Wednesday, July 7, 2010

It Doesn't Add Up

Just how much profit does CMS think the average provider makes on any transaction? You purchase an item for 75 cents and sell it for $1.25, which shows a 40 percent gross profit. But does that mean there is 50 cents left to run the operation? Heck, no!

This is not the way to determine how much the provider earns on each business deal. I had a meeting with a major accounting firm that specializes in home care and pharmacy locations. They told me that normal business expenses for similar operations average between 31 and 36 percent of the sales. Every time a provider opens the door to the operation, his costs do not change! The figures above leave behind about 5 percent, only a nickel remains from each dollar of a sale. So if they take 32 percent from the $1.25, how much is left to run the business, draw a salary and stay in business? This leaves only about 18 percent gross profit. It does not provide any funds for the services that HME providers are used to providing pro-bono.

I realize the reductions are for specific DME items. I saw their spreadsheet for oxygen concentrators, hospital beds and diabetic supplies. I tried to gather some figures for orthotic and prosthetic devices. How many dealers can run their operations without sufficient profits to maintain the company?

The CMS bid evaluation “ensures” that there will be enough suppliers to meet the needs of the beneficiaries. Just how many well-run companies, supporting their families and those of their employees, giving superb service, will be forced to close? How many senior citizens and their family caregivers will be required to go elsewhere? These patients will lose the level of care they have been receiving and the “winners” will not be in a position to provide the best service to their patients.

It is never too late to fight back! It may be more difficult but when your future is at stake, you have no choice but to make yourself heard. As I have stated many times, you cannot stand alone. But AAHomecare, NAIMES, the state associations, the buying groups (VGM, MED, etc.) all have to work together. You have to become a member and provide the funds they need to fight your battle. If not, your tomorrow will be very dismal.

No comments:

Post a Comment

Share your thoughts with Shelly!