Business Solutions

An Onramp to Cost Efficiency

How providers can optimize their delivery operations to slash costs and increase service.

• By Joseph Duffy
• Nov 01, 2010

As HME providers look to gain some of the financial ground they have lost to Medicare cuts, caps and competitive bidding, many eyes are turning toward delivery systems. Although delivery systems can be excellent cost centers with huge financial opportunities, they’re a mixing bowl of many elements — technology, personnel, emergency calls, deliveries, routing strategies — that when not well-oiled can chip away at the bottom line.

“It has been important for us to find efficiencies in the routing and data exchange and not cut the service to the patients,” says Brad Heath, Operations and Compliance Coordinator, Family Medical Supply. “Inevitably though, you are not able to provide the care that you would like and stay in business. Everything has to be looked at for inefficiencies and the biggest concern becomes being able to provide for your immediate family (the employees) while taking care of the extended family (your patients). Every family feels a responsibility to look after their immediate family first.

“When that happens companies begin have longer response times, quit carrying certain lines that are being subsidized by oxygen reimbursement, and cut patient care before laying off employees,” he continues. “We are in an environment now where not only is Medicare cutting reimbursement, but they are paying people commission to find reasons not to pay providers. We have been somewhat fortunate that infl ation has been no higher, but when it does return even more providers will disappear.”

It is typical within the HME industry that delivery systems rank in the top-third of costs, usually behind inventory and human resources. The first step in seeing how you can start saving is perhaps by getting a good grasp on what exactly delivery systems entail.

“Delivery management is a very wide-reaching term and includes many components of an HME’s business operation,” says Bob Wagner, owner of HMEGPS. “Not only does it include the equipment that is being delivered and repaired, it also includes the services delivered and the costs associated with those services. Today, delivery management is, or should be, under a microscope by HMEs. They have had an attack on their top line, and there are very few areas within HMEs to stop the bleeding on the bottom line. Delivery management is an area with some low-hanging fruit for efficiencies and savings. The costs for delivery management systems have gone down and implementation is relatively easy, making it a logical choice to implement and help maintain profitability.”

According to Heath, delivery management is everything from the time a referral or patient call comes into the door until that order creates an invoice. He feels there are three important delivery management points to consider. “The most important part is the patient care and customer service provided,” he says. “If the patient isn’t served properly and educated then the entire process has failed. A very close second is the compliance, the signatures, insurance information and all the data to justify the order. If you service the patient, you have looked after the patient, but without all the i’s dotted and t’s crossed then you cannot get paid for providing that service. These two are 95 percent of getting delivery management right. Everything else is routing. Technology has certainly helped with the routing, but the best innovations are coming from electronic delivery devices like Brightree’s POD system. This allows the orders to be tracked throughout the day and reduces errors by taking in the equipment’s serial number electronically. Finally, all the forms needed for signatures are on the device. This increases compliance since your techs are less likely to misplace paperwork. However, there is a cost to technology and you still have to decide if this investment creates a return for your company.”

Once you find a system that works for your company, results can be very good to your bottom line. Wagner, whose HMEGPS creates GPS solutions for home healthcare, says that his customers are seeing about an 11 percent reduction in total miles traveled, and reductions up to 100 percent in the area of overtime.

Delivery Technology

One of the fastest growing segments of delivery system strategy is technology. And according to Wagner, the most recent technological advancement in delivery management is the ability to manage employees who use their personal vehicles for company business.

“Over the years, there has been various choices for providers to manage their company-owned assets,” says Wagner. “However they have had no control over their clinicians or marketers who use their personal vehicles for company business. On-Board Communications has just released MileageTraks, a sister product of FleetTraks. This portable GPS unit plugs into the cigarette lighter of clinicians and marketers and insures that they are being productive and accountable and provides detailed trip and mileage reimbursement reports.”

Needless to say, one of the biggest challenges in managing delivery operations is ensuring that all the day’s calls are properly apportioned to the drivers and that they are able to efficiently make their rounds, while also being able to respond to unique or urgent calls that crop up during the day. Without software, this can represent a mind-boggling task.

