How to Start a Respiratory Equipment Business

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Success in respiratory equipment hinges on chasing pennies instead of dollars.
Success in respiratory equipment hinges on chasing pennies instead of dollars. (Image: Lisa F. Young/iStock/Getty Images)

Starting a respiratory equipment business presents relatively few, if any, major stumbling blocks. The “short version” of the process involves getting business licenses, getting certified by Medicare for billing and payments, sourcing suppliers, securing a location, hiring competent staff, and chasing customers. However, the respiratory equipment category is extremely competitive with an abundance of government controls. Your challenge, therefore, is to start a respiratory equipment business that will be profitable.

Routes to Profitability

The total durable medical equipment sector is characterized by fierce competition and tight government controls. In addition to several national competitors that constrain profitability, you have no control over what government agencies pay you. Medicare and Medicaid payments made up 81 percent of total home health care spending in 2012, says the Centers for Medicare and Medicaid. A big chunk of that spending went to respiratory equipment vendors. With virtually zero flexibility to control prices, you must find other ways to be profitable. Profit strategies in the respiratory equipment business typically focus on customer growth, product line diversification and the service delivery system. By incorporating winning profit strategies into the planning for your new business, you will enhance your chances of success.

Growing Your Customers

Three effective tactics to fast-track getting customers involve following the patients, market expansion and having an online store. Follow the patients by establishing relationships at key touchpoints in the patient-care supply funnel from original diagnosis until customers acquire respiratory equipment. This includes, among others, primary-care physicians, pulmonary specialists and the managers of hospital discharge departments. Next, anticipate that you will exhaust the customer potential in your initial market area. As soon as resources permit, replicate your marketing effort in new, adjacent markets. Lastly, augment your marketing effort by having a world-class online store. By chasing the pennies earned from each customer sale, you can amass major dollars by having an abundance of customers.

Product Line Diversification

Before you run out of customers for respiratory equipment, diversify your product line by selling other durable medical equipment -- DME. Few exclusive respiratory equipment vendors remain as such without being pushed to the precipice of going out of business by the competition or capricious changes in government payments. When chasing pennies, you need a lot of pennies to chase. Moreover, offering other DME better satisfies your customers' needs. For example, when Greene Respiratory Services in Ohio exhausted the potential in respiratory equipment, it moved into related DME. They even do home-rehab work that helps seniors stay at home instead of moving into assisted-living facilities.

Your Service Delivery System

Like insulating you house to conserve energy consumption, chasing pennies demands that you seal all cracks in your “service delivery system,” which includes internal controls and customer care. You will lose pennies without bullet-proof internal controls. You will surely lose pennies when you lose customers. To mitigate the chances of either, make it a priority to install a world-class management reporting system that's dedicated to the unique needs of the DME industry. Then, imitate the best practices of successful DME suppliers. Contact trade associations, such as the Home Medical Equipment/Respiratory Therapy Council or The American Association for Homecare, for guidance in all aspects of building a world-class system for your new respiratory equipment business.

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