Strategies to Survive and Thrive
In July, when H.R. 6331 — the Medicare Improvements for Patients & Providers Act – became law, it stopped competitive bidding’s first round, scrapped second-round competitive bidding plans, and required the Centers for Medicare & Medicaid Services (CMS) to overhaul a seriously flawed program.
The delay, however, came at a price: In January, CMS will implement a 9.5-percent cut in payments for DME product categories, including complex rehab power chairs, that were bid in the first round of the program. As the summer progressed, mobility and rehab suppliers had to adjust to this upcoming reality, particularly tough for power mobility suppliers who’d just seen serious funding cuts in late 2006.
Mobility Management asked industry experts to express their honest concerns about the 9.5-percent cut, as well as to provide tips, based on their own areas of experience, to help suppliers survive – and thrive — in these perilous times.
Five Steps to Survive the Cut
Donald E. Clayback, VP of Government Relations, The MED GroupStep One
: The first thing (suppliers) need to do is get a good handle on the actual dollar impact of their business before they start looking at cuts by quantifying what will be the impact in 2009. They need to obviously look at codes that will be impacted under Medicare, as well as look to their non-Medicare business.
From a management perspective, they need to quantify the impact on their business in 2009 and quantify that in terms of lost revenue and also from a profitability standpoint.
Providers need to look at the services they’re offering and identify which ones are required and which ones they may be able to eliminate or reduce.
For instance, doing repairs of equipment for people you don’t sell equipment to or doing assessments out of the actual office location may be areas you’ll want to reconsider. You may not be able to eliminate all of these areas. But a few can be reduced by asking yourself: OK, what are the activities that we do within our business, and which of those are required and which may have some potential to be either reduced or eliminated?
Providers should also take a look at their product costs and factor in who they’re buying from and the variety of products that they’re offering to their customers. The idea here is to consolidate where you can; consolidate your purchases, and that will hopefully help you negotiate and drive lower costs for your business.
When companies are looking at the cost of products, it’s important that they don’t look at just the invoice price, but the total cost of ownership. While companies are looking at lowering their product costs, they can’t lose sight of the quality issues that go along with that.
Companies need to minimize the variety of products that they offer to ensure that they’re getting the best value for their dollar. In other words, they should be getting a low cost and good quality.
Providers will also want to look to buying groups to help them get lower costs for their products. That’s one of the things The MED Group does for its members. They’re able to buy to our contracts, and we basically take the buying power of all of our members and negotiate lower prices with the manufacturers.Step Four:
Take a look at the cost paid for products, as well as the cost of running the business — which includes operating expenses, payroll, utilities, rent and those kinds of things. This ties into step number two, which is what services are you providing that maybe you can eliminate?
One of the biggest expenses of a company is payroll. If you can get employees to work more efficiently, you’re then able to get the most productivity out of your personnel. You may also be able to eliminate certain positions and give your employee another position within a growing area of the company. Technology is also a key factor. You’ll want to ask questions like “Do we have an efficient paperwork management system? Is our billing system efficient? Are we using things like document imaging?”Step Five:
Providers should ask themselves if there is any way that they could increase revenue in other areas to offset this cost, and are there certain products that our current customers use that maybe we could sell that we don’t currently sell?
So it isn’t all about “Let’s look at cutting our expenses” — that can only go so far.
Once you’ve gone through the various steps, put a dollar amount to all the changes you were going to make, and make sure that it meets the shortfall that you’ve calculated in step one. The process involves communicating with all the people in the company about what the impact is. Then, engage them in helping you find the solutions.
At the end of the process, you’ve gone through all the various steps and have identified, say, that you’re going to have a $500,000 shortfall. You then engage the employees to gather their input and to get their buy-in in terms of what’s necessary and then pull it all together at the end and say, “All right, we’ve now identified through new revenue and cost savings how we’re going to manage through this.” But it certainly is a real challenge.
State Associations Can Empower
Bob Harry, VP/Board Member, Alabama Durable Medical Equipment Association
Join state associations, get training and pass on knowledge to beneficiaries. Providers are going to have to maximize their education by joining state associations and getting training. It will also be important for them to educate beneficiaries on the changes going on in Medicare.