However, various HME software systems and related offerings are able to help providers easily generate efficient routes from the list of service calls and apportion them to each driver. Delivery management can generate the following days’ deliveries each evening, and in the morning, the drivers come in, are handed their pre-planned delivery routes and tickets for the day and set out on their rounds.

However, creating sensible routes that minimize mileage is only part of the delivery efficiencies offered by software. Additionally, HME software systems can also help providers to ensure that each driver adheres to optimal gas mileage by not traveling to fast or too slow by approximating how long a driver should take between one patient address and another.

Results from a recent HME Business survey lists features that software systems can tie together in one neat package:

• Claims/Billing – Billing tools, authentication, and processing capabilities.
• Reporting/Executive View – Overview screens and “dashboard” views that help providers manage their businesses.
• Inventory Management – Inventory management and control features, such as barcoding and scanning.
• Ordering – Order creation, entry, processing, automation features.
• Audits – Capabilities to help providers deal with increased RAC, CERT, ZPIC and other audit requests.
• PECOS – Features to help ensure claims are coming from referral partners entered in CMS’s PECOS database.
• Delivery Management – Delivery operations and optimization features.
• Marketing – Reports and other capabilities that help providers better reach out to patients and partners.
• Online Community – Tools to help providers communicate and share best practices with each other.

“POD by Brightree is a big industry changer for people who utilize it properly,” says Heath. “The key is that a process has to be designed around the technology. A simple technology investment is not enough. One day we will be taking signatures on iPads, but we are still in a very personal business that is completely about human relationships. That part cannot be over-managed. What takes one patient 20 minutes to learn may take another one an hour. It is our responsibility to educate both no matter how long it takes. The human element will always be the high hurdle for companies focused on the patients and you can only manage that so far with an algorithm and still be a people-to-people business.”

That said, Heath warns that the worst mistake providers do regarding delivery management is underestimating the intelligence of their techs.

Your action plan

Wagner warns that the single largest mistake an HME provider can do is to do nothing and watch the bottom line erode. “Reimbursement is not going to get any better and providers have to take action now to manage profitability,” says Wagner.

Heath says to study your business and ask your staff where they see inefficiencies. Also, investigate the technologies available and don’t overlook any details. Understand that improving delivery is something you will do over years and not a short-term project.

Wagner recommends that every provider consider the following:

• Implement a Fleet management system as quickly as possible. ROI is typically only 30 to 60 days. Implementation is not complex at all. It consists of installation of the GPS hardware, holding a drivers meeting, and then management information is a user name and password away. The greatest percent of return of a fleet management system is simply from knowing that your fleet is productive. From the day you hold your drivers meeting, it’s like you have a manager riding with each driver 24/7. You see a rapid increase in productivity and accountability.
• Talk to your drivers. Bring them into the decision process for delivery management. Review routes with them and look for efficiencies. Many times they will have good ideas; however, they have never been asked for those ideas.
• Examine your routes to see what efficiencies can be gained. For example are you sending more than one driver into the same market on the same day or are your vehicles crisscrossing each other?
• When you manage your idle time fleet management, you manage your fuel consumption. We’ve just come off one of the hottest summers on record and many drivers across the country kept their engines running so that their trucks were nice and cool when they got back in. The reverse happens in the winter with the desire for warm trucks. Excess idle time waists one gallon of gasoline per hour. Drivers don’t think much of leaving the engines running; however, idle costs spread out over the entire fl eet, over the entire month, add up to large numbers. Some providers have paid for their fl eet management system simply by managing idle time alone.
• Be sure you get the most out of your delivery management system and manage your vehicles maintenance. The constant flow of odometer readings updating a maintenance database makes for a paperless maintenance management system. We are all pretty good about getting our oil changed; however, the other items, such as tire rotation and transmission fl uid changes, tend to get overlooked. This will cause unnecessary and premature costs that add to your cost per mile if they are not monitored and maintained.
• Don’t forget about your clinicians and marketers. Efficiencies can also be realized by making these employees accountable for their time and expenses.

This article originally appeared in the November 2010 issue of HME Business.