HME/DME Manufacturers Look For Ways to Help Providers Reduce Costs

In the past, if Medicare cut reimbursement, HME/DME providers more often than not pressured manufacturers to decrease product pricing a comparable amount. However, a recent article featured on hmenews.com reports that manufacturers are no longer complying with this old strategy.

"This is not an environment where manufacturers can fund these changes," said Carl Will, Invacare's group vice president for HME. "Even with competitive bidding, it's not likely that prices are going down. Manufacturers are under significant pressure and in an already low-margin business."

Manufacturers may not be able to decrease costs; but they can help control them. At Pride, employees help providers with coding and billing, which speeds up the claims process and increases cash flow. Another way to increase cash flow that should be considered by providers is Medical Accounts Receivable (MAR) funding. With MAR funding, debt-free funds are available for everyday operations, business growth, expansion, etc.

Providers can also use MAR funding to increase their purchasing power. They can use the increased cash flow to take advantage of volume order discounts and save money on freight charges by reaching the 500-pound minimum for free shipping available by most manufacturers.

Former President Bush Sr. Greets HealthCare Executives

Michael Koslow, Sr. Vice President for Marketing and Jim Beutel, Sr. Vice President, Business Development for Sun Capital HealthCare Inc. had the pleasure of meeting President George H.W. Bush, the 41st President, at the recent HealthCare CFO conference held at the Mariott Sawgrass Resort in Ponte Vedra Beach, FL.

The former president was the keynote speaker and honored guest at the 3 day conference bringing together healthcare executives with leading healthcare solution providers. President Bush Sr. brought his well known charm to the podium as he addressed the audience and demonstrated his practical approach to problem solving with numerous stories and anecdotes from his many years in public service. He also encouraged the many people attending the conference to continue to search for new and better ways to deliver affordable healthcare to the citizens of the country.

Sun Capital HealthCare's participated as a national solution provider, offering healthcare executives additional funding solutions for the financial stresses they are experiencing, especially during the current economic downturn and credit crunch. A number of CFO's, when discussing their hospital's financial needs and plans with Koslow and Beutel, noted how they could take strategic advantage of Sun Capital's debt-free MAR [medical accounts receivable] Funding program, even though their hospitals are currently performing very well.

Protecting their bond ratings and funding future planned capital expenditures at today's lower costs clearly demonstrated how forward thinking CFO's can use the flexibility of MAR funding as an important tool in an overall strategic financial plan for long-term growth and viability. They reinforced Sun Capital HealthCare's platform that MAR Funding is not just for healthcare providers in distress, but is a cash-flow solution that can provide working capital for growth and expansion.

Creative Financial Solution for Funding Those "Below the Line" Projects

Marcus Evans hosted an important National Healthcare CFO Summit in Ponte Vedra, FL last week. The event was designed to provide a unique, interactive and educational forum where healthcare financial leaders could receive important updates, and share ideas and experiences regarding key strategic initiatives in healthcare finance.

Of coure, the main focus for many of the attendees was to gan insight on what healthcare providers can do to help offset the continuing decline in their financial positions. As we all know, costs continue to rise while payments are slowing down which puts healthcare providers in a difficult financial position.

During the conference, one Chief Financial Officer at a not-for-profit hospital was lamenting the fact that the current liquidity crunch has caused him to put several very important projects "below the line" meaning that, although they were valuable, revenue producing projects, the hospital just did not have the funds to invest at the time. He just could not put more debt on his balance sheet.

At one of the conference sessions, the CFO heard a presentation on Medical Account Receivables (MAR) Funding and recognized that this unique financial vehicle could well be just what the doctor ordered. MAR funding will enable the healthcare provider to obtain working capital without putting debt on the balance sheet.

In this case, the CFO is evaluating doing some of the unfunded projects using MAR funding.

Sun Capital HealthCare, Inc. to Exhibit at Annual Medtrade Spring Show

For the past 5 Medtrade shows, Sun Capital HealthCare (SCH) has made a strong presence for themselves amongst the DME/HME community. This year will be no exception.

SCH will be exhibiting at the annual Medtrade Spring show in Long Beach, California on May 7-8th, 2008. The event will highlight the newest healthcare products and related services being brought to the market with more than 400 exhibiting companies showcasing 90,000 net square feet of products and services.

Sun Capital HealthCare will be located at booth 1161 with financial professionals on hand to discuss how their Medical Accounts Receivable (MAR) funding program can be effectively used to boost liquidity while maintaining debt capacity in the midst of the current liquidity crunch.

MAR Funding: Not Just A Tool For The Financially Stressed

Having just returned from the HealthCare CFO conference in Florida, a number of interesting and creative strategies emerged from our one-on-one meetings with leading financial executives.

The current liquidity crisis was the main issue healthcare leaders were concerned about. The financial pressures were not only severely impacting the poorly performing hospitals that were in fiscal stress, but even the large well financed and well performing hospitals were increasingly concerned about where they go from here. The impact of rising costs and reduced liquidity in the bond market were of major concern for two major reasons:

Where was the hospital going to get its future capital funding from if the bond markets dried up?

