Assessing Retail Operations: How Retail Can Protect Your Business
on April 18, 2023
By Tim VanAntwerp, Director, Retail Services, VGM & Associates
In today’s world of healthcare, it goes without saying that DMEPOS businesses are looking for new ways to protect the business’s bottom line in order to safeguard their future. Providers should strongly consider how they maximize reimbursement and cash sales by expanding or investing in the retail side of the business.
Not only does retail include satisfying the needs and wants of customers, but an important piece of running a successful retail operation is looking at that side of the business and focusing on what makes the most sense to the business.
While we go over assessing days outstanding, rejections, staff education, training and incentives, and policies and procedures, remember that there’s not one entry point for retail. No matter the size of your company, there’s opportunity for retail operations to protect your business.
Retail vs. Reimbursement
Let’s start with the basics. With a retail sale, a customer will come into your store to acquire the product they need. You, the DMEPOS provider, determine whether or not the customer needs a prescription. Once the prescription is obtained, the customer pays out of pocket for the item, and the order is complete.
When billing an item through Medicare or any other third-party payer, there are many more steps both you and the customer must go through before you can even determine whether you want to submit a claim for the product. After submitting the claim and completing the billing process, it’s adjudicated at the third-party payer level. When they do finally pay you, there’s probably another party that gets billed as most payers are billed 80% and another 20% goes to a third party.
Billing through Medicare or other payers also opens the possibility of being audited on that claim in the future to ensure the proper process for you to get paid was followed, along with having assignment billing. With retail sales, those particular risks are not there.
Assessing Days Outstanding: Retail Puts Money in the Bank
Days outstanding is a metric that many DMEPOS providers look at constantly because it is an important metric for the business.
Let’s say a customer comes into your business looking for a nebulizer. If chosen to obtain the nebulizer through Medicare or any other third-party payer, you would bill that claim to the payer (Medicare, Blue Cross Blue Shield, etc.). That claim then gets sent to the payer, and then the claim must be assessed and accepted. Then, finally, you get paid for that claim.
In short, it takes a lot of time for that claim to be processed and for you to get paid. The time it takes between providing the nebulizer to the customer to when you finally get paid is the “days outstanding” metric. If those claims continue to pile up and are not getting processed in a timely manner, the days outstanding goes up. When your days outstanding increases, the amount of time without payment also increases.
However, if that same customer comes in and pays for the nebulizer out-of-pocket because it is a retail item, you are paid at the time of sale. There are no days outstanding with retail sales because you are getting paid the day that you put that product into a customer’s hand.
If a company gets to doing 30% retail, their days outstanding is reduced by 30%. Reducing days outstanding increases the cash you have on hand. Retail sales bring down the average time it takes between providing the product and getting money in the bank. Who wouldn’t like that?
Outstanding days is just one metric to consider when looking at retail. Another factor to consider is utilizing tools built within your billing systems to help you further analyze your business.
Depending on the type of system you have, billing systems used by DMEPOS providers come with many tools built in to analyze the business through. Those results will give you many good ideas on what you may want to consider turning into a retail item instead. One way to do this is to look at the number of rejections you receive on products by payer, physician, etc. Examining rejections can help you identify products that may not be working when billed through Medicare or another payer.
For example, let’s say you look into your support stockings and discover that it has a rejection rate of over 50%. It is nearly impossible to do business with that kind of rejection rate, so you would take that metric into consideration and either try to improve the current process you have with stockings, or you could simply switch that product to being sold as a retail item instead.
As a general rule of thumb, rejection rates should be no more than 10%. A relatively “normal” rejection rate for a well-run DMEPOS business for the first time is likely between 5-8%. If it is over 10%, that would be a good indication that a process needs to be reviewed or fixed, whether that be resolving issues with payers or making the decision to switch your policy on those problem areas.
There are many tools to help you make decisions that make sense for your business. If you have a payer that doesn’t pay you on a particular item, it would be beneficial to look into changing your policy and making that item cash-only. Using some of these tools can also help you when negotiating contracts in the future. Overall, consider taking those frustrating examples and moving them into cash-business only. By changing your policies and procedures and properly educating your staff, you’ll likely be better off.
Don’t Leave Money on the Table
Many providers make the mistake of not accepting particular scripts. If a customer comes through the door with a script for a wheelchair (perhaps for an upcoming surgery), many customer service reps automatically make the decision that the customer doesn’t qualify for that wheelchair. Whether or not it’s a qualified billable claim to their third-party payers, the point is to never let that person walk out the door. Instead, consider setting them up for the rental.
Let’s say you rent a $450 lightweight wheelchair and sell it over 10 months for $45. That not only gives you that customer’s business, but the customer is leaving with their needs met for that script. Providers should consider this option instead of turning away business.
In order to do this successfully, it is extremely important to provide the necessary education and training to your customer service representatives so they know the rules and how to meet those customers’ needs instead of turning them away.
Education, Training, and Incentives for Employees
The employees we have are an essential piece to the puzzle. They are the ones on the front lines talking to customers and making sure their needs are taken care of. Without the proper training in place, your staff will be less able to do their jobs effectively.
It is crucial to provide your employees with training that is consistent, supported by leadership, and supports your policies and procedures.
Consider implementing an incentive program for retail sales as well, as this can be a key tool in making sure your staff is engaged and motivated to pursue retail sales.
Policies and Procedures for Retail
As an industry standard, policies and procedures are in place to protect us and to keep our customers and our business safe.
An example is single-patient use items. If you determine that a nebulizer is a single-patient use item and have a policy and procedure that states this, then you would not provide nebulizers as rental items. Say a customer comes in with Medicaid for insurance, and perhaps Medicaid will pay the purchase price. So, in this case, it’s not that nebulizers are not billable to insurance, it’s that they’re only billable as a sale. Implementing policies and procedures such as these could be very effective.
Policies and procedures are in place to protect our business, so it is imperative to clearly define these and ensure your employees are trained on them.
Regardless of the size of your DMEPOS business, there’s not one entry point for retail. There are many opportunities to enhance your retail operations to protect your business and your bottom line.
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This article was originally featured in the VGM Playbook: Safeguarding Your Future in DMEPOS. To read the full article and more like this, download your copy of the playbook today!