The Centers for Medicare & Medicaid Services’ Competitive Bidding program has stirred anxiety in the home health industry, as Round 2 of the program’s 45% reimbursement cuts threaten to squeeze a number of durable medical equipment (DME) providers out of business.

To weather the storm, some providers are launching new service offerings to their current home care business lines to ensure they stay afloat.

Though Round 2 is expected to take effect July 1 of this year, pending a rallying support for a market pricing program that has been gaining steam in recent months, providers that have developed revenue streams apart from their traditional home medical equipment business lines feel ready to take Round 2 head on.

Liberty Rehab & Patient Aid Center has served the home health needs of residents in Connecticut and New York for more than 40 years.

In the last couple of years, Liberty has expanded its home health offerings outside of its oxygen, sleep therapy and medical equipment rental to long-term care facilities.

Liberty’s Respiratory Assist Program works as a partnership between the company and local nursing homes. Through the program, licensed respiratory therapists employed by Liberty help nursing home staff and residents by providing one-on-one training education on respiratory disease management.

So far, the implementation of the Respiratory Assist Program has increased overall revenues by as much as 10%, according to Bill Fletcher, president and owner of Liberty Rehab & Patient Aid Center.

“The traditional home care HME business is under assault,” says Fletcher. “[Providers] have to be looking for every possible opportunity to replace revenue from Round 2.”

About a third of Liberty’s business derives from work done with nursing homes, and while it may be a long time before Respiratory Assist becomes a “large part” of the company’s business, Fletcher assures it has strengthened Liberty’s overall reputation.

“When hospitals and doctors see that service provided, they’re more likely to refer patients to nursing homes with a respiratory assist program,” he says. “It gives us a leg up and raises the bar for competition.”

Omaha, Nebraska-based Kohll’s Pharmacy & Homecare is another company that has seen the advantages of branching out from its traditional HME business after the opening of its Preventative Medical Clinic in 2008.

The clinic provides a combination of medical services such as skin care and aesthetics including Botox and Juvederm, medically-supervised weight loss and bio-identical hormone replacement therapy—all of which complement and support Kohll’s business, according to Laurie Dondelinger, marketing director of Kohll’s Pharmacy & Homecare.

“With so many different cutbacks and regulations coming down, we needed to start looking into other avenues,” says Dondelinger.

As a result, most of the company’s Baby Boomer customers that have gone to the Preventative Medical Clinics for age-related skin care or weight loss has resulted in an increasing number of phone calls pouring in as well as healthy sales growth in these new areas of business.

“We saw that there was a need for these services in the area,” says Dondelinger. “We can definitely set ourselves aside as more clinics and medical centers are popping up.”

While the typical Kohll’s customer is between ages 40 and 60, the agency does not restrict its services to an older crowd, as its skin care services also serve a number of younger people, like teenagers with severe acne, says Dondelinger.

A diverse clientele served by the pharmacy-based Kohll’s unique medical clinics has also helped bolster the company’s confidence competing in Round 2.

“The Preventative Medical Clinic has allowed us private pay products that help keep our business strong in conjunction with our pharmacy business that we will continue to provide although reimbursements may lessen,” says Dondelinger.

With some DME providers standing to lose up to 80% of their businesses as a result of the 45% Medicare reimbursement cuts mandated by Round 2, according to the American Association for Homecare, the ability for providers to create new revenue streams is becoming more important than ever to stay afloat.

“It’s key,” says Fletcher. “Any time you can develop revenue streams that are outside the traditional home care model, you have to do that.”

Written by Jason Oliva