Unmanageable Medicare Cuts Put Another HME Out of Business

As reported recently in HME News, Northern Rehab Equipment & Respiratory closed after 19 years serving the community. AAHomecare reached out to Stephanie Schwartz PT, ATP, CAPS, to understand the full story and to share her experience. She said the following:

“Yes, the reimbursement rates and policies had a huge effect on my business and is why I closed.  Just to summarize the recent events for you: I am a very proactive owner and I like to make business decisions in advance of changes of sales and circumstance if possible. I owned three stores in the area at one period of time.  Downsized to decrease cost since it is more expensive to provide products and services over the distances rural providers have to go.

At my Redding store, when we saw the cuts coming we made models to predict if we could stay with our current overhead and staffing and make ends meet.  We could not, according to the models, so we began to change. I have been in business almost 20 years here in Redding and I was well aware that any poor decision could affect my retirement as I am 62 years old. So, we sold some areas of business that were getting too difficult to manage due to so many rules for documentation, qualification and constant changes in reimbursement and constant audits.

We sold our Rehab Division to National Seating and Mobility. Five of my employees went with them, so I felt good about retaining those jobs for them with a good new employer.  We then had the first round of cuts in January, surprisingly we did okay and we were still profitable and doing a lot of business. We were adding more retail sales due to the fact in our town many providers had stopped providing beds due to the severe audits and strict, arduous qualifications. 

Physicians were not willing to rewrite notes three and four times to get the documentation right so providers just stopped providing beds through insurance.  We picked up more retail sales that seemed to help balance out the initial 20% cut. 

When it appeared that there was to be no reprieve from the next 25% cuts in July, we again did models and reassessed our profit on individual items to see which ones would be profitable to sale.  WOW those were huge, unmanageable cuts that Medicare made in July. The cuts ranged from 25%-45% off the 20% cuts made in January.

I made the decision then to do a soft close of my business because so few items were going to show a profit and the delivery costs for a rural provider are so much more.  We added an Accessible Living Division a few months before the July cuts, selling ramps, lifts and bathroom inserts and remodels and were hoping to survive on mostly cash and retail sales and this new division. We cut staff again, as the cuts in July began and decided to sell off our respiratory division. We managed to stay in business almost 12 months after closing the respiratory division by getting some VA accounts for our ramps and lifts. But ultimately, I knew we could not survive, so we closed in August 2017. 

I did go not bankrupt, I paid all my bills and said good bye to some faithful customers, managed to find jobs for almost all the staff.  I always followed the Medicare rules and guidelines but the new qualification rules, audits, documentation, reimbursements are not made to be sustained by small businesses. Unable to purchase products at the reduced bulk cost of a larger business, our gross profit was always less than a larger business. This along with the effect the reimbursement cuts had and the cost of accreditation and audits was the reason we could ultimately not continue.”

Stephanie went further to say that she would like to own a small business again, clarifying, “one where there is a more equal playing field, one where I do not have to fight the government and prove every day I am not a fraud, a thief, a criminal or prove that I provide a worthy service to others. My new business will add value to my community. My new business will provide an excellent service or/and product.  I will not be a whipping boy of Medicare ever again. I am not angry or sorry for myself, I am simply a small business owner who used simple math to figure out the reimbursement schedule, weighed against the costs of doing business with Medicare was not sustainable for my business.”