Volume 5 Issue 7, March 27, 2018
By Bradley M. Smith, ATP, CMAA and Hilsman Knight, CMAA
Several years ago, DME competitive bidding was instituted by Medicare and the impact has been dramatic. Many smaller DMEs that could not successfully compete sold their assets, restructured their business, or simply closed their doors.
Other DME companies, however, saw an opportunity to be exploited. In our national DME merger and acquisition practice, we’ve seen a number of success stories of companies that have both survived and thrived in this increasingly competitive environment. Here’s what they did:
1. They ruthlessly assessed the healthcare marketplace.
Successful DME entrepreneurs realized quickly that healthcare is now being shaped by economics, managed care, rapid innovation, strongly-stated customer preferences, digital marketing, and new direct access to DME products. They then made a commitment to adapt to these changes rather than pretend they weren’t taking place.
2. They partnered with investors and capital.
Successful DME entrepreneurs scrapped the traditional “go it alone” strategy in favor of a new affiliation model, where competitors actively partner with one another in selected areas. They also brought in new investors, especially private equity groups (PEGs) that had abundant financial resources and saw an opportunity for disruptive innovation.
3. They adopted a millennial perspective.
Rather than the lethargic approach characteristic of many DME operators from the Baby Boomer generation, successful DME entrepreneurs have acted with a sense of urgency and agility that’s characteristic of high-tech firms, where most of the key employees are from the millennial generation.
4. They sharpened their strategic clarity.
Traditional DME companies often had a general sense of their strategic goals rather than a precise understanding of what would be necessary to succeed in a changed and changing marketplace. The most successful DME entrepreneurs set aside their historic biases, systematically assessed their risk/benefits, identified the resources necessary to succeed, and then aligned those resources strategically prior to taking action.
5. They focused on precise execution.
In the past, DME companies often had good, but general plans for the future. However, few were able or willing to execute those plans with precision. The DME companies that thrived (and there are quite a few) acted with conviction, evaluated their results, and made course corrections in order to keep on growing and diversifying. They were and are ambitious, in the best sense of that word.
6. They targeted their offerings.
Traditional DME companies tended to offer a full line of products, regardless of whether those products were profitable or in high demand. By contrast, today’s progressive DME companies tend to “drill down to core offerings,” all the while paying attention to cross-selling opportunities. This allows them to quickly eliminate underperforming products, thereby increasing profitability.
7. They’ve learned to learn quickly.
In order to take the actions described above, successful DME companies have learning quickly from their mistakes and successes alike, incorporating those lessons into new offerings and new initiatives. Mostly, they’ve learned that the DME market is shifting, like the rest of the healthcare industry, to a value-based, outcome-measured model.
8. They’ve become fanatical about measurement.
Funding entities and payers, whether public institutions, managed care organizations (MCOs), commercial insurance, or even consumers who pay cash, want to know about observable outcomes and value in terms of their healthcare. Healthcare companies that can’t deliver these outcomes and value – or can’t communicate them effectively – simply can’t compete in this rapidly-changing market.
These eight approaches have helped DME companies survive and thrive despite the changes in the industry. They offer lessons learned that can guide you now and in years to come, when no doubt further changes will be implemented by Medicare.
If you would like to personally discuss this article, the value of your healthcare company/practice, or how to get the best price when you sell it, you can reach Brad and Hilsman directly at [email protected] / 817.793.3773 or [email protected] / 229.669.9613.