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by: Liz Beaulieu - Friday, August 14, 2015

Here’s a sneak peak at the The Braff Group M&A Insider in our September issue.

This graph is a 10-year retrospective look at the percent change in deal volume since 2005 for four of the most active sectors in health care.

Here’s The Braff Group’s commentary:

“It’s no surprise that when you examine HME, the sector has spent most of the decade “in the red” at levels 50% below the 2005 base year (immediately prior to the Deficit Reduction Act becoming law in 2006). That said, once the downward pressure was fully absorbed between 2007 and 2008, it has not given up any further ground (and even enjoyed a nice bump between 2011 and 2013). Similarly, after the Medicare home health sector realized substantial gains between 2005 and 2007, there has been virtually no change in deal volume for eight consecutive years, which isn’t too bad given sector volatility in reimbursement and more). So which sectors have enjoyed the longest runs of deal growth since 2005? Well, hospice has had a nice run, but has recently flattened. The big winner?  The once largely ignored behavioral health sector, which has enjoyed near uninterrupted growth in deal flow over the past decade.”

by: Liz Beaulieu - Friday, August 7, 2015

I had a great call this week with the panelists for our “Rise of the Disrupters” panel at the upcoming HME News Business Summit in Nashville. I think this session, alone, will be worth the price of admission.

When I asked panelist Dan Afrasiabi whether being a disrupter was something that came naturally to him or something he had to work hard at, he said it was the latter.

“To borrow from Andy Grove from Intel, ‘Only the paranoid survive,’” he said. “That’s how I do business. I’m always paranoid that I’m missing something. I try to detach myself from my assumptions and ask, ‘What am I missing?’ I liken it to being a rabbit in a field with a bunch of coyotes. I have to be looking around all the time.”

Both Afrasiabi and panelist Dan DeSimone said one of the biggest challenges of being a disrupter is getting buy-in from staff.

“Constantly putting our people through changes kills us,” Afrasiabi said.

DeSimone agreed.

“The trait I look for in employees is flexibility,” he said. “Years ago, I wouldn’t have looked for that necessarily, but it takes a flexible person to go through so many changes. You’re taking something they loved to do and asking them to do something else.”

Both Afrasiabi and DeSimone acknowledge that not every idea they have is a home run.

“Sometimes you expect a certain shock factor and it doesn’t reach that level,” DeSimone said.

Hear from these disrupters and dozens of others at this year’s HME News Business Summit, Sept. 13-15 at the Nashville Marriott.

by: Liz Beaulieu - Tuesday, July 28, 2015

Last week, I shared the first installment of words of wisdom from this year’s speakers at the HME News Business Summit. (Refresher: I asked them that they think HME providers should be exploring, and what risks they should be taking.) Here’s the second.

Help physicians help patients

“It really is all about outcomes and patient-centered care at this point. Hospitals and payers want to know that you can make a difference in their patient/member’s experience and well-being, which ultimately should help to reduce costs. Providing physicians with their patient’s report helps to identify potential risks for readmissions, and builds creditability and trust within the healthcare team.”

Tammy Zelenko, AdvaCare Home Services

Lead above the death line

More from Zelenko: “You know how the saying goes: The greater the risk, the greater the return. The industry is facing the perfect storm with the extension of competitive bidding into rural areas, the creation of ACOs and the expansion of hospital-owned networks, the reductions in reimbursement hitting us from all the payers, and more. We are facing a great deal of uncertainty. I think we need to stay the course and manage our finances extremely well. I am reading a book by Jim Collins, “Great by Choice,” and one of the chapters is called “Leading Above the Death Line.” He describes three primary categories of risk: (1) death line risk, (2) asymmetric risk, and (3) uncontrollable risk. Death line risks are those that could kill or severely damage your organization. Asymmetric risks are those for which the potential downside is much bigger than the potential upside. Uncontrollable risks are those that expose the organization to forces and events that it has little ability to manage or control. So, if you are considering a new business line, product line or opportunity, take the time to determine if the decision that you make will lead you above the death line.”

Be OK with uncomfortable

“I believe that providers should do something out of their comfort zone at least once a quarter. Maybe it’s bringing in a new product line along with a plan to promote it and find that new niche that will set you apart from your competition. How about calling on a referral that is completely unrelated to your core business to maybe find a need that nobody is providing adequately in your market? In today’s HME arena the companies that are willing to put themselves in new uncomfortable positions are the ones who are ahead of the pack.”

