How to Sell HME: Your Front-End Profit Center

by Jack Evans

Independent drug stores are transitioning from pharmacy to health and wellness to health care. Today, home healthcare (HHC) is one of the fastest growing and highest margin segments sold in pharmacies.

Most drug stores are already in the healthcare business to a limited degree, selling throughout the store a basic selection of blood pressure monitors, canes and crutches, diabetes products, incontinence products, orthopedic supports, urinals and bedpans. When they make the commitment to become a HHC provider, these products are included within complete categories that are featured in separate departments. Examples include canes within mobility aids and blood pressure monitors as part of home diagnostics.

Pharmacies are the natural location to find home healthcare (HHC) products and supplies (or HME, home medical equipment). As Americans age and more Baby Boomers are becoming caregivers for their parents, consumers need convenient locations and knowledgeable people to help meet their daily home healthcare needs. According to numerous Gallop consumer surveys, the first person consulted outside of the immediate family concerning medical problems is the trusted pharmacist at their corner pharmacy.

Traditional HME Reimbursement Business

The traditional HME business is a far contrast from a retail drug store. The HME products are stored in a commercial or industrial storeroom, provided to the patient when they present a doctor’s prescription and then billed to and paid for by a third-party payor. But drug stores selling HME do not have to necessarily pay for the expenses of a billing expert and billing software to sell Medicare or other insurance patients.

Most drug stores that sell HME simply outsource their billing. These billing companies charge either a percentage of the claim, i.e. 4% to 7 %, or a flat fee per claim, i.e. $2.50 to $3.50. They also submit these claims electronically to speed up payment within two or three weeks.

Sell Retail HME

Most HME products in a retail setting are sold in exchange for money, whether cash, check or credit card. Without any 60 to 90-day payment delay from insurance, cash is deposited daily to help fund ongoing operating and marketing expenses.

In the retail HME business, first and foremost is location. The business is located in a highly visible and easily accessible area where customers are already shopping for healthcare products. Independent drug stores experience double-digit growth when they offer their own customers HME products and supplies. The key is to transition from a drug store with one HME planogram on an aisle to a HHC pharmacy with HME in front and the pharmacy counter in the rear.

Provide an attractive retail showroom in which HME products are displayed openly for customers to touch, try and buy. A complete product selection needs to be offered, enabling customers to choose between two or three options from basic to deluxe models. Customers are treated as top priority, regardless of ringing telephones, incoming prescptions or billing issues.

HME Showroom Size?

The average HME showroom around the country is 1,200 sq. ft., with most independent drug stores using a minimum of 800 sq. ft. Not all categories and products can be displayed or sold in this area. The key to successful sales, turns and profits is matching the categories with your customer demographics.

Examine your existing script patient base and identify several major medical conditions. Then focus on two or three related HME categories and display depth within these categories. For example, Baby Boomers who buy diabetic products on a monthly basis would also need compression stockings and orthopedic supports. Female seniors who buy incontinence products also need mobility and bathroom safety products. Utilize a front window to display lifestyle and comfort products from these categories on a monthly rotational basis.

How to Design and Merchandise an HME Showroom

There is no “one-size-fits-all” for home healthcare product selection. An HME business can no longer afford to carry every product. Stock the products your loyal customers buy on a repeated basis, and any other products that might also appeal to their same needs or values. Merchandise your HME showroom demographically to provide senior, Boomer and family caregiver selections that are grouped separately. Or simply start with the basic mobility and bath safety categories and customize related categories and products according to your customer’s needs.

By placing the pharmacy counter in the back of the store, customers are directed to walk through the HME section. By removing gondolas and displaying lift chairs, wheelchairs, walkers, bath benches and other large HME products on the floor, customers are invited to walk over and try the equipment. Arrange related equipment next to each other, so that a customer renting a wheelchair or buying a transport chair can also be shown wheelchair cushions, trays and lifts.

HME Salesperson = HME Sales

This is a bold statement, but HHC products and supplies are not OTC products that sell themselves. Someone must qualify a customer to find out the end-users home healthcare needs and then demonstrate related HME products that will help them maintain or improve their daily quality of life.

Dedicate a retail clerk as your HME salesperson to work the showroom during specific retail hours. Provide product training by having HME vendors inservice them on a regular basis before your business opens. Provide these HME salespeople with name tags that specify they are “HME Specialists” or “Home Healthcare Professionals” to let your customers know they are now experts in HME. And remember that HME salespeople are like anyone else in sales in that they work in response to the incentives that are provided to motivate them. The average HME commission paid is 10 percent on monthly gross HME sales.

Outside sales to referral sources are also very important for the growth of an HME business. Simply have your new HME salesperson visit local healthcare professionals one or two mornings each week. Find out what their patients need in relation to homecare products and services. Then provide these products and services and let your referral sources know you are helping to educate and care for their patients at home.

Selling Long-term Care Facilities

Long-term care (LTC) refers to non-acute facilities that include nursing homes, rehab centers, continuing care facilities, board-and-care homes and assisted living facilities. Their patients and residents usually need HHC products. Your goal is to determine what products they need and how to become their regular HME provider.

Contact the LTC directors of purchasing or procurement for HME, not pharmaceuticals. Find out what HHC products they are currently buying. Disposables are a large category, including gloves, incontinence and skin care products. Then determine who is being billed for these products, i.e. the patient, facility, private insurance, Medicare or Medicaid. Patients will often pay more for higher quality products, while Medicare/Medicaid patients simply accept their basic entitlements.

One usual concern of LTC’s in regard to their HME supplier is reliable service. Do they receive their orders the next day or have to use secondary vendors for quick fill-ins? Also determine monthly usage before quoting prices.

Selling Assisted Living Facilities

Assisted living facilities (ALF’s) are being built almost everywhere because Baby Boomers do not want to place their parents in traditional nursing homes. These “post-retirement” lifestyle centers offer private bedrooms and bathrooms combined with communal living and dining areas. The average resident is an 80-year-old female who needs help with two to three daily living activities, i.e., dressing, toileting, transferring or walking.

The big benefit to selling ALF’s is that the resident – not the facility – pays for any HHC products they buy. These are mostly retail, cash sales for higher-quality products. Many HME providers visit ALF’s monthly, providing “lemonade socials” along with demonstrations of different HME products.

Profiting from HME

When drug stores incorporate HME into their businesses, they usually open with a fanfare of advertising, PR and a grand opening complete with ribbon-cutting and local dignitaries. Sales usually start at $500 days for a $10,000 month, grow to $20,000/mo for several months and then slowly grow to $40,000/mo. The first year gross sales will reach $500,000 or $600,000. The second year usually peaks at $1 million, with Saturday HME sales averaging $5,000.

Note that the days and hours of business directly affect your bottom line. Seven days is not always cost-effective, but Saturday is usually a busy retail shopping day. Also, staying open until 7 PM one or two evenings will bring in the after-work caregivers. The more convenient you make shopping in your HHC showroom, the higher your sales, number of repeat customers and sales-per-customer.

Most of your regular customers already have some level of need for HHC products. Your goal is to become their local HME resource and help them better care for their loved ones at home.

Jack Evans, president of Global Media Marketing, is an educator and marketing specialist in HHC. He works with HME providers and drug stores to develop retail layouts, merchandising, sales training, marketing and advertising programs. He can be reached at www.retailhomecare.com or 310 457-7333.
 

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