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by: Mike Moran - Wednesday, August 18, 2010

We just requested a whole bunch of data from CMS, and it has begun to trickle in. The data below is DMEPOS spending for the product categories that make up all of "Medical Equipment and Supplies."

The most interesting data here relates to oxygen spending, which dropped by $800 million in 2009 compared to 2008, from $2.8 billion to $2 billion. Looks like the oxygen cap and 9.5% cut, which took effect Jan. 1, 2009, played out the way CMS hoped they would.

Without further ado, here's the data. The dollar amounts are for allowed charges.

2008 /2009

Med/surge supplies:     $176 million          $202 million

Hospital beds:               $276 million          $244 million

Oxygen and supplies:    $2.8 billion            $2 billion

Wheelchairs:                   $1.5  billion          $1.4 billion

Other DME:                     $3.3 billion           $3.4 billion

O&P devices:                   $2 billion               $2.2 billion

Respiratory meds:          $656 million        $588 million

Grand total:                      $10.7                  $10 billion

If you'd like more Medicare reimbursement data, check out the HME News Databank. We'll also be presenting our annual Financial Benchmarking Survey at the HME News Business Summit, Sept. 12-14 in Nashville.

Mike Moran

by: Mike Moran - Monday, August 16, 2010

I had a conversation this morning that left me shaking my head.

Here's the deal. A company that introduced a cash product to the HME market last year recently received a HCPCS code for that product. Why did they get a HCPCS code for the product? Because a whole bunch of HME providers asked them to get a HCPCS code for the product.

Here's what a company official told me: "We kept hearing from the DMEs that they had to have a code to bill it. We're selling it around the world and people around the world are paying cash because they don't have reimbursement codes. Here in America, everyone wanted a HCPCS code so we went for it."

I may be missing something here, so if I am, please let me know. But why would a provider rather bill Medicare for a product than have customers pay cash?

Aren't providers supposed to be increasing their cash business and decreasing their reliance on Medicare? If that is the case, it seems really dumb to take a cash product--a product that retails for $24.99--and stick it in the Medicare fee schedule.

Like I said, I may be wrong, but on the surface this seems to be one of those little tiny stories that demonstrates a very big point: Way too many providers don't have a clue about retail/cash sales.

If competitive bidding and other reimbursement cuts don't push providers to get serious about cash sales, I don't know what will. Do you?

Mike Moran

by: Mike Moran - Wednesday, August 11, 2010

Here's something I've been thinking about for a long time: Would it be totally off the wall to suggest that Medicare remove a bunch of HME products from the fee schedule?

I'm not talking about oxygen and power wheelchairs and some of the bigger more expensive items that some seniors (but certainly not all) might have trouble paying for. I'm talking about stuff that could be considered a commodity. Things like walkers, commodes, cane handgrips,  bed side rails, trays. That kind of stuff.

I suggest this because over the past weekend I went to two large family gatherings. One was a good old-fashioned family reunion and the other a memorial service. There were plenty of Medicare age folks at both, including my mother, 72, and my father, 75. I didn't see one person who could not afford some of this less-expensive HME. In fact, many if not all, could probably afford a power wheelchair if they really needed one. I know my parents could and they are not wealthy. They recently bought a big fancy flat screen TV. If they can afford that, they can certainly afford a scooter, and a commode would not even make them blink. I didn't ask them, but they may even think it's funny that Medicare pays for a cane grip. I know I do. A cane grip?  Come on.

Like I said, I could be way off base here.  But removing some of these inexpensive/commodity items from the fee schedule seems to make sense for two key reasons (and I'm sure there are more): 1. HME providers would see an immediately increase in cash sales and reduce their dependence on Medicare. 2. Medicare would see a corresponding decrease in utilization.

Isn't that what they call a win-win?

Please don't tell me that the majority of seniors, if they had to fork over their own cash and not Medicare's, would go without these products. We all know that would not be the case. It's certainly not going to be the case with baby boomers. If they want something, boomers are going to buy it. They may have to choose between a flat screen TV and a scooter, but life is full of such choices, right?


