Moving Your Healthcare Company up the Growth Ladder

Volume 11, Issue 9, May 21, 2024

By: Miriam Lieber

Most successful companies reach points in their history where big decisions must be made that will determine whether these companies largely remain the same size and stay on their current course or undertake significant changes — and usually investments — that lead to a transformation in size and services. Successfully executing this transformation isn't typically easy and often introduces big risks to the viability of the company. For businesses that want to grow, taking risks is a necessity. Fortunately, business can also take steps to reduce the likelihood that these risks will backfire and potentially stifle growth or even cause financial harm.

In this column, I will discuss three types of companies — small, mid-sized, and large — and share key considerations for business owners and operators as they work to successfully move their companies up the growth ladder. Discussions of each company type will be accompanied by a real example of such a company that reached a significant growth turning point and the advice I provided or will be providing that can help turn risk into reward.

Smaller Companies

Let's start with a discussion of smaller companies, and we will define them as companies with revenue between $1 million and $20 million. These tend to be very service-forward companies that often cater to the whim of referral sources and are known in their communities as companies to go to when you want to work with somebody who cares.

That's not to say a larger company can't be a company that cares, but smaller companies tend to have that reputation. In addition, the competitive advantage and differentiator for a smaller company must be its service level — almost bar none. We are in an extremely mature industry that has been on the consolidation trail for a long time. This tells me that if you're a smaller company that wants to stay profitable, flourish, and grow, you need a service component that is your raison d'être.

I recently worked with a small(ish) home medical equipment (HME) company that specializes in diabetes care. It has a few branch locations. The company is known in its community as the company that will be there when push comes to shove. That's their best asset but also their worst detriment because they are known to be the go-to source for everything and anything.

This company recently decided to take on continuous glucose monitoring (CGM) as its next best product area of interest. The service line is being built by a few of the company's core staff members, and it is rapidly taking off. What this tells me is the company is ready to step outside the proverbial small "ma-and-pop" box and into a landscape where it will be able to achieve significant growth.

That's good news for the company, but it presents a big challenge. What they are contending with now is how to tell the community that the addition of this service line and its associated growth will require the company to pull back on being everything to the community all the time. The company still intends to help its customers with anything related to diabetes care because that is its area of specialty, which is supported by a pharmacy. But now the company will be focusing on the CGM line coupled with its CPAP business and other durable medical equipment-related items. That means changes are coming, including only providing one-off items within reason and needing to dropship items like a walker rather than personally deliver it. Alternatively, patients can drop by to pick up their equipment. It may also mean longer times between appointments for homebound CPAP patients and/or a need to deliver equipment and training remotely. And it means that for services that fall outside the company's wheelhouse, the business will refer customers to someone else.

One of the lessons learned for this small — and soon be a mid-sized — company is the importance of determining how to maintain a local feel without needing to be everything to everybody. That is requiring them to focus on the positives — the areas where they can excel as a business — and reduce or eliminate the negatives — the areas that do not make sense for the business. In other words, this company is cleaning up its house, making sure that what people see reflects the business in an accurate, positive way, and eliminating the nonprofitable products and business practices, with very occasional exception.

Mid-Sized Companies

Now let's move to mid-sized companies, which we'll say are those generating between $21 million and $100 million in revenue. They have many locations. They have good processes in place to support the business and growth, but now as they are scaling up and getting closer to becoming large companies, what they need is to become more consistent in the way they run their business.

What do I mean by this? For mid-sized companies, something that often gets overlooked is the notion of being centralized. This can be difficult because mid-sized companies have grown from the successful smaller companies that had a local feel and presence, but now with the larger contracts they have with insurance companies, these mid-sized company must be more consistent in the way they do their business across the enterprise. They must create "by rote" functions, to some extent. They must promote centralization of functions such as purchasing, for example. To further scale the company, non-routine or exception tasks should be reserved for leaders or higher skilled staff.

The challenge and opportunity here is how to achieve this consistency and continue growing without needing to add significant additional human resources that can cut into profitability. This points to the need for automation. Mid-sized companies must explore how to use automation and to begin exploring machine learning in ways they have not yet entertained.

Quickly emerging are the many companies offering services powered by machine learning. Mid-sized companies must start to look at these companies and their services as potential ways to continue to meet payer contract expectations and then be able to scale the company without needing to add extensive resources.

Consider that to handle orders that come in, mid-sized companies generally rely on people to process them. Sometimes that work is performed in-house; sometimes it's outsourced. But in either situation, it's a people-driven process. A person needs to go through the documentation with each order and find the chart note, the prescription (medical necessity form from the treating practitioner, and the other item-related documents. Then they need to electronically file these documents accordingly.

With machine learning, technology can do this work, with the solution essentially becoming the "fax wrangler." This doesn't eliminate the need for people. Rather, you take your really good processors and have them teach the machine what it needs to know and then have these people manage the machine and ensure the work is completed appropriately.

