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.

Avoiding Common Traps That Lead to Distress

The Turnaround Management Association posted an excellent article on its website, Managing to Avoid Failure; Avoiding Common Traps That Lead to Distress by Tyrone Courtman and Andres Wild, both of Cooper Parry LLP.

The article discusses that both external issues and internal issues lead to business distress and, all too frequently, to outright failure of the business. Internal issues include: complaceny, lack of objectivity in analyzing the business, not allocating time for thinking/planning, lack of strategic planning, lack of communication with employees and not providing appropriate motivation for employees. External issues are many and include cutthroat competition, harsh economic conditions, high cost of borrowing, and even the inability to obtain investments required for the business. Indeed more firms fail when market liquidity falls.

In times of low liquidity businesses must expand their thinking and explore alternative sources of financing. Accounts Receivable Funding can be an effective financing source for businesses in the healthcare, commercial and government industries during periods of low liquidity.