Observation Deck

Savvy Positioning for PMD Providers

Opportunity abounds for rental-ready HMEs.

• By Ted Raquet
• Apr 01, 2011

There is no question that the elimination of Medicare’s first month purchase option presents power mobility providers with some unprecedented challenges. The elimination has fundamentally transformed what has traditionally been a business with positive cash flow and a somewhatestablished business plan into a much more complex endeavor.

Despite this, our industry still delivers tremendous opportunity. On the same day the purchase option was eliminated, America’s baby boomers began turning 65 at a rate of one every 10 seconds. For the next 18 years, these individuals will continue to age into their Medicare benefits at an accelerated rate. These individuals typically have one or more chronic, long-term or debilitating conditions, live longer than their predecessors and are inclined to remain in their own home upon retirement.

So, while the impact of this change is something we will look back on as significantly reshaping the way we do business, the right “rental ready” strategy will position the savvy provider for success, but there are a few things to consider.

Find Innovative Cash Flow Solutions. As providers wait 13 months to receive full payment for products they must pay for up front, there is certainly an impact on their working capital.

The most immediate and challenging impact the elimination of the purchase option has on providers’ businesses is the restraints it places on positive cash flow. That, of course, infl uences every aspect of a business from inventory planning to petty cash.

Making the situation even more daunting for providers is the fact that they remain significantly challenged to secure financing through traditional methods. Banks and other lending institutions cannot lend money with unsecured Medicare payments as collateral. Even with collateral to secure a loan, many lending institutions refuse to offer manageable or financially viable terms. The reasons for this vary, but often include the risks associated with monthly billing, the high audit activity for power wheelchairs and the potential for the Medicare program to recoup payments made. It is important to remember that acquisition cost is only one component of the cash flow issue.

Providers should look to partner with manufacturers who truly understand their financial needs in the rental era. They should look for their manufacturing partners to offer financial services and terms that meet the unique demands of the rental environment.

Specialize in True Rental-Ready Products. Advancements in technology continue to pave the way for more reliable, user-friendly power wheelchairs that are easy to service. This trend toward more advanced and innovative technologies is essential in the rental product market. If a product does not stand up to the rigors of the 13-month rental period, the provider’s initial investment is devoured by ongoing service claims and refurbishment costs.

To truly maximize their rental product investment, providers should look for high-quality, high-performance products that are designed specifically for the daily grind of the 13-month rental period. The products that will make the most of the provider’s initial investment must have durable robust motors and features that protect the most at risk components from damage.

The rental product warranty and service options should also be geared to protecting the provider’s initial investment with extended coverage for the 13-month rental period. Product refurbishment should be modular and easy to complete to maximize service efficiency.

Additionally, having the right product and service support will generate positive satisfaction which is an invaluable asset in an environment where every possible advantage counts. Having a customer who is satisfied with their product during the rental period is an excellent way to ensure avoiding needless service calls, freeing up your resources to focus on other areas of concern.

Effectively Manage the Process. While Medicare does not require a provider to contact their customers to confirm they are still at home and continue to need and use their power wheelchair, implementing this practice into the rental business model will increase the provider’s ability to manage cash fl ow and track inventory through the rental cycle. Thirteen months of rental payment also affords a provider increased opportunity to collect co-payment from the beneficiary, manage denials effectively and market to their customers legally.

Be Aggressive in Marketing Your Business. In response to the elimination of Medicare’s first month purchase option, some providers have exited the marketplace or have stopped providing power wheelchairs altogether. Many providers who have chosen to stay in the power chair market have greatly reduced or cut their marketing and advertising efforts completely. Take advantage of that fact in your marketing strategy.

With your competitors cutting back, it will be much easier to effectively get your message out without having to outspend them to be heard. If you maintain an aggressive, consistent marketing message rather than cutting back, you have the opportunity to take advantage of some exceptional advertising value. With your competition in fl ux within a challenging environment, you can actually increase the potency of your marketing efforts on a smaller budget.

Television advertising specifically is an area where value may surprise you. People often equate large expense to TV, but that’s not an accurate perception. Many markets have inexpensive cable buys and local news stations that allow you to run TV advertising rather inexpensively. And, if you consider tagging a pre-produced TV spot, the production costs to you are nominal.

Print materials and showroom point of purchase advertising are also effective means of increasing foot traffic and interesting prospective buyers in your products and services. Again, partnering with a manufacturer who offers comprehensive marketing support goes a long way in helping you reduce cost.

While the industry stands forever changed in 2011, the impressive opportunities presented by population trends remain the same. As a provider, you simply need to develop the right rental ready business plan to take full advantage of them and turn the challenges into triumphs for your business for years to come.

This article originally appeared in the April 2011 issue of HME Business.