Provider Strategy

The Devil is in the Details

New rules included in competitive bidding will force providers to streamline their 'product fleet.

• By Brian LaDuke
• Aug 01, 2013

Without a law degree or a fine-tooth comb, deciphering the nuances of the latest national competitive bidding (NCB) rules from CMS can be quite a challenge. In fact, there is an obscure line item that you might gloss over upon reading that could change the way you do business. I’m referring to section 42 C.F.R. Section 414.422(c), the federal regulation defining the Medicare NCB contract terms. This subsection c addresses what is called “nondiscrimination.”

As it currently stands, you probably stock a variety of products meant to address the varying needs of your customers. This could include factors such as the features and benefits of a product. It could also mean different products for customers purchasing products with Medicare, private insurance or selfpay. To meet these different requirements in both pay and preference, you may have a “product fleet” with a mix of DME items, possibly from a number of different manufacturers.

The new NCB rules could change how you manage your product portfolio. Section 414.422(c) states that, “The items furnished by a contract supplier under this subpart must be the same items that the contract supplier makes available to other customers.” In other words, you can’t offer a higher quality product to someone with private insurance and a cheaper, lesser product to your Medicare patients. The playing field must be level.

The home medical equipment industry as a whole is confronted with a number of challenges that require sometimes drastic changes to the way we do business. If you are a bid winner, this is a potentially new snag to consider on top of the average 45 percent reduction in payments you are facing. Your first inclination might be to focus on your acquisition costs alone and purchase the lowest cost products you can to keep the initial costs low. In light of the nondiscrimination rule, this would mean only those cheaper products will be available to your customers, even those paying cash or using private insurance.

Streamlined Sustainability

With audits as a major concern and in order to comply with section 414.422(c), you will need to streamline your product fleet. Standardizing on high-quality products will not only allow you to better serve your customers, but will also improve your bottom line. You need a sustainable business model that can build profits. The best way to drive success and achieve regulatory compliance is Fleet Management.

So, what is Fleet Management? Fleet Management is the controlled operation of your company’s product fleet, which can include maintenance, repairs, tracking, delivery management, financing, regulatory compliance and health and safety management. Engaging in a fleet management approach can improve efficiency and productivity and reduce overall costs, providing longterm success.

Every day, you’re juggling a number of large issues such as inventory control, product maintenance, delivery management and regulatory compliance while trying to keep product costs low, and these issues are connected. A Fleet Management approach can address all of these concerns. It is easy to look at the sticker price of a product alone and think, lowest acquisition cost means I am saving money. That is true on initial purchase, but it may not be true over the long run, especially when you factor in things like inventory control, associate training, etc. Our research has shown that a healthy business starts with a strong core of fl eet products that stand the test of time.

Moving Toward Rental

In looking at what the most successful HME providers are doing to ensure profitability without sacrificing patient care, we’ve learned that the greatest path to success is for a provider to adopt a rental model. Financially strong, best in class providers purchase high quality rental fleet products. Creating a rental fleet of durable, high-quality products allows you to rent products longer while minimizing your costs. A longer useful life means more provider profit. It also allows you to keep your focus on what really matters, providing superior patient care.

For those of you who have already adopted this approach, you are taking the right steps and positioning yourself for current and future success. For those looking to make the change, I am sure you can see the logic in a fleet management approach, though you are probably hesitant to change the way you are doing business. You may have existing inventory on hand, or be focused on keeping your monthly product acquisition costs as low as possible to deal with the changes in reimbursement levels. With nondiscrimination in mind, this approach is more important than ever to reduce complexity and also to reduce your regulatory exposure.

Building a fleet of high-quality products that will truly have an impact on the longevity of your business takes time and strategic planning, but there are resources that can help. At Invacare, for example, we have a number of tools to get you started with this proven way of thinking, available at www.invacare.com/fleetmanagement, or directly through your Invacare Territory Business Manager.

The challenges facing you are daunting, but you are not alone. The business decisions you make today impact your ability to survive and thrive in this changing environment. They also affect the patients you serve. Taking a tried and true Fleet Management approach allows you to adopt a sustainable business model that can build profits while being compliant so you can put your focus on what really matters, the patients who need your services to live their best lives.

This article originally appeared in the August 2013 issue of HME Business.