Mike Moran

by: Mike Moran - Friday, August 6, 2010

During the course of my work week, I often call up people I haven't talked to in awhile just to chat and see if there's anything going on that we ought to check in to. All kinds of press releases find there way into HME News' World Headquarters here in Yarmouth, Maine, but often the best news, information and advice comes from these cold calls. Cold calls are kind of like digging for gold. Anyone can find the nuggets laying on the surface, but only the folks willing to pick up a shovel and break a sweat are going to find the hidden treasure below.

This week during my calls I had a couple of interesting conversations with industry attorneys Neil Caesar and Asela Cuervo. I think most, if not all, providers can benefit from what Neil and Asela had to say, so here, in their own words, is what they said.

Neil Caesar on audits

"The various entities, the ZPIC and RAC contractors, even just the MACs on the regular audits, are taking their new empowerment and running with it to see what they  can get away with.

"I don't mean to imply that there is any kind of conscious venal motive. I don't know that we are going to find some memorandum out there, secretly, where they say, 'Don't worry about the rules, let's just see what we can get way with.'

"But I think their interpretation, for all the financial incentives, is to push hard on everything, be as aggressive as possible, until they are slapped down by an administrative law judge or CMS. I think that it is going to be a year and a half before there is enough push back that we'll see a lessening of that aggression."

Neil's Advice

"Make sure you are doing it as well as possible up front. There's more reason than ever before for investing in the front end and pre-submission audits and monitoring how you are doing things.

"Second. The instant you get any kind of request for documentation, do your own investigation and figure out truly what is going on .

"And third, fight unless you have have absolutely no argument to make. They  are counting on nine people being passive for every one who fights. More than perhaps regular audits, I think there is going to be some picking and choosing. People who make the most noise and give them the most grief are the people least likely to get hit repeatedly."

Asela Cuervo on surviving reimbursement cuts

"I tell my clients that home health agencies were creamed in BBA '97. And now they are making so much money that they are attracting attention again. Those who survived it and knew how to reposition themselves and restructure their businesses are doing great. It was a rough patch but they came out the other end and are doing great.

"The ones who adopted technology are doing very well, and that is what I tell my clients. If you can figure out how to make it through the next three, maybe five years, you can come out the other side. You are not going to be making as much per patient, but you certainly are going to be doing well because the demographics point in that direction.

"You don't have to give up Medicare, but you want to have other pieces to what you offer. There are opportunities and the creative suppliers will explore them."

Mike Moran

by: Mike Moran - Friday, July 30, 2010

People love lists. I love lists. Why is that? What is it about a list that makes you automatically want to scan it?

Whenever you see a list of the richest people in the world, don't you more often than not bury your nose in it to see who is rich and just how rich they are? I do. The same goes for those lists of the most beautiful people that celebrity-driven rags run on a regular basis.

I guess it's just human nature to like lists, which are a bit like gossip, and, as we know, most of us like (love?) gossip.

In the spirit of lists, here are the top 10 HME News TV segments, ranked by total views, from the past year or so.  What do you think makes these 10 so interesting? Subject matter, I suspect, as well as personality and esteem. Whatever, if you missed these interviews the first time around, here's a second chance to see why everybody's watching. FYI:  You can also find these and other interviews with industry newsmakers on our website.

10 Andrea Stark, reimbursement expert (332)                                                                                                                                                      9 Gary Sheehan, provider (355)
8 Eric Kline, sales consultant (356)
7 Sarah Hanna, billing expert (437)
6 Mal Mixon, Invacare CEO (472)
5. Seth Johnson, Pride Mobility Products, and  Cara  Bachenheimer, Invacare (521)
4 Hymie Pogir (720)
3 Tyler Wilson, AAHomecare CEO (1,122)
2 Denise Fletcher, industry attorney (1,233)
1 Doug Harrison, Scooter Store CEO (1,627)

Mike Moran

by: Mike Moran - Tuesday, July 27, 2010

I just finished reading an HME News story about a provider who later this summer plans to add a line of shoes with "coil springs."

I got a chuckle out of that. In my mind, I picture a guy bouncing around on sneakers attached to some big mattress springs. Bouncing through the supermarket. Bouncing down the sidewalk. Bouncing up and down while he mows his lawn. Of course, he's got a big smile on his face because springy shoes are fun.

Boing. Boing. Boing.

I sent out an email to some coworkers. Who would use these shoes?

Someone emailed back: Basketball players.

