Unlike the initial set up revenue, resupply revenue streams in steadily over a long period time. The replenishment market for sleep therapy can be lucrative especially with cash items like tubing comfort wraps or cleaning supplies which need to be bought regularly. Instead of putting your energy into building new customer base to increase revenue, try putting more focus on your current customer base by providing your existing customers with the best most complete care possible by establishing a good resupply schedule.
What it Means for CPAP Suppliers and How Sunset Can Help
Round 2 reimbursement amounts from Medicare were recently announced. This new competitive bidding legislation means there will be a lot of change in our industry in the next couple of years, especially for smaller stores who may not have the scale to remain competitive due to these new Medicare cuts. Many HME registered for this process as of March of 2012 and are probably anxiously awaiting their fate.
This new legislation does not affect reimbursement amounts for private insurance; it only affects Medicare reimbursements at this time. There are pros and cons to accepting a round 2 contract. As Elizabeth Deprey of HME News blogged earlier this week, some HMEs were relieved to be out of a Medicare contract. The high administrative costs of billing Medicare and time consuming government audits are draining and in the end, just not worth it for many smaller companies. The National Association of Independent Medical Equipment Suppliers (NAIMES) has put together an anonymous survey to gauge the end result of round 2 contracts.
The whole logic behind this legislation change is to protect consumer rights; ensuring companies are delivering the highest quality products to their patients at the lowest possible cost. The bill is also a means for cutting the allocation of Medicare spending on these products by dramatically decreasing reimbursement rates. To give you a little more insight to specifics on how this might affect you, check out the new HCPCS Reimbursement by State. We also put together the chart below so you could better see an example of how HCPCS rates have changed across CPAP supplies specifically.
|Replacement Full Face Cushion||65.00||20.40||44.60||69%|
|Full Face CPAP Mask||170.55||99.00||71.55||42%|
|Nasal CPAP Mask||106.35||59.00||47.35||44%|
|Replacement Foam Filters||11.78||6.81||4.97||42%|
*reimbursement average 2012
**reimbursement Ohio 2013
As you can see, the average 45% decrease in reimbursement rates was no media exaggeration. Some products are affected more than others, for example, replacement cushions’ reimbursement rate decreased 69% while chinstrap reimbursement rates decreased by only 24%, with additional variances by state and region.
So what is Sunset doing to help our customers during these times of reimbursement cuts? We recently came out with a new deluxe line of CPAP masks that include a replaceable cushion and cost about 40-50% less than similar masks from leading manufacturers. We’ll continue to provide the lowest prices to our customers, whenever possible. We’re also looking to add more cash and retail items to our line in the next year so our customers can battle Medicare cuts with a boost to their cash sales.
In addition, we are backing a favorable alternative for home care providers, the Medicare DMEPOS Market Pricing Program. This act will still reduce Medicare spending but would better accommodate smaller providers and preserve their ability to compete. John Gallagher and the team with VGM government relations are making a stand for a new Market Pricing Program (MPP), if you’re interested in advocating this, check out VGM DC Link or AAHOMECARE. Many people in the HME industry are going to be talking about this at MedTrade Spring 2013. So if you’re headed out there, keep an eye out for MPP news and updates. What do you think about the Medicare cuts and MPP? We would love to hear your feedback in the comment section below.
Excerpt featuring Sunset Healthcare from an article in HomeCare Magazine by Larry Anderson.
Full Service Approach.
Fully servicing existing patients enables providers to maximize profitability in PAP products, said Ashley Wood, director of operations at Sunset Healthcare Solutions. Replacing masks, tubes, cushions, chinstraps, humidifier chambers and filters as often as the patient’s insurance will allow can maximize HME reimbursements and profits. Wood noted that the reimbursement for supplies can add up to more per year than the device rental fees for a new CPAP setup.
Sunset Healthcare Solutions specializes in replaceable PAP accessories, including their own line of tubes, filters and masks as well as masks, cushions and humidifier chambers from major manufacturers.
“We also carry many hard-to-find filters or replacement parts for machines and masks that are previous-generation and might be discontinued by the original manufacturer,” Wood said.
Sunset Healthcare Solutions offers a customizable Resupply Kit that includes an entire three- or six-month supply of CPAP tubes, disposable and nondisposable filters and even a mask, cushions, chinstrap or humidifier chamber in a single easy-to-handle kit.
Wood suggested the addition of retail products such as CPAP mask wipes or accessory cleaners that provide continuous revenue in addition to reimbursements. “By adding retail products to their line, HME providers have a diverse product set to fall back on as reimbursements are being cut,” Wood said.