The key is learning from somebody else who’s doing it right and doing it better than you. There are 1,000 secrets out there. But that’s why it’s a secret, because nobody’s telling anybody. Beneficiaries oftentimes don’t know what’s going on because these aren’t issues that they read about in a newspaper, and providers have absorbed various cuts for several years, so (beneficiaries) haven’t felt it. But when they do get wind of these types of cuts, it’s important for consumers to call their Congressmen.
Reduce your service area. This will save providers on time, gas and maintenance. (The drawbacks:) You lose contact with your patients because you can’t afford to keep in touch at $4 a gallon; having patients come to you isn’t always the solution, either. Mobility-device users sometimes can’t come to you because leaving the home is a major event, so you’re simply unable to reach everyone you once did.
Work smarter, not harder. You’re just going to have to get smarter and smarter and smarter, and figure out how to reduce your expenses, especially small providers. Large providers are buying at cheaper cost than we have to spend for, so you’ve got buying opportunities there, and they’re marketing in areas and with methods that we can’t afford. They’re doing TV ads, direct mailing and ads in magazines. Most of us don’t have the opportunity or the kind of money to do that. They have a budget for marketing, when we don’t. The bottom line is larger providers have other areas they can cut from, when smaller providers don’t. It all comes down to money.
Bob Harry also owns AABON Home Health Care in Ozark, Ala., and is an ATS.
Bill Properly for Repairs the First Time Around
Peggy Walker, RN, Billing & Reimbursement Advisor, U.S. Rehab
Know CMS’ regulations and what you’re entitled to bill. Repairs are covered if the patient owns the equipment and that equipment is still medically necessary.
The first thing a supplier/rehab provider must do is figure out their cost for the items, which means they have to know their cost, and they have to know the allowable. This is something that they can find from https://www.dmepdac.com
Providers also need to know if their company is a participating or non-participating provider, so they can decide whether to do an assigned or non-assigned claim. They’re going to have to know how to bill a repair claim the first time around. In order to do that, providers will need to know what the proper codes are.
Many items are already priced below or at cost. In these instances, providers will have to know the item’s cost to know how long it will take to repair. They’ll also want to make sure they know the proper codes and modifiers to use and what to add to the narrative notes to get the payment the first time around. It’s important for providers to know the documentation required and be able to put it in the narrative.
Fill out claims properly, including appropriate codes. All repair claims must indicate that the patient owns the equipment, along with listing the name, make, model, serial number, when the item was purchased and by whom, which goes in Block 19 for a paper claim or in the narrative field for an electronic claim.
Providers will also need to charge the code for labor, which is E1340; one unit equals 15 minutes. This will need to be explained. For example, you must say it took 15 minutes to replace an armrest, 30 minutes to change brakes, etc. That’s the first code providers will bill.
The next code is K0462, the loaner code; this is for the item used while the patient-owned equipment is being repaired (paid up to one month’s rental). It’s important to state what equipment is being repaired, along with the name, make and model.
For instance, you’ll want to say that it is a K0823 power chair rental while the patient’s chair is being repaired. If a provider is using any kind of “Not Otherwise Classified” code, they must state the name, make, model and manufacturer, suggested retail price of that particular item, that there are no modifiers on these codes, and why it is needed over a coded item.
Providers also need to get specific information from patients, such as the patient’s Medicare number, their address and the name, make and model of the item that’s being repaired. Non-participating providers can have the patient pay them for repairs and then bill Medicare and have Medicare pay the patient. Make sure you let the patient know up front if you’re going to charge them for pickup and delivery.
Think about repairs in a new way. Repairs are a big issue. Rehab providers have always repaired the equipment and taken the hit. We didn’t always make money on repairs, but we survived on it. It was more of a customer service-type thing, but we can’t do that now. You’ve got to pay attention and bill correctly in order to get paid.
Recap of billing and modifiers:
• E1340 would be the first line, with explanation of time units.
• K0462 is the second line, with explanation of base (item) provided and what item is being repaired (no modifier required).
• K0462 does not have to be on the same claim as a repair, but it is easier if it is.
• Use the code you are replacing with the RP modifier for accessories and parts, KC modifier if replacing interfaces.
• If using K0108, E1399 or E2399 codes, state name, make, model and manufacturer’s suggested retail price of item being used. No modifiers on these codes.
