.

Many of these items do not require prescriptions and are not covered by Medicare at all. Consumers eager to optimize their golden years and family members that want the best for them are often happy to purchase these higher-margin products. Transitioning to offer more of these cash sale items removes Medicare from the transaction and eliminates problematic
reimbursements.

The HME business is a sector that should be in a fantastic growth mode, but Medicare is effectively squashing many of the opportunities to find success. The best workaround is to shift into offerings that Medicare can’t touch, like value-added services, add-ons, complementary products, replacement parts, and servicing products. Something to remember is that how well HME providers succeed in the coming years relies on how savvy they become at marketing.

Ken Robbins is the CEO and founder of Response Mine Interactive (RMI), a fully HIPAA compliant digital agency that helps health and wellness companies improve their marketing to acquire more qualified customers and patients using direct response strategy. He can be reached at ken.robbins@responsemine.com.