Riding Out the Recession: Survival Tips for O&P Businesses

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By Judith Philipps Otto

Finances are tighter than ever for O&P business owners. The recession, coupled with uncertainty regarding the potential impact of proposed governmental healthcare reform, has left O&P business owners in limbo-reluctant to respond until new laws have been passed and the economy has stabilized. The O&P EDGE asked a number of O&P business professionals for their perspective on the economic situation, and the resounding consensus was that doing nothing is no longer an option. Survival, they agree, depends on two simple rules:

1. Pay attention
2. Sweat the details

"O&P entrepreneurs are in the business to improve people's functionality, but leadership in our profession right now needs to be closely involved with the business end of the business," advises Dennis Clark, CPO, OPGA president.

Catherine Pruitt, president and CEO of PrimeCare O&P Network LLC, agrees. "My experience is that most independent facility owners got into the field by following their hearts-which, sadly, in these difficult times, is not enough. Better and more up-to-date business practices are essential to survival."

Because of changed market conditions resulting from the economic downturn, now, as never before, O&P practice owners trying to weather this storm are finding it essential to shake off complacency, insist on vigilance and accuracy from themselves and their employees, and refuse to settle for measures that used to be "good enough."

The recession is having a profound impact on access to, delivery of, and payment for healthcare:

1. Patients' healthcare coverage has changed or vanished entirely.

Rick Fleetwood, CEO of Snell Prosthetic & Orthotic Laboratory, Little Rock, Arkansas, points out that ten years ago, two-thirds of the companies in Arkansas provided insurance for their employees and one-third did not. Today, those numbers are reversed. "These coverage changes impact our ability to provide service and require us to work much harder to find funding for those individuals. Sadly, that's not always possible."

Greg Gruman, CP, president and CEO of Winkley Orthotics & Prosthetics, Golden Valley, Minnesota, notes that recent American Orthotic & Prosthetic Association (AOPA) surveys reveal that 20 percent of responding AOPA members don't provide fully paid employee healthcare.

Clark speculates that between 52,000,000 and 54,000,000 Americans lack any kind of healthcare coverage-figures from the 2001-2004 recession counted some 50 million underinsured people, on top of the estimated 4 million who have recently lost coverage.

Uninsured or underinsured patients are more apt to spend money on repairs than on replacements, Gruman finds. "Additionally, high-deductible health plans have stopped patients from coming in early in the year, so we find that our Januaries and Februaries are starting to get slow again, and that has thrown off our forecasting."

Michael Oros, CPO, FAAOP, president of Scheck & Siress, Oakbrook Terrace, Illinois, reports seeing an expectation of discounting from their higher-deductible patients. "They're looking for ways to manage their payments."

"With people waiting longer for care," Clark says, "we are moving away from a wellness approach to patient care. At-risk patients are trying to make their prosthesis or orthosis work longer-until the situation is nearly catastrophic-and that could lead to some real co-morbidity issues."

Unemployment also is a large contributor to patients' reluctance to invest in their own care, notes Elizabeth Carlstrom, founder and owner of O&P Business Solutions, Austin, Texas. "With less money in their pockets, patients are suspending their elective medical attention and only getting treatment for mandatory health issues."

2. Medicare is enforcing medical-policy revisions and scrutinizing claims as never before.

The Centers for Medicare & Medicaid Services (CMS) has been vigilantly focusing on strengthening its internal employee training and education efforts that have been in effect since late 2008, Carlstrom observes. "That is a big factor because it means stronger claims-systems checks relating to coding and billing-an essential lifeline for any O&P business. Claims that were previously processed and paid quickly, despite missing modifiers, are now being denied."

She describes modifier changes, the introduction of Medicare's Provider Enrollment, Chain, and Ownership System (PECOS), and the recovery-audit contractors that Medicare has hired to audit healthcare-facility records from October 2007 forward, seeking out billing trends, missing documentation, or prescription details. "If they find these things, they can recover money that has already been paid out. Millions of dollars have already been recovered for the government-as much as $300,000 from just one business. Who can afford that?"

Carlstrom also points out that the Office of the Inspector General (OIG) effort has been bolstered with newly approved funding to help combat fraud and abuse, and the FBI is actively hunting down lawbreakers.

3. Government funds are hard to find.

Oros notes that the national recession is having an impact at the state level as well. "A number of states are in a tough financial position because they have huge budget deficits that this recession is prolonging, and Illinois happens to be one of those states. Illinois O&P service providers are seeing their payments delayed significantly. Where a six-month delay was to be expected previously, now it's not unusual to be from 240 days to a year behind on some payments. This can have a significant effect on your cash flow."

