Industry muddles through

YARMOUTH, Maine--A little pre-emptive belt tightening on the part of providers has enabled many of them to weather the overall economic slump.

With the 36-month oxygen cap and the 9.5% reimbursement cut starting on Jan. 1, providers were already anticipating a lean year.

“A lot of people spent the last year re-engineering their businesses,” said Bob Leonard, an analyst with The Braff Group, an M&A firm in Pittsburgh. “It's harsh but they are getting through.”

Cost cutting measures include curtailing deliveries, improving efficiencies, and, unfortunately, reducing staff.

It hasn't been easy, said provider Alan Cross.

“We had to tell employees right before Christmas to take a couple of weeks off without pay,” said Cross, co-owner of Bradenton, Fla.-based C&C Homecare Services. “We're taking a hit because of the number of oxygen patients we have capping out.”

Provider Cindy Bishop has so far managed to avoid layoffs at her small family-owned company. Instead, Little Rock Ark.-based Diamond Medical Equipment & Supply has switched to a four-day work week, staggering staff so the company is still open 40 hours, but employees work 32.

“They took it well,” said Bishop, one of the owners. “We all walked away glad that we still have a job.”

While most of the nationals deny they are closing branches or laying off employees, they are trimming operations - and expenses.

Apria, for example, plans to consolidate billing operations, closing offices in Seattle, Houston and Hanover Township, Pa.

“We are striving to reduce costs, but it is directly related to Medicare cuts,” said Lisa Getson, executive vice president of government relations and corporate compliance. “We're not seeing the economy impact business.”

Medicare reimbursement cuts aside, segments of health care that are traditionally cash sales or have higher out-of-pocket costs are more vulnerable, said Rick Glass, president of Steven Richards & Associates, an M&A firm in Tarpon Springs Fla.

“We've seen a lot of sleep slowdown due to the economy,” he said. “People view it as more of an elective therapy, so they are deferring treatment.”