Further, if the hospitals go to the banks to increase their credit lines and take on more debt, how was this going to affect their credit ratings and subsequently their interest expenses?

After discussing with one hospital CFO, in a successful and profitable hospital, how a medical accounts receivable [MAR]program from Sun Capital HealthCare works, he identified a very effective role that MAR funding can perform within his overall financial strategy. Instead of taking on additional debt that could affect his financial ratios and increase the costs of his next series of bonds, he suggested that he could use a MAR funding program to protect his current AAA bond rating. Additionally, the costs of MAR funding would be far less than the increased costs associated with any drop in his bond rating over a 14 or 20 year bond issue.

This is just another reason why more and more healthcare financial executives are adding MAR funding to their financial strategies. Given the financial conditions in today's healthcare markets, MAR funding is no longer just for the financially distressed hospitals. This debt-free funding tool can be used in many different ways to protect and enhance the financial resources of healthcare providers.

Phillipsburg Hospital Plans to Reopen After Bankruptcy

2 years ago, Phillipsburg Hospital was forced to close due to growing financial problems. Last week, the Moshannon Valley Economic Development Partnership announced its plans to study what would be needed to reopen the hospital and develop a strategy for it.

Moshannon would like to create a partnership and take a "leadership role" in developing a plan that would work with elected leaders, health care experts, and other professionals in the community. They intend to hire an outside consultant to study the area's demographics to determine the best approach for offering health care.

The partnership would also look for expertise from its board members as well as options including various funding sources to ensure the hospital's financial health.

A vital component of the hospital's new financial strategy should include Medical Accounts Receivable (MAR) funding. MAR funding is a proven successful tool for generating debt-free working capital which can be used to capitalize on growth opportunities and to ensure financial survival.

Medical Accounts Receivable (MAR) Funding: How Simple or Difficult Is It?

MAR funding is a process that a provider can participate in with no disruption to the usual routines. The entire process from application to funding can be summarized as follows.

As with all financial processes, an application for funding is the initial task. The application will give the MAR funding source the basic information about the applicant and his/her business (practice). Information on the applicant's receivables is a key component to understanding if MAR funding is the best choice for the applicant.

Looking at the receivables allows the underwriter to determine if the payor is the correct type for this strategy, and if the provider has the ability to bill and collect efficiently. These issues give the funder a comfort level that he will be paid for the claims he purchases. Duplication of claims is a problem that must be evaluated to determine if such events occur infrequently. Denials, and payor requests for more documentation are events that affect the overall decision on whether to move forward.

Following the application process, the claims have to be valued. Determining net collectible value is absolutely essential when purchasing medical A/R. The funding source wants to buy something that is worth the amount of money paid for it! As we all know, providers bill; and then get paid two very different amounts. The funding source must determine the payable amount for each claim to the payor.

Finally, basic searches and filings are done to protect the funder's collateral (which is the A/R). The MAR funding source cannot buy receivables that are pledged to other financial institutions. Legal review of any existing loans or financing facilities is done to make sure that the collateral is free to be sold. The provider's electronic transmission of claims to be sold is then set up so that the funding process can be quick and efficient.

Once all completed, the accounts is opened for business and the provider can change his reimbursement time from 60 -75 days to 24-48 hours by selling any or all of his claims regularly.

A simple process that facilitates an amazing product!

A Cost Reduction Strategy

A recent article in HME News highlighted the need for cost reductions from manufacturers of home medical equipment. It pointed out that in the "good" old days, a viable provider strategy to cut costs was to pressure manufacturers. However, in these economic times, that is not likely to be successful since manufacturers are already under intense financial pressure and often working on thin margins. The current era of "competitive bidding" further intensifies that overall cost pressures for HME and DME providers.


A tool that providers can use to cut their costs is to use a Medical Accounts Receivable [MAR] funding program that allows them to take advantage of cash discounts many manufacturers offer in return for fast payment. Reimbursement delays affect the cash flow of providers and consequently providers want to delay payment to manufacturers, all of which combine to put cost and price pressures throughout the system. However, a MAR funding program accelerates the provider's cash flow without adding debt. And by doing so, it can minimize the pressures for cost reductions on the part of the manufacturers. Furthermore, the manufacturer can use an accounts receivable funding program to accelerate their own cash flow from their customers. In either case, given the increasing cost pressures on medical equipment, both customer and supplier could benefit by adding an accounts receivable funding program to their financial strateies.

Will MAR Funding Disrupt My Billing Procedures?

A common concern expressed by medical practitioners of all types is the potential disruption that Medical Accounts Receivable (MAR) funding may have on the billing and coding process currently in use by the facility. Medical professionals do not want to interfere with these processes since changes usually cause interruption of payments, possible audits by regulatory bodies and minimally a further delay in receiving payments.