Jim Greatorex, The VGM Group

Which path are you on?

“As an HME provider, when your products become more of a commodity item than the provision of comprehensive clinical outcomes, it is important to decide what growth pathway you wish to pursue. If you choose to pursue growth of commodity items, the large retailers, including Internet fulfillment houses ie: Amazon, will always have the upper hand on delivery to the masses. Their incredible volume demands focus on mass delivery, which puts less focus on traditional margins HME providers historically enjoyed. So, if you want to be primarily in the delivery business and if you run an efficient operation, the demand will certainly feed scaling your operations. On the other hand, if you have traditionally been inspired, motivated and expert at the clinical aspects of HME, you have other options to consider. As you have seen big retailers avoid too much clinical exposure, this is your opportunity to develop your clinical business model (which can include HME commodity items in a larger bundle of services) to blaze the trail of increased sales and profitability.”

Jonathan Sadock, Paragon Ventures

Know your pain threshold

Retail locations need to maximize cash sales. Looking for non-coded items and providing personal service/up-selling/up-caring—you want to provide a one-on-one exceptional experience that customers cannot get anywhere else. In addition, up-selling and/or up-caring should be part of every customer interaction. Finally, pain management is something we would like to get into more. Did you know that 28% of adults 40 years and older take cholesterol fighting medication and 1 million people are on cholesterol medication and suffer debilitating muscle pain. Expanding our pain management line is something we would like to expand into.

Coleen Zinda, Home Care Medical

by: Liz Beaulieu - Wednesday, July 15, 2015

I asked this year’s slate of speakers for the HME News Business Summit what different avenues they think HME providers should be exploring, and what risks they should be taking.

Here’s how you can hit the sweet spot and other words of wisdom.

Young boomers provide customer base with longer life cycle

“HME providers should be thinking and executing ‘differently.’ In a time where technology and the power of choice, search, and selection are moving faster than the speed of light, providers should be exploring their differentiations, both online and traditional, as well as generationally. How do I mean generationally? Well, baby boomers are in the sights of all, but are they really the users of these products and services? Some yes, but remember, baby boomers are defined by being born between 1946 and 1964, which gives us a rough gap of 50 to 70 years old. Most 50 year olds do not need these products or services—yet; however, they are much more tech savvy than the older generation in this group. Because of this, my suggestion is that providers should target these young boomers now, but target them for their parents, aunts, uncles, and relatives because more than likely, they need these items now. By creating and fostering a relationship with younger boomers now, an HME provider will have already created a solid brand image and commitment to care, which will prove beneficial down the road when this ‘tech savvy’ younger boomer needs products for themselves, thus giving the provider a customer base with a longer lifecycle.”

Justin Racine, Geriatric Medical

Technology is your friend

“Our industry, partly because of the extreme cutbacks, is lagging significantly in its use of technology. The two spots I’d invest in right now would be security around my data, as well as mobile solutions for equipment delivery and inventory management.”

Ryan McDevitt, Laboratory Tactical Consulting

Don’t figure it out as you go

“They should look at merging and consolidating their businesses with other DMEs whose businesses complement theirs but provide services and products they aren't involved in and are outside Medicare competitive bidding. That makes more sense than trying to diversify into new areas and figure them out as they go.”

Mike Kuller, Allstar Medical Supply

Hit the sweet spot

More from Kuller: “Companies need to build their size to create economies of scale to survive in the post-competitive bidding era, particularly when the pricing goes beyond the 101 MSAs in 2016. The sweet spot seems to be about $10 million or greater in annual revenue with diversified services.”

by: Liz Beaulieu - Thursday, July 9, 2015

If it’s summer in Maine, it means I’m in the throes of requesting, collecting and analyzing Medicare data sets for two upcoming projects: the annual update of our HME Databank (it happens Oct. 1!) and the publication of the State of the Industry Report (it will be an insert in the December issue).

Both will feature 2014 data.

To put 2014 in perspective, let’s consider that pricing for the Round 1 re-compete went into effect Jan. 1, 2014, and six months before that, pricing for the Round 2 re-compete went into effect July 1, 2013.

I pulled Medicare’s allowed charges for some of the more popular DMEPOS codes, like:

E1390: $1,186,187,433 (vs. $1,403,398,730 in 2013)

E1392: $30,644,855 (vs. $29,359,144 in 2013)

No drastic changes there. How about:

E0601: $181,689,399 (vs. $228,523,480 in 2013)

That’s a change.