Boing. Boing. Boing.

HME News Business Summit

Don Davis understands company finances as well as--and maybe better than--anyone in the HME industry. And guess what? He'll be speaking at the HME Business Summit, Sept. 12-14, in Nashville. When I asked all Summit speakers to tell me some of the best business advice they'd ever heard, here's what Don emailed me:

I was an ambitious young executive in a company loaded with ambitious young executives, and I made a mistake. Although the mistake wasn't a threat to our company's survival, it nevertheless negatively impacted profit and our debt covenants. With a little finesse, I could have covered the whole thing up by blaming the shortfall on operations, and it's unlikely anyone would have ever known. My boss gave me the best advice I ever received, he just said to "do the right thing" and followed it up by asking if I would be proud to discuss my decision with my family at dinner that evening? The decision became so simple. I admitted my mistake to the CFO and although he wasn't happy, he and I worked on the appropriate disclosure and a new policy to prohibit this problem from recurring. A year later, I was promoted to CFO upon the retirement of my predecessor. I have used that simple bit of advice throughout my life and truly believe if you "do the right thing," everything else will take care of itself.

Mike Moran

by: Mike Moran - Friday, July 23, 2010

Here is the third installment of Best Business Advice Ever from this year's HME News Business Summit speakers.

This advice comes from former AAHomecare chairman Tim Pontius, who is now a director at the M&A firm Steven Richards & Associates. Check out Tim's bio on the Summit website. To see the other installments  in this Best Advice series, just scroll down through my blogs. I ran one on July 16 and June 24.

Now, here's Tim.

Some of the best advice I ever got came from an old Woody Hayes book, "You Win With People".

Many of us like to think we are smarter than most of the folks around us, and too often, that is simply not true. We appear to be smarter because we have better information. We choose to limit the information we provide to our employees and co-workers and the result is that we get limited performance from most of them. The better informed we can make our staff, the better their performance.

If you involve your staff in all aspects of the business, including strategic planning, you increase the likelihood of coming up with better goals and having a staff that believes in them because they have some ownership. Just because it might make sense to you, doesn't mean it will have the same meaning for the A/R staff, or the person cleaning equipment in the back room. Yet, when they participate in planning discussions and are asked for their ideas, they feel more empowered and believe that their efforts  make a difference in the big picture.

We always posted short and long term goals as part of our strategic planning efforts. Those goals included measurable milestones along the way, whether it was a cash collections goal, a sales goal, or even profitability goals.

You don't have to open the books to everyone, but sharing key performance indicators gets everyone on the same page very quickly. And don't forget to take the time to celebrate milestones. We all have different sources of motivation, some like money, some like security, and some like recognition. When you share small accomplishments along the way with each other, it makes reaching the overall goal much more probable.

Mike Moran

by: Mike Moran - Thursday, July 22, 2010

I talked to a consultant last week who said something that left me shaking my head. Since CMS announced the competitive bid prices earlier this month, he's talked to both winning and losing HME providers, and guess what? Neither the winners nor the loser have a clue, at least the ones this consultant talked to.

When he asked the winners how they planned to handle the giant reimbursement cut, they said they didn't know.

When he asked the losers what they planned to do, they said they didn't know.

If you fail to plan, plan to fail.

Now I realize the bids, which drop reimbursement by an average of 32%, are lower than most people expected, but not a ton lower. In fact, based on a survey of HME providers we did earlier this year, it was pretty clear that providers would bid down prices between 25% and 30%.

On top of this, the industry has had two years to get ready for this latest round of competitive bidding. I wonder: How many providers during this two year window asked themselves these two questions: What will I do if I win the bid? What will I do if I lose the bid?

For providers in the recent Round 1.2 rebidding, if they haven't already, it may be too late to ask those questions. The new bid prices take effect Jan. 1, provided the industry doesn't eliminate competitive bidding all together.

It is not too late, however, for other providers around the country to ask themselves these questions and lay out strategic plans for both scenarios. As we know, even the best laid plans of mice and men can go awry. Even a good strategic plan may prove useless if reimbursement drops too sharply. But if you have a plan, at least you've got something to work with, a place to start, and that's a lot better than not having a clue.

Mike Moran

by: Mike Moran - Friday, July 16, 2010

Here's the second installment of the "best business advice ever" from speakers who will be at this year's HME News Business Summit, Sept. 12-14, in Nashville. As I said when I ran the first installment June 24, the speakers at this year's Summit are as good as they come. So I figured asking them for the best single piece of business advice they'd ever heard or received would be interesting. I think this stuff is great, and I hope that you will, too.

These short articles are a nice snapshot of the kind of education you'll receive at the Summit. To see everything the Summit has to offer, please go to its website.

Lisa Wells, online marketing and e-commerce consultant
My father was a successful CEO and entrepreneur in the dental industry for more than 35 years. One of his favorite work-related "hobbies" was to sit down with dentists and help them design blueprints for their new or expanding practices. I asked him one morning why he did it for free? He told me: "I'm investing in people whose success will also help me succeed." Throughout my career, I've worked for companies that invest in their people, and also for those that don't. The contrast showed me how much of a difference people development can make in your organization's success--and your own. Think of your career path in places where your managers and peers took time to help grow your skills. How did you feel about your job? Now think of places where you didn't feel valued. Did you have the same level of engagement and motivation? But if you look at successful companies, in any category of any size, you'll see repeatedly that the ones who dominate are the ones that invest in their people, knowing their investment will pay off, time and time again.

Doug Westerdahl, president, Monroe Wheelchair
The single best piece of business advice I ever received was that to succeed
in any business, there are revenue growth points where you must change your
business model or go out of business.  In the early stages of your business,
those changes occur at $500,000 and $1 million in annual revenues. The span
between when those changes are necessary grows wider the larger your company becomes. The next changes must take place at $3 million, $5 million and $10 million in annual revenues.  For example, the owner of a complex rehab company who is an active ATP must at some point hire an ATP to take over those responsibilities. Only this way will the owner have time to manage/run the business.  In most cases, the necessary changes are very obvious. However, many business owners are afraid or unwilling to make them.

See you at the Summit.

Mike Moran

by: Mike Moran - Thursday, July 15, 2010

I'll be honest: While I realize competitive bidding is a terribly flawed program, I have no idea what Medicare should pay for DME. Congress and CMS obviously don't know either. Neither, I'm sure, does 99.9% of the general public.

That's why, on the surface, for so many people bidding seems like a good way to determine pricing. (For an example of this mindset, check out this scathing commentary on the HME industry.) But if bidding's a terrible idea, how should pricing be set? How would the industry like to see this issue addressed? Let's face it, at some point, prices have to be set at such a level that good businesses thrive, bad business struggle or die, and Medicare and other payers don't feel like they are being gouged.

I don't know what that price point is, but I was thinking about this the other day. Then I remembered that years ago I had a long interview about competitive bidding with Tom Scully, the CMS administrator during the early years of the Bush Administration. Scully's long gone, but when it came to discussing fair pricing for DME, I thought he made some good points. Of course, he may have been blowing smoke, but I give him credit for sounding reasonable.

Here's the interview, which ran in the September 2002 issue of HME News:

WASHINGTON -- HME News interviewed CMS Administrator Tom Scully last month about national competitive bidding for durable medical equipment and related issues. As is his style, the second most powerful man in healthcare (according to a recent poll by Modern Healthcare), didn't mince words. He sees competitive bidding as the best way to achieve the lowest price possible for taxpayers. At the same time, he recognizes that the government has a responsibility to safeguard beneficiary access and assure a robust mix of small, medium and large providers. To find out how he might balance those competing interests, read on.
HME News: Do you favor competitive bidding?
Tom Scully: Yes. I was a little surprised that some folks in the industry seemed to take some comments I said to mean that I was against competitive bidding. What I've said all along is that if you are interested in markets, how can you be against competitive bidding or inherent reasonableness? We like competitive bidding, getting the lowest price possible for taxpayers. And how could you possibly be against taxpayers paying inherently reasonable prices? Conceptually, it is impossible to be against either one of them.
HME: If competitive bidding passes, would you be willing to work with the home medical equipment industry to craft the program?
Scully: Yes. Most of the industry realizes that inherent reasonableness and competitive bidding are more than just words. Instead of being just against them, the industry ought to figure out how to make them work. We'll all be a lot better off.
HME: What about industry fears that competitive bidding favors large companies over small?
Scully: What I've said is that if the government goes out and does not understand that in some cases it is 85% or 90% of the market, and isn't sensitive about using its market power appropriately, it can wipe out many small business and many providers, which is not a good thing. The issue is to find the right balance. The government has to be careful when getting into competitive bidding not to get the lowest price and wipe out all the little guys. It is easy in competitive bidding to have a big player come in and low ball the price and get the volume and come back and raise prices later. We need to say, 'How do we get the best price for taxpayers but make sure we keep a broad base of providers in the game at the same time.'
HME: How do you do that?
Scully: I haven't thought what our policy will be. But if Congress passes competitive bidding and we go into an area and do it for some type of DME,  the goal would be to have multiple suppliers and set up a structure where we'll have the best prices with reasonable margins for the long term. It is not in our interest to come in and find one guy to sell wheelchairs and one guy to sell hospital beds. And have the biggest player get the contract and wipe out everyone else. That doesn't mean competitive bidding is not going to work. You just have to be aware that when the government is the biggest player in the market, you can really screw things up if you don't' make sure you have a balanced approach.
HME: Word is that a final rule on inherent reasonable should be released soon. How do you feel about using inherent reasonableness?
Scully: How can anyone justify us not looking at the rates we are paying and say we shouldn't try and find out what the inherently reasonable rate is and pay it? It is counter intuitive. What they should be afraid of is us being heavy handed and using it inappropriately. Obviously, we are hoping not to do that.
HME: Do you prefer IR over competitive bidding?
Scully: I don't like being a price fixer. We would rather have a competitive program for everything. But given that Congress has given us direction to set prices, we have a responsibility to taxpayers to figure out what the right prices are that give people reasonable margins and still make government contracting an attractive business.
HME: How do you define 'attractive'?
Scully: My goal is to make Medicare a balanced, reasonable payer, where people can make fair, decent boring margins. It shouldn't be a cash cow."
HME: Are your talking single digit margins?
Scully: I don't know. Margins are hard to measure. But we need to do the best we can to come up with the best payer rates for taxpayers. It is also in our long term interest to keep good solid providers --  large and small -- in business.
HME: What do you think about the industry study that states CMS would have to hire an additional 1,626 employees to implement and run a national competitive bidding?
Scully: That is outrageous garbage. Just silly. I don't know who cooked that up but they should be embarrassed. I used to run a trade association. I used to cook up silly arguments. The bottomline is that if we do competitive bidding, and we do it right, some of our contractors and carriers will have to hire more people to carry it out. But we are not going to spend nearly as much money as we will theoretically save. If that were the case, we wouldn't do it.
HME: Based your limited demonstration projects, can you really say competitive bidding will save Medicare money? The data hasn't even been analyzed yet.
Scully: I don't' think either one of those demonstration projects were perfectly structured. But there is no question we will save money. Whether it is right or not for the House bill, the CBO said competitive bidding would save $7 billion over 10 years. Whether it will save that much or not, I don't know. But I've been around the business long enough to realize that there are plenty of places competitive bidding can save money.
HME: CMS seems fixated on the DME industry. Aren't there place to reduce reimbursement in Medicare's other provider groups?
Scully: The squeeze has already come on the biggest parts of the program. We've spend the last 20 years squeezing hospitals, the biggest part of the program. We've spend a lot of time the last 10 years squeezing doctors. Nursing homes took a beating a few years back. DME is a relatively small pot and has gotten relatively less attention, and I think it is starting to get more. There are certainly places for efficiency in DME. Any one who tells you there are not is not being straight.
HME: How do you create a national competitive bidding program that doesn't favor companies willing to cut corners to shave costs?
Scully: Our job is to set the right incentive for people to behave reasonably and for honest people to make a reasonable return on their investments. We need to make sure that every senior who needs one has access to a wheelchair a scooter or whatever. But it is not in the program's interest to set up incentives where every person in the country who can't think of anything else to do is incentivized to go out and sell medical equipment.
HME: What kind of standards do you have in mind?
Scully: If competitive bidding does into the final bill, we will spend a lot of time coming up with the most reasonable competitive bidding program that we can by taking the best of what we've found in the demonstrations and the best of what we've found talking to people on the outside.

Mike Moran