In a mid-sized company consulting engagement last year, one of the tasks I was charged with was coming up with a way to make more consistent use of their people. To do so, we centralized various responsibilities. For example, we created a centralized phone team. That was step one, and a valuable step that will help achieve consistency. What I find fascinating is a next step where the company would investigate how the use of machine learning may be able to reassign people on that phone team.

Let's say this phone team receives frequent questions about the status of a new order. Machine learning (also referred to as "digital experience" by some) should be able to proactively automate a text message to patients that confirms receipt of the order from their doctor, stating an update will follow within 48 hours. While this won't eliminate all calls about new orders, it should greatly reduce the number of calls that come in for order status and thus the number of people who need to answer these calls. In cases where automation is employed, companies have been able to reduce the number of inbound calls for order status by 75% or more.

The best places to start looking at where you should first work to incorporate machine learning are those aspects of your operations requiring the most human resource time, which are likely some of your largest cost centers. Once you've identified these pain point areas, determine what opportunities exist to introduce automation and eventually add machine learning to power this automation. This undertaking is one way to create a much easier and more consistent landscape for a mid-sized company to grow to the next level.

Large Companies

Now let’s discuss our final group: large companies with revenue greater than $100 million. These are businesses that are moving from being a regional player to a national player or a regional player moving into a new region. This growth is complicated because it often occurs through acquisitions, so now you are looking at melding different companies together. These companies have their own way of running their operations, with leaders who have had roles defined based on needs, personality, and demographics of a company. Following the acquisition, these leaders and managers are now being told that the way they have worked and the work they have done will need to change. Those can require difficult conversations and difficult changes.

What a large company needs to do is essentially look at each of the processes for the various companies now part of the larger entity and determine which ones perform the strongest and where large holes exist that need to be filled. For example, let's consider a company that has one contract that does not allow offshore billing and one contract that permits it. The company will want to look within its expanded operations to identify individuals who can champion these distinct efforts. Maybe Susie's company in Kentucky had a fantastic offshore company partner achieving great results. You might want to use Susie and her experience to champion the offshore billing efforts. For payers that do not permit offshore billing, you might find that Bobby's company in Rhode Island had impressive in-house billing performance, so he would champion that effort for the organization.

In larger companies, you typically have defined centers of excellence based on product mix and payer mix within each product. For example, you may have a large HME company with a center of excellence for urological and ostomy supplies and a separate center of excellence for CPAP and CPAP supplies. These centers of excellence are formed by larger companies dividing up the companies they've acquired first by their strengths (in revenue and collections), second by payer (contracts) that dictate how they are going to run their business, and third by product mix.

This brings me to a large client example and how this mindset would play out. One of my large clients recently finished a significant sized acquisition. But the post-acquisition transition is not going as well as they had hoped. Timely payments aren't as seamless as they had been previously because the companies haven't been merged well yet. People who are doing day-to-day work have been tasked with trying to merge the companies, but the work is just too much, and these people cannot focus on their daily tasks and simultaneously handle the merger tasks.

One recommendation for this large company is to assemble a dedicated mergers and acquisition transition team. If this large company is going to continue to pursue acquisitions, which I believe it will, now the company will have a dedicated team to handle merger-related functions, which would include creating centers of excellence.

An important caveat to using a transition team is the need to stay nimble and consider when growing the team would be worthwhile. Perhaps an acquisition necessitates the merging of software. If your transition team lacks a specialist in merging software, you will want to find this talent and add it to the team or use an outside contractor with this specific experience.

Once you have completed a merger, then a large company should further evaluate processes and determine what changes will help it get the biggest return on investment (ROI) based on payers and product mix. Do this by evaluating the best practices of each of the merged companies, including the original company, and determine the ROI from there.

Key Takeaways

I've covered a lot of information here, so I want to conclude by summarizing what I think are some of the key takeaways. For small companies, you must understand the nuances of going from ma and pa to the next stage where you are not and cannot be everything to everybody anymore. You must decide what you want to be "when you grow up." You still need to have a local feel, but inside your operation, your guts must be run much more efficiently.

When you get to the mid-size level, you need to rely on software to scale your company and find those people who will champion this cause. When you have the right people managing the optimal solutions that introduce automation, you will still be able to deliver an exceptional customer experience and achieve success. Lean on your heavy hitters when scaling your capabilities through automation and machine learning.

Finally, when you become a large company and are on an acquisition trail or you have completed an acquisition, you must understand which of the companies is better at payer and product mix integration. Then you must look at how you're going to fit in together as one team. A transition team that can effectively prioritize getting two distinct businesses combined will greatly help in that cause.

Regardless of your size, stay focused on your core competencies and best practices, then plan ahead and pivot as necessary to continue to flourish and profit in the ever-changing healthcare landscape.

Miriam Lieber President, Lieber Consulting LLC

Miriam Lieber is a principal consultant and trainer specializing in home healthcare revenue cycle management.  Her extensive experience with Medicare and other third-party payers has brought her national recognition in the homecare industry.  With over 25 years in the homecare field, Miriam has consulted with over 500 HME companies nationwide and is a featured author of many articles in the areas of operations management and leadership.  She is also a nationally known speaker for many homecare trade associations.  She can be reached at 818-692-1626.