How about:

A4253: $317,741,495 (vs. $753,293,520 in 2013)

Yikes. The Round 2 re-compete that went into effect July 1 included a national mail-order program for diabetes supplies that reduced reimbursement by 72%.

For you mobility folks, how about:

K0823: $55,990,584 (vs. $133,239,857 in 2013).

Yikes again. As you know, in addition to competitive bidding, this product has been subject to prior authorization approval in a number of states.

Well, there’s more where this came from.

Stay tuned.

by: Liz Beaulieu - Monday, June 29, 2015

I’m working on a story about oxygen transfilling technology.

I’m working on a story about oxygen transfilling technology because Invacare has reported, for the past few quarters, the loss of a significant order of HomeFills by a national account.

I thought it was a good time to check in on this technology.

I’m still in the middle of interviewing sources, but in trying to determine whether this was a one-off or a trend, I first looked at some data.

In our HME Databank, we track total Medicare reimbursement by code, including K0738, E1392 and E1390. The most current year for which we have data: 2013. That’s before Invacare’s loss, but there’s no denying in looking at total Medicare reimbursement for these three codes from 2009-2013 that portable oxygen concentrators have been the big gainers.





























We also track the top providers by code, including K0738. It turns out Apria is not only the No. 1 provider of this technology (again, as of 2013, before Invacare’s loss) but also the only national provider until Lincare makes an appearance at No. 36. I suppose this is harder to discern than at first glance, however, because some of the providers listed may be owned by Lincare or another national provider. Still, with Apria by far the leader of this product category it’s likely the national account Invacare speaks of.



Will sources in the field support the data: That POCs are enjoying a greater adoption rate than transfilling devices?

More to come.

by: Liz Beaulieu - Wednesday, June 24, 2015

It’s easy to feel, in this small world that is the HME industry, that you’re the only ones going through so much change.

You might ask yourself, is any other industry part of such a seismic shift in the way goods and services are delivered? Is any other industry, as part of that shift, seeing its revenues cut nearly in half?

Of course, the HME industry is not the only industry going through so much change.

This hit me in the side of the head yesterday on my commute home.

I was listening to a story on NPR about a makeover at food giant General Mills. You probably heard the company’s announcement this week that it is removing artificial colors and flavors from its cereal line. (This is good news for a semi-rehabilitated Lucky Charms fan like myself.)

But there’s more to the story, as NPR found out.

General Mills is in the midst of overhauling a number of its food lines, including the iconic Green Giant, which sells some 140 different kinds of vegetable products.

For some perspective, picture the Green Giant and a Golden Commode. They’re both throwbacks to an era gone by.

You see, canned and frozen vegetables don’t have the same appeal they once had. With farm shares, farm-to-table restaurants and farm stands inside grocery stores, consumers expect, and increasingly get, fresh vegetables.

“I think there’s been a pretty dramatic shift across the grocery aisle in the last five years,” Justin Massa, founder of the research firm Food Genius, told NPR. “There’s kind of very few sacred cows in the grocery store.”

Kind of like there are very few sacred products in the HME industry?

Faced with this shift in consumer tastes and the subsequent slowdown in growth, General Mills has two choices, Massa says: It can cut costs by merging (a la Heinz and Kraft); or it can try to increase revenues with products that are more in line with consumer demands.

So, cut costs and shift product mix. Sound familiar?

General Mills is trying to do both. To make its products more in line with consumer demands, for example, it will launch a new line of frozen vegetables this summer—think Brussells sprouts with lentils—that are meant to be sautéed quickly, rather than microwaved, improving their taste and texture.

HME and food are apples and oranges, so to speak, but the themes here are similar.

Only, where the HME industry is dealing with fickle payers like Medicare, General Mills is dealing with fickle consumers.

I’m not sure which is more of a challenge.

by: Liz Beaulieu - Friday, June 19, 2015

I love how The Braff Group thinks.

It noticed last June a particularly low deal count for the HME industry in the first quarter of 2015. But it also noticed a low deal count for the other healthcare sectors it tracks.

So it asked itself, how much of the fourth quarter to first quarter decline was a lull in dealmaking as the New Year kicked off?

