Moving the HME Industry Forward

General Healthcare

Rapidly Changing Landscape – Role of the DME Supplier

Jeffrey S. Baird, JD • January 7, 2018

AMARILLO, TX – As I have discussed in previous Medtrade Monday articles, our nation’s health care delivery system is being turned on its head. The archaic fee-for-service model is being replaced by a patient outcome model. Payors are expecting health care providers to collaborate in their treatment of patients, and the successful DME supplier will be the one that has totally “bought into” data analytics (i.e., the collection of data showing how the supplier’s products and services are keeping patients from being readmitted to the hospital). This rapid shift in health care delivery is discussed in a December 20, 2017 Wall Street Journal article entitled “Deals Boom in Health-Care Shift.” The article says, in part:

A recent burst of deal-making among health-care companies is set to accelerate the shift in how and where Americans get medical care – away from hospitals and toward clinics, doctors’ offices, surgery centers and even drugstores.  Potential mergers disclosed since early December involve companies with more than $550 billion in cumulative revenue, a sign of how much of the industry is caught up in efforts to reshape the landscape…” The industry is going through a version of upheaval,” said Kindred Chief Executive Benjamin A. Breier.  “Providers across the country are trying to figure out what their place in the world is going to be.”  The moves underscore the shift in power as health-care companies look to drive down costs and change how and where patients get care…

Managed-care companies are going deeper into the business of delivering health care outside hospital walls. They are seeking to squeeze out costs by speeding up the decline in hospital use, which is already under way.  CVS Health Corp., with its roughly $79 billion acquisition of Aetna Inc., wants patients to stay out of emergency rooms and do more at revamped, upgraded drugstores. UnitedHealth Group Inc.’s $4.9 billion purchase of DaVita Inc.’s doctor group is part of a plunge into owning physician practices, clinics and out-patient surgery centers.

The trend puts hospital companies on the defensive. Some are bulking up to form ever-larger players…Hospitals seek heft to cut costs and do battle with managed-care firms over their future role and payment rates.  Meanwhile, they continue to invest in their own outpatient settings, looking to capture more of the patients their main facilities may lose. On the hospital side, “they’re basically increasing their leverage” in negotiations with insurers by forming ever-larger systems, said Glenn Steele, former CEO of Geisinger Health System. “If they get big enough, they have to be part of any care-giving network.”

Hospitals have been suffering a slow bleed for years…Hospitals have responded by rapidly expanding outside their facilities, investing in outpatient surgery centers, occupational-health clinics and urgent-care centers. “They want to get more involved in where the action is,” said Kathleen Carey, a professor in the Boston University School of Public Health.

Other factors behind the shift away from in-hospital care include evolving medical practice and technology that enable more procedures and other care to be done on an outpatient basis.  Insurers and employers have sought to advance the trend, including with health-plan designs and rules that try to prod consumers away from hospitals… [A] rising share of Medicaid and Medicare beneficiaries are now enrolled with a managed-care company, rather than getting their coverage directly from the government.  About a third of eligible Medicare beneficiaries are in Medicare Advantage plans offered by companies such as UnitedHealth and Humana…That is giving insurers greater influence as they aim to move care away from hospitals and hold down cost…[For example, Centene Corp., a major Medicaid managed-care company…is using] data analysis and other tools…to [according to its CEO] “prospectively identify disease states before they become an issue”…[According to Humana CEO Bruce Broussard], “We believe that care in the home is a vital element of improving the health of seniors living with chronic conditions, allowing them to receive services in the comfort of their home, with less time in more costly institutional settings.”

All of these large movements in the health care space affect DME suppliers…even the suppliers in Small Town, America. As all of us are aware, the DME supplier can no longer just open its doors and wait for its phone to ring or for someone to walk through the door.  That train has long departed the station. The supplier need to determine how it fits into the bigger picture.  More importantly, the DME supplier must determine how it can make itself dispensable to hospitals and third party payors (“TPPs”).

More than just about any other health care provider, the DME supplier (i) knows where the patient lives; (ii) knows who the patient’s care giver is; (iii) knows who the patient’s physician is; (iv) knows what the patient’s various ailments are; and (v) has regular contact with the patient and his/her caregiver. In other words, the DME supplier is uniquely positioned to keep patients healthy…and away from hospitals. The DME supplier is also well-positioned to collect data on how the supplier’s products and services keep patients healthy.

The opportunity for the well-run DME supplier is to be, as stated by Professor Carey, “part of the action.” The supplier can accomplish this goal in a number of ways. For example:

  • The supplier can invest in data analytics. Essentially, this means that the supplier can invest in the technology to collect and “crunch” data pertaining to patient outcomes. The supplier can then present this data to hospitals and TPPs
  • The supplier can approach TPPs with the goal of being admitted to the TPPs’ provider panels. The supplier’s chance of success will be enhanced if it can submit data showing how the supplier’s products and services keep patients healthy and out of hospitals.
  • The supplier can enter into Preferred Provider Agreements with hospitals. In return for being designated as a “preferred provider,” the supplier will commit to provide “value added” services to the hospital’s discharged patients…so as to reduce the chances of them being readmitted soon after discharge. As with approaching TPPs, the chance of convincing a hospital to enter into a Preferred Provider Agreement will be enhanced if the supplier can show (through collected data) how the supplier’s products and services keep patients healthy and out of hospitals.
  • The supplier can offer to enter into a joint venture with a hospital in which the hospital and supplier jointly own a DME operation. This DME operation will focus on providing “value added” services to discharged patients.
  • The supplier can approach Accountable Care Organizations (“ACOs”) and request to be included on the list of the ACO’s providers. Again, the supplier’s patient outcome data will be critical to the supplier’s success.

Jeffrey S. Baird, JD, is chairman of the Health Care Group at Brown & Fortunato, PC, a law firm based in Amarillo, Tex. He represents pharmacies, infusion companies, HME companies and other health care providers throughout the United States. Baird is Board Certified in Health Law by the Texas Board of Legal Specialization, and can be reached at (806) 345-6320 or jbaird@bf-law.com.