Profitability in Wound Care: Is it Possible?

Published in Wound Care on February 07, 2022

Heather TrummBy Heather Trumm, Director of VGM Wound Care

As we begin a new year, now is a great time to look into new business opportunities, and one to consider is wound care. If your business does not have a wound care offering, you may be leaving money on the table.

Is this for me?

The short answer is yes. Wound care can be applicable to every business, from a HME company who mainly provides disposables to a complex rehab provider. There are various categories in wound care as it relates to HME.  Those categories include but are not limited to dressings, negative pressure, support surfaces, pneumatic pumps, compression, and nutrition. 

Wound care can be profitable in every category.  For example, with negative pressure wound therapy, the pump is the main revenue source (it’s a rental product). One pump generally costs around $2,000. The Medicare fee schedule, depending on state, rural, non-rural, and the point of service, can vary anywhere from $500-$1,200 per month, per patient. The average length of stay for one patient on negative pressure is 45 days (2-month billing cycle). Depending on your state and rural versus non-rural, you could have 1 pump paid for after 1 patient.  The disposables that are billed with the pump (A6550 – kits and A7000 – Canisters) are generally reimbursed at what they cost.

Profitability Calculators

VGM Wound Care offers profitability calculators for dressings, negative pressure wound therapy (NPWT), and support surfaces to help VGM members determine how profitable wound care could be for their business.  The wound care profitability calculators will give you an estimation of revenue based on product cost and reimbursement rates. Often, these calculators bring to light small changes that could impact your bottom line.

The profitability calculators provide a hard number so you can see if you are making a profit in wound care or not.  We are all in this business for the patient, but if we can’t make a profit, it does not benefit us or the patient. The numbers that are prepopulated in the calculators are based on Iowa Medicare allowables and the revenue is based off average COGS. You can change these numbers to match your state and fee schedules. 

This tool was created with the collaboration of myself and our business intelligence team at VGM & Associates. It includes cost of goods sold (COGS), reimbursement rates, and frequencies allowing to quickly determine the gross margins on providing certain products. Certain product categories, like NPWT factors in a 24-month depreciation. These tools have become very useful when members are looking to get into a category such as dressings or negative pressure. The numbers don’t lie!

I had a call from a new provider last week and walked her though the calculators to get a glimpse of the possible revenue from dressings and NPWT. It opened her eyes quite a bit! She is now going back to her payor sources to negotiate better pricing, so her margins increase.

These tools are available to all VGM members. Download them now under the Wound Care Forms & Documents section of the members-only portal. If you don’t have access to the Wound Care part of the portal, make sure you fill out the VGM Wound Care Profile!


TAGS

  1. business development
  2. operations
  3. wound care

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