Competitive bidding forces a shift to retail
By: Jeff Baird, Chairman of the Health Care Group, Brown & Fortunato, P.C.
Competitive bidding has resulted in low reimbursement and fewer DME suppliers being able to bill the Medicare fee-for-service (“FFS”) program. Because of the low reimbursement, competitive bidding favors large DME suppliers that benefit from economies of scale. There’s not a shrinking demand. There are 78 million Baby Boomers who are retiring at the rate of 10,000 per day – but the traditional FFS model isn’t sustainable for most smaller DME suppliers. As demand swells, many suppliers are transforming their businesses into retail destinations for Baby Boomers. Those who refuse to adapt risk losing their customers, their revenue, and their businesses.
Simply put, Baby Boomers value a convenient and comfortable shopping experience. According to a report from Chain Store Age, Boomers are the most finicky demographic – more likely than most to dislike retailers that have messy stores, difficult return policies, and unappreciative sales staff. For DME suppliers, this may mean retraining staff on customer service techniques, adding retail space in a high traffic area while keeping warehouse space for back-end operations, and explaining a clear return policy to every paying customer.
When creating a retail space to compete with big-box retailers and the Internet for cash sales, the supplier needs to focus on its inherent competitive advantage: the physical space itself. Baby Boomers prefer to shop in-store. Chain Store Age reports that 84% would choose to visit a retailer instead of placing an order online or over the phone. A convenient location – perhaps a high-traffic area near a hospital or pharmacy – coupled with a “retail sales mindset” that prioritizes customer service and satisfaction will make DME retailer locations attractive destinations for Baby Boomers.
To create these shopping destinations, retailers need to flip the traditional model on its head. Instead of limited, basic products in a sterile environment for “old people,” new-era DME suppliers should host an array of products. Baby Boomers want to choose from fun colors and styles; they don’t want the standard, hospital-issue gray walker. They’re young at heart and don’t want to be catered to as elderly or infirm.
There’s also no harm in adding flair to traditional products. Products on the showroom floor should show customers all of the add-ons, such as carts for walkers, wheelchair lights, and backpacks. A unique product selection will push customers to visit the store when they don’t have an immediate need but they just want a practical piece of equipment that allows them to show some of their personality.
The chief flaw in the Medicare FFS model is that DME suppliers are left at the mercy of the Medicare-set reimbursement rate. In a retail setting, the supplier can set the prices for itself. This creates an opportunity to mark up retail prices for the additional products, for which customers pay in cash at the time of sale. Most Baby Boomers won’t be deterred by higher prices. According to AARP, they spend $3.2 trillion annually.
As DME suppliers shift to a retail-oriented business model, the right software automation systems will help track inventory, keep accurate records, and streamline the purchasing process. Mediware’s CareTend software boasts easy-to-use point-of-sale technologies that integrate into existing software with no additional equipment required. Barcode scanning features allow for quick and easy scanning of items during the checkout process while managing the store’s inventory.