How Power Mobility HMEs can Become Rental Businesses

• By David Kopf
• Jul 01, 2011

The standard power mobility services industry has been completely stood on its head. Starting this year, those providers have had to contend with the removal of the first-month purchase option, and the effect has been to upend their business models.

Previously providers of power mobility devices originally could depend on the first month purchase option to get patients with long-term or permanent mobility impairments into chairs. This made sense. If a patient had a very long-term or life-long mobility condition that was going to require him or her to use a power mobility device, why stretch out the payment? Instead, the device was reimbursed in the first month.

However, as of Jan. 1, the first-month purchase option for standard power mobility devices was removed. (Which doesn’t make much sense in the case of patients with permanent or longterm ailments, but when has that stopped CMS?) This means that instead of receiving full compensation for the chair at the outset of a claim, providers must now be satisfied with that amount trickling in while they still must purchase the chair and endure the costs associated with serving that patient. While the overall funding for that chair actually increases by roughly 5 percent, those providers have had to reinvent themselves.

Mobility providers are trying to transition into to what is essentially a rental business and with that comes a whole new set of priorities and business practices.

Now, mobility providers must convert to a 13-month rental model for all standard power mobility claims. While the patient will still receive the DME he or she needs, this new funding arrangement requires an almost complete reinvention of mobility providers’ businesses. What are some key was to successfully transition to a rental model?

Leverage financing. Obviously the critical issue for standard power mobility providers is that they are now waiting for their reimbursement to trickle in over 13 months, instead of it coming in the first month — and meanwhile they still need to pay for their DME while suffering a massive impact to their cash flow. Also, they need operating funds in addition to the capital necessary to purchase inventory. Financing is a must.

A primary source of financing in the HME industry comes from the very vendors that manufacture the equipment HME’s provide to their patients. Two key examples would be Pride Mobility Corp. and Invacare Corp. These manufacturers are a solid option because they offer very attractive terms to their provider customers to finance the purchase of the products they make.

But vendor-sourced inventory financing is only one option. The other option is to finance inventory through a third party, such as a commercial lender or similar source. One industry grown-source is VGM Financial Services, which is clearly familiar with the financing needs of the HMEs. Another option when searching for, selecting and securing financing is through brokering, in which the provider works with a third-party that has relationships with various sources of financing. The broker looks at the HME’s business history, and other factors to come up with right financing for that provider’s financial position.

Build the rental model. While you have the capital secured to keep your business afloat and to purchase the DME, you will still need to reorganize how your standard power mobility works. Now you must build in the business processes for ensuring monthly reimbursement comes in at a regular rate; repairing and servicing rental equipment that is in the field; and receiving rental equipment, refurbishing it and returning it to inventory. Consider the variables. Will you need new staff, or additional shop or storage space?

Educate your referral partners. Because this will affect how your business will operate and to a certain degree the types of PMDs you will provide your patients, you owe it to your referral partners to educate them. Explain how the removal of the first month purchase option has changed how your business works, but that it hasn’t altered the top-quality care that you provide to patients. You want to remove any trace of concern from there minds.

And there could be concern if other providers in your marketplace have started to ratchet back their standard power mobility services. Bearing that in mind, this could be an excellent opportunity for you to reach out to new referral partners and see if they are in need of additional support for their standard power mobility patients. While you might have had to completely change your business model and finances, you might actually grow your business in the process.

Seek DME designed for rentals. Because chairs will be coming in and out of your business, and need to be prepped for new users, standard power mobility providers need to seek power mobility devices that can easily be services and continue to look good after use. This means simpler construction, more durable materials and finishes, and rubber parts that don’t show age (which is why you will notice an infl ux of PMDs with black, no-scuff tires, as opposed to gray tires). When these devices comes back to the provider they are easier to quickly and cheaply refurbish and put back into circulation. But this “rental readiness” doesn’t just stop at the actual PMDs. Also, the warranty for these devices should cover the device throughout the duration of the 13-month rental.

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