He cites a similar situation in California, where O&P providers were being paid with non-negotiable IOUs. "It's tough to pay your bills with somebody else's IOU," he points out.

4. Authorizations are difficult to gain.

Fleetwood reports that higher-tech and more sophisticated services and devices are less likely to be authorized by payers and require considerably more documentation.

"We are increasingly asked to do more with less," he reflects. "Coast to coast, everybody has seen their profit margin go down. They're not making less money, they're just having to work harder to earn it-sell more, offer more clinics, more services, more everything. Dollars have to work harder and go further."

How Have Practices Been Coping?

Responses to the changed O&P business environment vary, but similarities are evident:

Jason Whiteaker, business development manager, RemitDATA Inc., Memphis, Tennessee, helps O&P clients reduce their denial rate and improve overall efficiency by working with post-adjudicated claims data. "Patients have a lot less money for patient-pay programs," Whiteaker says, "so providers are now trying to find anything and everything they can do to become more efficient [and] more viable as an overall company; e.g., automating some of their existing systems, outsourcing and/or centralizing other pieces of their operation, and also managing their finances better and having a better understanding of what they're being paid and why they're not being paid so that they can make adjustments. Upcoming coding changes are going to create...new hurdles to overcome."

Gruman admits that his company has become more pessimistic about its budget and forecasting. "We have a very conservative estimate for sales growth, we're not going to be raising prices this year, and we're doing really frugal budgeting. We're paying more attention to our debt-trying to increase cash reserves and maintain our creditworthiness-so credit will be available to us should we need it."

Overall, Winkley is paying more attention to basics such as inventory control, benefits costs, staffing efficiencies, and billing systems. The company has changed its policy and is now collecting co-payments up front during the initial visit, as well as payment on delivery from patients for whom they file Medicare claims, Gruman explains. "We're a lot more strict on non-assigned claims that we file. We've also had to spend a lot more time dealing with collection problems connected to reimbursement.

"When the business is running well, we tend to get a little lax on monitoring systems, increasing efficiency, and making changes. When things get tight, we start doing what we should have been doing all along."

Fleetwood notes that in difficult times, "you find out who your friends are. The employees and vendors you can count on to support you in this fight are easy to identify. We have asked our employees to dig deeper and do more in these hard times, and they have done so. Our loyal suppliers, too, recognize that when our reimbursement doesn't increase, we can't afford increases on their products, and they stand by us-and the industry-by holding the line."

Overall business compliance, billing and coding, product management, patient satisfaction, and complaints should all be measured, monitored, tracked, calculated, and reported, Carlstrom notes. Everything should be documented, she stresses-on paper, not in your head. Details are important, and people who are not taking these requirements seriously must begin to do so.

Carlstrom also reminds us that Medicare is constantly changing. "Stay alert, aware, and comply with those changes as they are announced. Although orthotists and prosthetists may be exempt from accreditation today, that is supposed to be a temporary exemption that could change at any time; have a plan of action and be prepared to implement it. Be aware that there's a second phase to facility accreditation as well. In the performance-management phase, facilities must comply with performance requirements and implement the changes outlined in their corrective plan of action, otherwise they risk losing their accreditation status."

Carlstrom's final advice offers a sound motto for these troubled times: "Prepare for the worst and hope for the best."

Even if you do everything right, in many cases you are the proverbial ship tossed by gales-at the mercy of factors over which you can have no control. Your best defense is being prepared. Have everything shipshape, batten the hatches, and then full steam ahead.

Judith Philipps Otto is a freelance writer who has assisted with marketing and public relations for various clients in the O&P profession. She has been a newspaper writer and editor and has won national and international awards as a broadcast writer-producer.

Survival Tips to Try

Being prepared appears to be the best defense. Our panel of experts provided the following list of proactive pointers for practice owners and managers to consider:

Become better-informed and politically aware. Keep up-to-date on tax policies and the healthcare debate. When tax-relief exemptions expire in 2010, for example, thousands of dollars in state and local property taxes will no longer be deductible, potentially costing business owners far more than increased reimbursements would cover. Being aware, making your vote count, and influencing others to do the same is crucial to survival. (Gruman)

Employ sound business practices, especially in the financial management of the company. As with personal finances, six months of reserve savings is essential, providing something to fall back on before the safety net kicks in. (Gruman)