What the medical provider must understand is that MAR funding occurs once the billing process has taken place. It is difficult sometimes for doctors, DME’s, home healthcare providers and even hospital administrators to initially understand the difference the difference between billing / collections, and a MAR financing facility. Since this financial strategy involves the medical claims, it is very often mistaken for a billing and collections service. MAR funding is a means by which the provider’s reimbursement process is accelerated through the sale of the claims already submitted to the carriers, but still await payment. The reality is, that the provider can bill and submit claims to the carriers and be paid within a 48 hour period through MAR funding. No other financing vehicle works as quickly, requires no other collateral aside from A/R (claims) and is virtually limitless in volume as long as valid claims are available for funding.

So, to directly answer the concern “Will MAR Funding Disrupt My Billing Procedures? Absolutely not! MAR funding will accelerate your cash flow, provide an instant cash infusion and allow the medical practitioner to run and efficient and worry free business……..without disrupting the normal administrative activities performed by member of your staff.

IMMEDIATE WORKING CAPITAL

The current headlines, focusing on the credit crunch resulting from the mortgage crises, highlight the financial squeeze that is being put on hospitals so that they can meet their ongoing overhead costs. What is often overlooked in the current dialogue is the costs associated with missed opportunities to grow or expand revenues - through acquisition, expanding facilities, adding new services, purchasing new equipment, upgrading systems and even engaging in a more aggressive marketing approach.

Having access to immediate working capital that allows the healthcare provider to take advantage of opportunities now is also critical to long term growth and survival. Medical Accounts Receivable [MAR]Funding is the funding tool that allows CFO's to access immediate working capital to take advantage of these short term opportunities that translate into long term gains. Once a MAR Funding program is set up, the provider does not have to go through a lengthy application process or time consuming paperwork that can unnecessarily delay the provider's ability to act quickly. With MAR Funding, since it is not a debt financing vehicle, the provider merely submits the medical receivable to the funding source, such as Sun Capital HealthCare, Inc., and can get a cash infusion within 24-48 hours of submission of claims.

Financial Tools Available to Protect Your Business From Fluctuations in Revenue Cycle

The question of which financial tool to use in order to overcome fluctuations in revenue cycle arises very often as providers strive to keep up with pay overhead commitments and perhaps even have a few dollars left over to feel their business is not "hand to mouth."

The operative phrase shown above is "fluctuations in revenue cycle." There is no way to address this issue without evaluating the financial vehicles available to medical businesses and ascertaining whether these financing tools actually move concurrently with the regular occurring billing/overhead cycle (imitating the revenue cycle). Loans, of all kinds to include (but not limited to) lines of credit, asset based lines and unsecured lines of credit have one common theme which in fact limits their ability to solve the question presented. Simply put, they all have limits. Loans of any nature are fixed in dollar availability, and once fully drawn upon, are no longer useful until some portion (or all) is paid back.

To further illustrate, imagine a medical practice has acquired a loan of $50,000. On the first of the month the business needed the full loan value for rent, insurance, payroll, phones, other utilities, and normal monthly expenses. A piece of diagnostic machinery breaks and repair is immediately needed. Payments from Medicare and other carriers are not due for a week. There is no more line available for use until part or all of the line has been returned to the lender. The obvious conclusion....loans will not work because they do not follow the revenue cycle.

The only financial tool that directly follows the revenue cycle is Medical Accounts Receivable (MAR) funding. Simply put, the provider delivers healthcare, and will get paid in no more than 48 hours. The key here is there is no limit or requirement for the first MAR funding to be paid back in order to draw down again, daily, weekly or in any time interval desired. The more receivables generated, the more financing is immediately available for the business...truly a revenue based financing facility.

New Wave of Hospital Bankruptcies

In 2002, the collapse of National Century Financial Enterprises (NCFE), one of the nation's largest healthcare lenders, suddenly left dozens of hospitals without financing and started a wave of hospital bankruptcies throughout the country, reports a recent article on Mondaq.com.

Five years later, in September 2007, nearly 2 dozen private hospitals were in "dire financial straits and in danger of bankruptcy or closure." This current financial crisis for hospitals is not the result of a single triggering event; but, rather reflects the profound industry changes that are making it increasingly difficult for small and mid-size hospitals to operate profitably. The article reports, among the factors contributing to the current crisis are freezes in Medicare reimbursement rates, reductions in Medicaid payment rates, increasing numbers of uninsured patients, and the growing competition from ambulatory surgery centers and specialty hospitals.

Amid all the healthcare industry woes, however, there are still opportunities available. Mondaq reports that healthcare is still a growing industry in the U.S. due to an aging population and technological advances. Hospitals that survive the current crisis will be able to take advantage of these trends.

However, in order to make it past the current credit crunch, hospitals will need to consider a wide variety of financing alternatives. The article points out some financing alternatives including asset-based loans, equipment leases, bond financing and Medical Accounts Receivable (MAR) funding as possible solutions.

A comparison between bank financing and MAR Funding can be seen in the graphic below: