How DME Companies can thrive in tough times?

Several years ago, durable medical equipment competitive bidding was instituted by Medicare and the impact has been dramatic. Competitive bidding was so disruptive to the healthcare market that over 40 percent of DMEs are no longer in existence. Many smaller DMEs that could not successfully compete sold their assets, restructured their business, or simply closed their doors, with the owners moving on to new pursuits.

While these 40 percent of DMEs were in denial or frozen like a deer in headlights, other DMEs companies saw this market disrupted for what it was an opportunity to be exploited with growth and increased profitability.

In our national DME merger and acquisition practice, we’ve seen a number of success stories of companies that have both survived and thrived in this increasingly competitive environment. Here’s what they did:

1. They ruthlessly assessed the healthcare marketplace.

Successful DME entrepreneurs realized quickly that healthcare is now being shaped by economics, managed care, rapid innovation, strongly stated customer preferences, digital marketing, and new direct access to DME products. They then made a commitment to adapt to these changes rather than pretend they weren’t taking place.

2. They partnered with investors and capital.

Successful DME entrepreneurs scrapped the traditional “go it alone” strategy in favor of a new affiliation model, where competitors actively partner with one another in selected areas. They also brought in new investors, especially private equity groups that had abundant financial resources and saw an opportunity for disruptive innovation.

3. They adopted a millennial perspective.

Rather than the lethargic approach characteristic of many DME operators from the Baby Boomer generation, successful DME entrepreneurs have acted with a sense of urgency and agility that’s characteristic of high-tech firms, where most of the key employees are from the millennial generation.

4. They sharpened their strategic clarity.

Traditional DME companies often had a general sense of their strategic goals rather than a precise understanding of what would be necessary to succeed in a changed and changing marketplace. The most successful DME entrepreneurs set aside their historic biases, systematically assessed their risk/benefits, identified the resources necessary to succeed, and then aligned those resources strategically prior to taking action.

5. They focused on precise execution.

In the past, DME companies often had good, but general plans for the future. However, few were able or willing to execute those plans with precision. The DME companies that thrived acted with conviction, evaluated their results, and made course corrections in order to keep on growing and diversifying. They were and are ambitious, in the best sense of that word.

6. They targeted their offerings.

Traditional DME companies tended to offer a full line of products, regardless of whether those products were profitable or in high demand. By contrast, today’s progressive DME companies tend to “drill down to core offerings,” all the while paying attention to cross-selling opportunities. This allows them to quickly eliminate under performing products, thereby increasing profitability.

7. They’ve learned to learn quickly.

In order to take the actions described above, successful DME companies have learning quickly from their mistakes and successes alike, incorporating those lessons into new offerings and new initiatives. Mostly, they’ve learned that the DME market is shifting, like the rest of the healthcare industry, to a value-based, outcome measured model.

8. They’ve become fanatical about measurement.

Funding entities and payers, whether public institutions, managed care organizations, commercial insurance, or even consumers who pay cash, want to know about observable outcomes and value in terms of their healthcare. Healthcare companies that can’t deliver these outcomes and value or can’t communicate them effectively simply can’t compete in this rapidly changing market.

Conclusion:

The disruptive approaches have helped DME companies survive and thrive despite the monumental changes in the industry. They also offer lessons learned that can guide you now and in years to come. Further changes are inevitable so keeping an agile perspective on the future will serve you and your DME well.

If you would like to know more about this article, you can reach us directly at support@wonderws.com

However, other companies saw an opportunity to be exploited. In my national DME merger and acquisition practice, I’ve seen a number of success stories of companies that have both survived and thrived in this increasingly competitive environment.

Here’s what they did:

1. They ruthlessly assessed the healthcare marketplace.

Successful entrepreneurs will realise quickly that healthcare is now being shaped by economics, managed care, rapid innovation, digital marketing, and new direct access to DME products. They then made a commitment to adapt to these changes rather than pretend they weren’t taking place.

2. They adopted a millennial perspective.

Rather than the lethargic approach characteristic of many operators from the Baby Boomer generation, successful  entrepreneurs have acted with a sense of urgency and agility that’s characteristic of high-tech firms, where most of the key employees are from the millennial generation.

3. They partnered with investors and capital.

Successful entrepreneurs scrapped the traditional “go it alone” strategy in favour of a new affiliation model, where competitors actively partner with one another in selected areas. They also brought in new investors, especially private equity groups that had abundant financial resources and saw an opportunity for disruptive innovation.

4. They sharpened their strategic clarity.

The companies often had a general sense of their strategic goals rather than a precise understanding of what would be necessary to succeed in a changed and changing marketplace.

The most successful entrepreneurs set aside their historic biases, systematically assessed their risk/benefits, identified the resources necessary to succeed, and then aligned those resources strategically prior to taking action.

5. They targeted their offerings.

Traditional companies tended to offer a full line of products, regardless of whether those products were profitable or in high demand. By contrast, today’s progressive companies tend to “drill down to core offerings,” all the while paying attention to cross-selling opportunities. This allows them to quickly eliminate under performing products, thereby increasing profitability.

6. They focused on precise execution.

In the past, DME companies often had good, but general plans for the future. However, few were able or willing to execute those plans with precision.

The companies that thrived acted with conviction, evaluated their results, and made course corrections in order to keep on growing and diversifying. They were and are ambitious, in the best sense of that word.

7. They’ve become fanatical about measurement.

Funding entities and payers, whether public institutions, managed care organisations, commercial insurance, or even consumers who pay cash, want to know about observable outcomes and value in terms of their healthcare. Healthcare companies that can’t deliver these outcomes and value or can’t communicate them effectively simply can’t compete in this rapidly changing market.

8. They’ve learned to learn quickly.

Successful Durable Medical Equipment companies have learning quickly from their mistakes and successes alike, incorporating those lessons into new offerings and new initiatives. Mostly, they’ve learned that the market is shifting, like the rest of the healthcare industry, to a value-based, outcome measured model.

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Contact us or you can reach Erica Shannon directly at support@wonderws.com

The revenue cycle management function has come a long way for companies with a recent paradigm shift in thinking from a cost centre to a profit centre view. Unfortunately, this shift in mindset has not led to an industry breakthrough solution. In a survey conducted by ISG, 97% of  companies reported they struggle with optimising the workforce, asset, productivity, or growth. Each level has a correlation with the revenue cycle function, which contributes to an industry average of 15–25% of overall operating costs (i.e. a large population of DME companies continue to operate at 25–35% revenue cycle costs).

Although companies are adapting to cope with revenue cycle issues, the size of the canvas has expanded beyond focusing on just the following:

• 100% accurate inputs at the order-entry stage leading to a clean claim submission.
• 100% adherence to the eligibility criteria based on medical necessity established by the physician before dispensing the products.
• Timely collections of required documents before billing to avoid timely filing denials.
• Understanding of payer/product rules for accurately determining required documents to avoid complete or partial denial.

The industry has used a combination of process and technology to tackle these factors with varying degrees of success. However, the desired end state seems to be as elusive as when we began this journey. Now we are forced to ask why. The answer begins with recalibrating the set of variables we need to monitor:

• The shift in the payer mix due to demographic factors, such as an increase in aged population
• Product mix changes as result of sales strategies and the resulting swing on pricing
• Onslaught of regulatory audits warranting increased scrutiny of processes and appeals have grown more than 150% over the last three years as a result of high claim rejections

These factors are playing a larger role in affecting providers that struggle with razor-thin margins, competitive bidding, and unfavourable contracts dictated by the payers.

To achieve a genuine view on the actual reasons, a three-step method must be used:

• Use data analytics to understand historical trends.
• Assemble a revenue projection blueprint design. The model maps the order from inflow to cash yield. Predictions from each process phase are compared to actual performance to identify where the stoppage in flow is occurring; and
• Form a “line of sight” team from core business operations to review process performance, identify opportunities, and tactically align initiatives to improve results.

This approach generates insights that link the cash shortfalls to unsuspected sources unlike the usual ones, such as productivity, timely filing limits, ageing, delay in follow-ups, ineffective collection practices, etc. Cash was down not because the collections team was less effective, but because the average value of a cash payment had dropped. The sales team was meeting the overall volume goal, but the team was selling lower-priced items. This product shift had a cascading effect, triggering a negative impact on the payer mix.

An unexpected variation in product sales brought an unexpected shift in who was buying the product, the purchaser base. The new trend was sales to payers with reduced contract pricing and, ultimately, a lower value per order.

As an outcome, companies can create a well-defined model on which to base probabilities versus random targets. This model equips a company’s leadership with certifiable triggers for evaluating cash results.

Conclusion

The way to the future for DME companies to constantly stay on top will depend on their agility to respond, which comes from the power of smart intelligent processes achieved through the following:

1. Investing in data infrastructure that supports information exchange among payers and providers.
2. Including payer, product mix, and sales effectiveness in the list of process metrics.
3. Establishing a measurement system that tracks metrics and reports all performance indicators in the entire RCM value chain, including sales.
4. Building a forecasting model built on predictive analytics principles using historical data to act as an alert too.

Regardless of what you decide is the best for your company and understanding the importance of RCM checklist as a function of your success is a key. Contact us for more information.

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