Study and understand cost-accounting principles-and know what constitutes profitability. Most healthcare providers don't know how to calculate the true costs of their products. The costs consist of both "variable costs" (the direct cost of the product/service being provided) and "fixed operating costs" (such as the general administrative overhead that a business must pay regardless of the volume of product it sells). O&P businesses need to understand cost-accounting concepts so they can reasonably determine how much profit and/or loss will be incurred based on the proposed contract rate from the healthcare-payer entity. (Pruitt)

Cut costs. Take a much finer lens to the expense side of the equation. Trim discretionary spending, consolidate purchasing, and take advantage of value discounts when possible. Consider substituting products that provide a similar clinical function but can be purchased either at a lower cost or on consignment, helping to reduce your monthly cash outlay. (Oros)

Monitor your cashflow. You have to make sure you're profitable, so cost analysis and comparison is vital. (Carlstrom)

Purchase wisely. If vendor prices exceed reimbursement, comparison shop for the best quality product/service at the best prices and renegotiate with manufacturers, if necessary. (Carlstrom)

Appoint a practice manager. Practitioners went to school to practice O&P; many don't have any business training. You should have a trained, dedicated business manager if your business is going to survive. (Jane Edwards, vice president of operations, PrimeCare O&P Network)

One of our member facilities, Dynamic O&P, keeps cases moving and facilitates billing by using patient-care coordinators who are paired with specific practitioners. Once a week they sit down together to track the progress of each case, focusing on expediting in order to complete and bill the claim. (Pruitt)

Begin practicing evidence-based care. People who measure results and use that information to improve the level of care they provide, demonstrating the validity and the value of healthcare dollars spent on O&P, will continue to grow and thrive through this recessionary time. The people who are going to win this game are the ones who have the data. (Clark)

Upgrade to new technology to support your practice. Go paperless and centralize your documentation with an ultra-efficient web-based document-management system such as WebScan PRO-a full OCR engine that automatically files billing records, contracts, human resources paperwork, etc. safely and securely. Another web-based tool, Reimbursement PRO, automatically analyzes and trends your reimbursement information in reports that allow you to identify and correct costly problems; it also tracks and works denials, saving money as well as 20 to 30 hours per week in clerical time. (Whiteaker)

Maintain good credit-with your suppliers and your bank. Lack of or limited access to credit seems to be hurting a lot of businesses right now. (Gruman)

Refine your payer mix-and your products and services. Consider trimming or eliminating products and services that are not profitable, such as off-the-shelf shoes and orthotic items that don't necessarily require the skills of a certified practitioner. (Oros)

Encourage discounts based on prompt payments. Try to collect as much of the patient's balance as possible up front, and offer a discount for doing so. It might hurt your top line a little but will ultimately improve your cashflow. (Oros)

Keep learning. Be a lifetime student, always aware of what's going on and which new issues are on the way, so you can be prepared. (Whiteaker)

Learn from survivors in other industries. Some have already experienced similar regulations, reimbursement cuts, competitive bidding, etc. How did they succeed? (Whiteaker)

Take a hard, critical look at yourself. To survive in a changing environment, you have to be ready to identify and acknowledge your business' shortcomings and be willing to change. Make sure that you're operating as efficiently as you can, and that your inventory is under control. (Fleetwood)

Arrange with a trained and experienced professional to undergo a Strengths, Weaknesses, Opportunities, and Threats (SWOT) analysis to identify your practice's strengths and guides you to either improve or capitalize on them. The fresh perspective provided by a third-party moderator can be invaluable. (Pruitt)

Educate and invest in your staff. If you want to recession-proof yourself, do it by hiring and choosing employees who will work with you; make sure they are trained, educated, and prepared to deal with any possible exigency. (Fleetwood)

Build relationships with patients, referral sources, and managed-care contracts. Seek to improve your service by soliciting critiques and responding to any legitimate unserved needs that come to light. (Pruitt)

Be competitive-and market your advantages. Identify or develop benefits that are unique to your practice-even something as simple as staying open until 7 p.m. two nights a week so working patients can conveniently schedule appointments. Be sure to advertise these features so patients are aware of them. (Pruitt)

Increase direct-to-patient communication. Having good, informative information on your website, getting involved with social networking, and reaching purchasing decision-makers via the Internet give people reasons to come to your door for service. (Clark)

When it comes to reimbursement, play by the rules. "Monitor billing and coding errors and EOBs more closely, because a single denied claim can cost companies a lot of money," Carlstrom advises. "If we spend more time making sure our claims are scrubbed before they go out-and before our records are audited-then we can catch some of these things and receive prompt reimbursement. Realistically, you should be able to provide service and product to a patient today, bill for the service, and get paid within 30 to 45 days. Period."