Outsourcing: Outsourcing can maintain profitability

A. As it is for the insurance, telecommunications, technology, and financial services sectors, outsourcing is a necessity for HME companies to thrive in the new economy. 

The HME Industry is consolidating. The pressures of competitive bidding, increased regulatory bureaucracy, and rising wage pressures have created an increasingly unprofitable atmosphere. 

As a result, industry segment leaders (CPAP, oxygen and O&P to name a few) are acquiring local and regional players at a breakneck pace. The race is on to create economies of scale that allow for the profitability that volume and market share produce. These companies know that their price is fixed, thus the only way to climb back into profitability is to reduce operating and supply costs.

Reducing the cost of supplies is achieved by manufacturers reducing their cost as the volume of the orders increase.

Reducing operating expenses in this environment is more difficult. The increased regulatory bureaucracy creates higher demands on our workforce. DME owners need additional staff to ensure all documentation requirements have been met before an order is sent. These requirements drive up denial rates and cause an increased need for trained accounts receivable professionals. Although necessary, the model of replicating operating processes offshore to a lower cost structure requires a different set of operating and management principals to be successful. 

Once mastered, these principles will ensure an organization can retain its profitability, best managers, and institutional knowledge, while bringing down operating expenses.

Tim Crimmins is vice president of business development for EqualizeRCM Services. He can be reached at tim.crimmins@sysinformation.com.