Jeff Baird Discusses the Future of DME

Jeff Baird, with Brown & Fortunato, discusses some of the current challenges that DME suppliers are facing. From competitive bidding, Medicare practices and the expectations of the retiring Baby Boomer generation, DMEs are facing more hurdles than ever before.

Transcript

In the DME industry, we’ve seen reimbursement really go down the tubes and that’s a result of competitive bidding and other factors. Up to this point, the DME industry has been an assignment industry where DME suppliers take assignment and bill Medicare. That no longer really can work anymore. The DME suppliers, for them to…I mean, to put things into perspective, the demand for DME is going to go through the roof with 78 million Baby Boomers that are retiring at the rate of ten thousand per day. So, the demand is huge. Boomers expect to pay cash. They get it. They understand that. Unlike perhaps their parents or grandparents. And so, in order to survive and in order to meet the demand, DME suppliers need to go heavily into the cash retail market. Meaning, that they need to sell products for cash and frankly, the Boomers will pay cash and in so doing, the DME suppliers can sell the Cadillac versus the Cavalier…can sell high quality products and that’s something that Boomers are going to want. And, that’s the future of DME.

The biggest drawback is that Medicare fee for service means that the DME supplier is paid whatever Medicare decides to pay it, and right now DME suppliers are getting hit with a perfect storm of competitive bidding, low reimbursement and stringent documentation requirements. We’ve got audits that are pretty much out of control by third party payers, particularly the CMS contractors. And so, with Medicare fee for service, the reimbursement is just pretty much set by Medicare and that reimbursement has been driven really, really low by competitive bidding, which is a program that has many flaws, but the end result has been much lower reimbursement. On the other hand, with retail, the supplier can charge whatever it wants to charge. It can certainly charge much more than the Medicare allowable and it can also charge less than the Medicare allowable, subject to certain types of parameters. But in terms of setting the price, with retail, the DME supplier can pretty much do it wants to. And, and again, Boomers want to be active until they die. Boomers, you know, if a Boomer lives be eightyfive years old, he plans to be running triathlons and going to Stones concerts until he’s eightyfive years old. He’s not going to be playing shuffleboard down in Scottsdale. And so, there’s a huge market for Boomers who want to be active and who are more than happy to pay cash for retail products.

Question is, what should a DME supplier store look like? Up to now, DME stores, if you will, have been pretty sterile. It’s like walking into a nursing home. It’s pretty depressing. And, up to now, DME suppliers really have not had retail showrooms because there’s been no need to. They get a referral from Dr Jones or from the hospital and they deliver to the patient’s home and that’s been about it. Or, when somebody does walk in to purchase something, because Medicare pays for it, as opposed to the patient or the customer then there’s really no reason for the DME supplier to have anything that’s aesthetically pleasing. Well, that’s changing now. I’m a boomer…someday, unfortunately…I don’t get a free pass from getting old and so when I wake up one day and I’m 75 years old and I drive to a DME facility, I’m not going to be listening to Lawrence Welk. I want to be listening to stairway to heaven and when I walk in, I want the store…I want to have the same type of experience as though I’m walking into Academy Sports or Bass Pro Shop. I don’t want it to be a sterile environment. I want it to be a fun environment and for that reason it’s important that DME suppliers have really attractive, somewhat funky, really fun, retail showroom floors.