The Art of Cloning Yourself -- HME Business

Business Solutions

The Art of Cloning Yourself

As HMEs realize they can't do it all, outsourcing various business functions is becoming an increasingly important element in HME business management.

By David Kopf
Aug 01, 2013

outsourcing HME business Working under the funding pressures and constant need to cut costs while expanding revenue, many HME providers might well wish they could clone themselves. It turns out that they can.

Over the years, a variety of services have sprung up to help providers outsource various components of their businesses. The key offerings are billing services, which help providers off-load time- and employee-intensive efforts such as patient co-pay collection, which can rack up a tremendous level of overhead. In fact, sometimes that overhead can rack up so much that it negates the return from the collected receivables.

A look back, and a look ahead for HME.

Many provider business have operated for years under the assumption that they must do it all. They have been care experts, billing experts, documentation experts, collections experts, delivery experts, equipment experts, and maintenance experts. You name the business function, and they did it. However, as funding pressures continue to mount, providers are re-examining what is truly “mission critical” and considering outsourcing non-essential functions.

But by outsourcing functions such as billing and collections, providers can suddenly find that they now not only lose a substantial portion of the cost directed at collecting those funds, but see solid improvement in the amounts collected each month. This is the benefit of off-loading a business function to professionals that deal solely in that specific aspect of business operations.

And HME outsourcing has expanded over recent years to broaden its scope beyond billing. Now there are companies that help providers collect documentation, manage equipment, and handle repairs, to name a few. If anything, the HME industry is starting to look like many other modern businesses, which opt to outsource a variety of key business functions that they don’t see as necessarily mission critical.

What Is Mission Critical?

That’s represents a massive realignment in thinking: What is truly mission critical for HMEs? It’s tough to say given the massive changes and challenges the industry is facing.

For instance, five years ago, Medicare billing functions would be considered absolutely mission-critical, but now, given how much Medicare reimbursement has diminished in value while expanded in difficulty, that might not be the case. Moreover, even if Medicare reimbursement was the same as, say, seven years ago, would it not make sense to off-load claims processing to a third-party firm with a proven track record that can handle the job for a fraction of the price? Many providers might approach that notion with some initial trepidation, but many might warm to the idea, as well.

But defining “mission critical” might ultimately become an academic point at best. At the end of the day, dollars and cents make the strongest argument.

“Outsourcing is always a cost and efficiency question,” says Kevin Winkley, president and CEO of billing collections service provider Strategic AR. Needless to say, co-pay collections has become an increasingly key element of provider revenues; roviders cannot leave money sitting on the table.

“Obviously with the changes that are happening in HME — and absolutely with competitive bidding probably being the biggest change — you have to evaluate cost and efficiency,” he says.

“Competitive bidding is one of the primary reasons, the average reimbursement rate is being cut by approximately 40 percent,” adds Keith Lilek, CEO of A/R Allegiance Group LLC, which provides outsourced billing services to HME providers. “Winning providers have to find ways to reduce their operating expenses because the increase in volume alone is not going to allow them to be profitable. Outsourcing is one of the best options to significantly reduce those expenses. Other payers will soon try to capitalize on these rates so the overall reimbursement is going to continue to fall.”

“And that’s what’s really driving everyone to really look at outsourcing,” Winkley says. “Whether its in our neck of the woods, or throughout all of their business processes [providers ask], ‘Can I do it for cheaper cost by outsourcing it? Can I be more efficient? Can I buy expertise versus building it in-house?’”

And that question of expertise is a key point in the argument for outsourcing. Some processes represent a considerable amount of overhead. Billing is one of them. The human resources costs are substantial, and they are compounded because of all the paper involved in the process. As a result, providers have to think long and hard about those costs if they get the same level of performance by “hiring the pros.” Especially if it means it’s going to get more money in the door.

“That’s the thing with patient billing,” Winkley says. “You have this mail component. The only reasonable way still today to get bills paid is that you have to print and stuff bills. So you have that component, and granted it might be kind of an administrative function, but it’s amazing how many providers rely on the standard monthly statement, and they’re not able to throw extra labor at it to follow up and actually get the A/R collected.”

“Patient co-pays are the largest component of provider’s bad debt,” Lilek says. “To recover margins providers have to begin collecting these dollars more efficiently.”

Read about some key outsourcing service providers serving the HME industry.

Letting Go

But those dollars and cents arguments do butt up against concerns providers have about off-loading big components of their businesses. At the end of the day, it comes down to control. Many business owners and operators worry about losing control over something they see as important.

“Provider ownership has always been hesitant to delegate responsibility for collecting current dollars to outside organizations,” Lilek explains. “It is a control issue in an industry that is extremely sensitive to cash flow.” In response, many businesses that offer outsourced services to HME providers try to assuage these fears and concerns by giving providers the information they need to still stay in the driver’s seat.

“We still give them all the control with our AR Dashboard, so they can manage their A/R,” says Gabe Buckner, director of sales for Strategic AR. Winkley adds tools like his dashboard can sometimes give providers better insight into their businesses than what they currently have, which can help boost providers’ confidence level in outsourcing considerably.

“In a lot of cases providers [feel like] they’re operating blind,” he explains. “They don’t have a good workflow tool. Yes, in their management software they can run 90-, 120-, 180-day reports to see how much A/R is hanging out there, but it doesn’t give you a good way to attack it. That’s what we do. … Any outliers, any patients that need attention are pointed out on the dashboard. So that does give them some comfort, I think.”

Moving Forward

But comfort isn’t the only concern. Providers do have other issues they need to address when working with an outsourcer, especially how they integrate an outsourcer’s function with their business processes and workflows.

“Some of the other concerns would be time to implement a new solution; training their staff; getting their team to understand they need to collect from patients,” Buckner says, using his company as an example. “And that’s not just from the perspective of after the time of service, but actually asking for the patient to pay at the time of service; getting the co-pays up front.”

And what do providers need to consider when considering different outsourcers? Lilek advises that just like when working with any kind of service provider, examining an outsourcing company’s track record and past performance is a good place to start.

“Providers need to ask hard questions regarding the performance of the company that is asking for their business,” he suggests. “How did they come into the industry? What performance reporting is available? What is their client retention rate? How many new services or enhancements have they implemented to increase the value of their services to their customers? Are they innovators, or followers?”

The Future of Outsourcing

One thing is for certain, outsourcing is not going away. Off-loading business processes is a normal course of affairs for many industries these days, and that trend will continue to reverberate in the HME provider space, especially as cost-cutting and diversifying and maximizing revenues are top priorities. Savvy owners and operators need savvy partners.

“The future of outsourcing, at least in our space, the patient billing space, is going to continue to grow,” Winkley says. “…The constant evaluation of efficiency and cost is going to come into play, and the eroding margins are just pushing providers to do it. Certainly from a patient billing perspective outsourcing will continue to grow.”

“I believe that providers will continue to move toward outsourcing many of the activities that have traditionally been performed internally,” Lilek says. “Employee expenses are traditionally the highest component of provider operating expenses. When you reduce employee expenses there is also corresponding reduction of expenses in other areas of the operations, for example, telephone, office supplies, office equipment, etc. Outsourcing will continue to grow.”