Health Management Services: Excel at CPAP supply replenishment

A few years back, Houston-based Health Management Services (HMS) was strong and growing in its core sleep business, but it was singing a song familiar to many other CPAP providers.

"Six years ago we weren't doing a strong job of following up on CPAP reorders," says Jason Holzman, general manager of the 21-year-old provider. "Reorders were probably 5% (of sales)."

Holzman was charged with changing that and he created a coordinated supply replenishment program that now accounts for 30% of HMS's sales.

"It's our largest producer of cash," said Holzman. "It isn't an option; it's a must to follow up on your commercial patients."

HMS ranked 13th in 2009 for Medicare reimbursement of CPAPs nationwide. It serves 60,000 patients from 10 locations in five states and Puerto Rico. Sleep therapy accounts for 90% of its business, and Medicare makes up 25% of its revenues.

Earlier this year, HMS submitted a bid for CPAPs for the Dallas competitive bidding area, but it didn't get offered a contract. Holzman says the company is adjusting by choosing lower-cost CPAP equipment, reducing office size and automating some customer service functions.

But where HMS isn't skimping is on talented, knowledgeable employees.

"You need to have A-plus employees and clinicians," said Holzman. "If they don't do good setups, the patient won't be compliant. And if they're not getting the job done, you need to replace them."

Indeed, HMS's growth is often driven by finding talented people in a target market.

"I look for quality salespeople in a specific city and try to court them to start a location," he said. "I'm always open to that."

In the future, Holzman expects cash business in the CPAP market to grow, and he looks forward to the opportunities that home sleep testing may create. In the meantime, he urges every CPAP provider he meets to get onto the supply replenishment bandwagon.

"Those supply sales are your profits," he said.