I’ll let The Braff Group explain:

“To answer this, we first added up all the deals completed in a particular quarter since 2001. Then, to adjust for the possibility that a surge of volume in a particular quarter in a particular year might distort these figures, we simply ranked each quarter for each year based on the number of deals completed. This way, it doesn’t matter how many more deals were completed in one period vs. another, just now each period compared to another.”

The results:

What does The Braff Group make of all this?

“Clearly, the second half of the year produces more deals than the first, but not by much,” it says. “That means that, while some of the quarter to quarter fall-off in HME dealmaking may be due to natural rhythms in M&A, there’s more at work here than the calendar.”

The $64-million question: What’s at work here?

See the full analysis in The Braff Group M&A Insider on page 23 of the July issue of HME News.

by: Liz Beaulieu - Wednesday, June 10, 2015

While trying to parse together the news last Friday that CMS was dropping non-invasive vents from Round 1 2017, Managing Editor Theresa and I came to the conclusion that the agency figured out it needed to work out some kinks with this product category before putting it out to bid.

“How refreshing” was, I think, Theresa’s reaction.


This is not to say, of course, that non-invasive vents won’t be included in a future round of competitive bidding, but it’s evidence, nonetheless, that there is some sense of reason at CMS.

Theresa will be calling the usual suspects this week to get further intel on CMS’s decision to drop non-invasive vents from competitive bidding and overhaul the product category.

Why is the agency dropping five existing codes and replacing them with two new codes? Why does it believe this will help to prevent the codes from being used to bill for pressure support vents that are used as positive airway pressure devices for treating OSA rather than respiratory failure?

Something that would help to restore reason to this product category: local coverage determinations with specific criteria for vents. Will this be part of CMS’s overhaul? One can hope.

Reason and CMS came to mind this week, too, when I read the results of a study concluding that Medicare beneficiaries in the initial nine test markets for competitive bidding are receiving only a portion of the diabetes supplies they need. As a result, there was a higher number of deaths and hospitalizations in these markets in 2011, according to the study’s backers, the National Minority Quorum.

The forum argues that CMS needs to be held to the same standards as other clinical trials involving humans.

“A clinical trial’s safety review board looking at these findings would stop a trial out of an abundance of caution for patients,” said the forum’s president and CEO, Gary Puckrein.

How’s that for reason?

by: Liz Beaulieu - Tuesday, June 2, 2015

No sooner had I heard that CMS had sent out letters to providers asking them to review their bids as part of the Round 2 re-compete had I started hearing of issues.

The letters prompt providers to verify with the applicable organizations that they have met requirements required for submitting bids. The reaction started on twitter.

One provider tweeted me, “My analysis shows a BIG disconnect between CBIC/NSC and accrediting bodies.” His emphasis, not mine. A few tweets back and forth and the provider tweeted me again, “As we speak (tweet), the CBIC sent out a notice to disregard our prelim report as it was in error.”

The next day, another tweet: “Looks like new preliminary reports are out. On a Saturday no less. Just got the email.” Any difference between this report and the first report? Not as far as this provider can tell. “The accrediting organization info seems to be ignored.”

Then I got an email from a provider saying CMS wasn’t showing that he was licensed and that he needed to check with the NSC. Before doing that, the provider checked PECOS and sure enough it showed he was licensed. So he called the CBIC and they still told him to call the NSC. So he called the NSC and they told him his licensure is valid and current, and it was valid and current prior to March 26 when the CBIC pulled the info. They told him to call the CBIC.

You can probably guess where this is going. I’ll let the provider explain:

“I just spoke to the CBIC and they told me that if the NSC says it is there than it is OK. However, she couldn’t confirm anything on the CBIC side and she told me to only go by what the NSC told me. I asked how this could have even not showed in there in the first place and she just said that PECOS was back logged and it might not have been in there when it was pulled on March 26. The call ended with me just saying, ‘It is really hard for me to trust what I’m being told since everything was in there before and you didn’t show it so now my company and livelihood is at the hands of something that didn’t work in the first place.’ All she said was she was sorry and that if the NSC stated it was on there, then I was OK.”

The provider's email ended with: “Ughhh.”

I realize that running a program as large and complicated as competitive bidding is probably no easy task but, since we’re talking about the Round 2 re-compete, this isn’t CMS’s first rodeo.

With the added emphasis on meeting licensure requirements thanks to a provision in the recently passed “doc fix” bill, CMS has every incentive to get it right. Everyone's watching this time.