Serving as Chief Procurement Officer and Senior Vice President of Supply Chain and Logistics, at Apria Healthcare for twelve years, Jack Baikie knows a thing or two about managing equipment and supply chain challenges. Jack has 40 years’ experience in logistics, supply chain, asset management, and procurement with companies like John Deere, Compaq Computer, Gateway Computers, Raytheon, and most recently, twelve years at Apria Healthcare. We’re fortunate to have him as a member of the Quality Biomedical Board of Advisors and we appreciate the opportunity to pick his brain and share his insights with you.
QB: Jack, with your four decades of experience in logistics, supply chain and asset management, I’m sure you’ve witnessed a great deal of change across the industries you’ve served.
JB: Yes, I sure have. Each of those industries and companies has a unique and diverse set of challenges. As I reflect on the durable medical equipment (DME) industry in particular, from a healthcare perspective, optimizing your investment in equipment is extremely critical and probably one of the biggest challenges as it relates to profitability and growth. The DME industry revolves around optimizing the company’s investment in patient service equipment.
QB: In regard to equipment and supply chain management, what would you say are the most significant challenges facing DME companies right now?
JB: Maintaining and growing profitability is and always has been a challenge for the industry.
The inflationary pressures of the last couple of years, as well as supply chain constraints brought on by the pandemic and their lingering effects, have taken a while to work themselves out of the supply chain. It has been a drain on profitability and cash flow. Cost increases, availability issues, and being forced to take unusual steps to obtain, maintain and deploy equipment have exacerbated the challenge. It’s been a difficult couple of years for the industry and I don’t believe those challenges are going away anytime soon.
Inherent to the industry is the difficulty in passing along cost increases to your customers. You’re bound by payer contracts and also government reimbursement rates that tend to be set for long periods of time without the ability to increase your billings. So, it is extremely important, as you think about how to be successful in this industry, to get maximum utilization out of your fleet of equipment. Therefore, optimizing the efficiency of the company’s investment in patient service equipment is paramount to improving profitability and cash flow. Having the right equipment in the right place at the right time, and ready to deploy to the patient, is extremely critical; yet having too much equipment drains profitability and cash flow.
Given the historically low level of technology deployed by the industry, all the processes tend to be manual in nature. You have multiple locations to deal with, and each have different levels of and capabilities for reporting. It’s critical that you standardize process, tools and reporting across all of the different locations. Yet the lack of technology makes it very difficult to be efficient and get the most on-rent utilization from your equipment investment. Inventory optimization is an inefficient, manual activity at most companies.
QB: So, there’s a real need to use technology in the industry?
JB: Absolutely. It’s extremely important to have tools that provide clear visibility of your equipment, so you can make sure it’s in the right place and is actually patient-ready to go out on rent. Accelerating that cycle as much as possible brings the most revenue – but it’s very difficult to do without technology.
QB: Let’s talk about asset visibility, which is likely tied to technology. What is it and why is improving it important?
JB: Asset visibility means knowing where all your equipment is and what condition it’s in at any point in time. When it’s time to make decisions about investing in more inventory or rebalancing inventory across multiple locations, you have to know what’s on rent, what’s in transit, what’s sitting in a warehouse not ready for deployment, or what’s at a repair facility—and how long it will be there. Having that visibility means you have all the tools you need to make the right decisions to drive higher asset velocity, higher equipment utilization, and a higher return on your investment in equipment.
QB: Tell me more about how asset velocity impacts ROI.
JB: I believe asset velocity is key to success in this area. Stating the obvious, only equipment that is operational in a patient’s home is generating revenue. Equipment failures at a patient’s home, low equipment utilization, excess or unbalanced inventory across multiple locations, and long repair turn-around times all decrease asset velocity. Maximizing revenue per unit really requires companies to have technology, processes and/or partners such as Quality Biomedical that provide the tools to increase asset velocity. It’s one thing to have the ability to repair and to do it efficiently. It’s another thing for all stake holders to understand where that product is at any given time. That’s nearly impossible to do without the right technology.
QB: I’ve heard you say there’s a huge gap in the use of technology in the healthcare industry. Tell me more about that.
JB: Technology adoption in general has been lagging across the DME industry. The amount of paperwork involved in the healthcare industry in general, but in the DME industry specifically, is a burden. It has been getting better, but certainly is not on par with the technology in a lot of other industries. Specifically, as it relates to equipment visibility, there definitely has been a lack of centralized planning and product allocation systems. For example, there are a lot of manual processes, as well as disparate tracking and reporting across multiple locations and platforms, typically done via spreadsheets and human intervention. Decision-making is based on cumbersome manual assessments of multiple spreadsheets.
There is a high degree of consolidation in the DME industry as well. As companies merge, it adds a whole other level of complexity because they each have different processes, systems, and tools. Consolidating those to make the acquisition more efficient is critical to gaining the synergies needed for profitability. Imagine trying to optimize the percentage of equipment that is on rent without technology, using only a bunch of manual spreadsheets and trying to make sense of multiple bits of disparate data.
Even if you take consolidation out of the equation, any given company of medium to large size will find it extremely difficult to maintain consistency across multiple locations. Having a tool that is easy to deploy, easy to use, and is central to the company allows them ability to have a much better handle on where inventory is at any given point in time and where is it best deployed to keep the on-rent utilization as high as possible across multiple locations.
QB: Do you have suggestions for DME companies about what first steps they might take to expand their use of technology?
JB: Having a partner that puts technology first is a huge advantage. You want to make sure you’re looking at technology that’s cost effective to deploy, readily available, and proven. You need a repair partner like Quality Biomedical that lets you leverage the tools they have so you can easily track your equipment through its life cycle from on rent to getting repaired and on to the next patient. Being able to see accurate intel online across multiple locations is extremely valuable. During my twelve years at Apria, having something like Quality Biomedical’s QConnect software would have made my job much easier and I believe would have helped us increase our asset velocity cost effectively and rapidly.
QB: Thank you, Jack, for taking time to share your expertise with us today. We appreciate your weighing in on this important subject and giving us the opportunity to pass along your valuable insights to people in the industry who are dealing with these frustrations.
JB: The main reason I joined Quality Biomedical’s Advisory Board is because their strategy, products, and services enable the DME industry to become more efficient in managing equipment to increase asset velocity. I know from personal experience the value Quality Biomedical delivers to their customers so I’m happy to be of service.