• The new codes for power do not change the way you bill. You are not required to loan clients the same base they are in — just a base they can use while you repair theirs.
Peggy Walker, prior to joining U.S. Rehab, worked at Region C DMERC in the post-pay medical review arena.
Look Beyond Traditional Methods
Kirsten DeLay, VP of Sales Management & Operational Planning, Pride Mobility Products/Quantum Rehab
Take a multi-faceted approach to offsetting the funding cut. Challenging times loom ahead for providers, with the convergence of the impending 9.5-percent funding fee schedule reduction and the complex task of endeavoring to turn a profit in today’s tumultuous economic environment.Providers need to look beyond the traditional in order to prepare for these challenges and set the stage to emerge from these challenges in a more fiscally sound position. Pride Mobility Products is focused on the success of our providers and suggests that navigating through these challenging times will require the implementation of a multi-faceted plan that focuses on product, service, marketing and education.
Consider product quality when ordering. One way in which providers can help minimize costs is to feature high-quality, reliable products which ultimately result in a reduction in back-end service and warranty calls, and a more satisfied customer base. Selecting quality products with profitable price points provides a winning environment for all involved in the sale, selection and utilization of mobility products, and sets the stage for satisfied, repeat customers, who will be quick to provide recommendations based on their positive experiences and satisfaction with the overall product, and its features, functionality and dependability.
Retail sales can bring in more revenue… and statistics say the time is right to expand into the cash-pay arena. Expanding into retail products creates a variety of revenue channels which will prove beneficial to providers’ bottom line. Providers need only look to the first wave of baby boomers turning 62 this year to be convinced that there is tremendous potential available with retail expansion.
Research indicates that this first wave of baby boomers represents more than 26 percent of the country’s population and has the potential spending power of $1.1 trillion annually.Providers would be wise to acknowledge this statistic and embrace the strategies necessary in order to capitalize on the spending potential this audience presents.
Expanding the product portfolio to include retail products enables providers to take advantage of cross-selling opportunities and be in a position to accommodate for more of the mobility needs of the beneficiaries with whom they interact, and, as a result, have the potential to increase their sales and overall profitability.
Keep all stakeholders in your communications loop. Communication is an essential element in the providers’ overall business plan in order to generate awareness among current and potential customers, keeping the provider top of mind among these audiences. Obtaining marketing communication services can require a significant investment, so providers should analyze, and capitalize on, the cost-effective programs that are available through the manufacturers with whom they conduct business.
Consumers want to deal with a knowledgeable sales staff, and it would be advantageous for providers to take advantage of the educational opportunities presented by manufacturers and industry associations.
Change is certain. There is one certainty in this environment — providers can be assured that the environment will continue to change, and the challenges will continue to present themselves. Providers need to stay one step ahead by preparing for the future with the development and implementation of a multi-faceted business plan that accommodates for the changing environment.
More Expert Cost-Cutting Strategies to Consider
• Assess your inventory needs. What do you need to keep in stock? What can you order only when you need it, on a per-client basis, without causing prolonged wait times? When determining what products to purchase on an as-needed basis and which manufacturers and distributors to work with, consider their abilities to fulfill your orders and deliver them quickly.
• Take advantage of assistance from manufacturers and member service organizations. Now is a good time to take stock of all possible resources you might have. If you belong to a member service organization, are you aware of and taking advantage of the full range of services offered, from marketing to assistance with documentation or funding issues? Many manufacturers also have marketing programs that offer help with commercials, product literature, print advertising, Web site design, etc., at prices far below what you’d pay to a public relations firm you found in the Yellow Pages.
• Consider learning closer to home. Educational opportunities come in many forms, including online at-your-own-pace courses and Webinars. Many manufacturers offer such classes, as does the Centers for Medicare & Medicaid Services (CMS) and their assorted contractors – so sign up for their e-newsletters so you’ll hear about upcoming opportunities. For face-to-face learning, check with manufacturers regarding their seminar tours in your neighborhood or region: You’ll still get to raise your hand in class, sit with peers and chat over lunch, but you won’t have to pay for airfare or lengthy hotel stays.
This article originally appeared in the November 2008 issue of Mobility Management.