“What should my cost PPD be?”

I get this question all the time, and the honest answer is, “It depends.”

Your medical supplier can only control so much, and after that, it’s really up to you. For example, the two biggest factors that affect your cost PPD is your quality of products and your usage. The biggest of the two is your usage. I have numerous examples of customers complaining about their high-cost PPD only to find their practice is improperly using various different medical supplies which drastically increases their usage and therefore their cost PPD. Sure, your medical supplier plays a role in your cost PPD, but the truth is, ultimately the provider determines their cost PPD.

Why does my cost PPD differ so much from the national averages?

Okay, my first piece of advice here is to just ignore your vendor’s stated national averages for costs PPD. This is because most providers offer far more for their patients than what is used in calculating this “national average.” These national averages really don’t mean much and sure won’t be what you’ll end up paying.

Additionally, geographic differences play a big role in cost PPD as well. In order to stay competitive, you know that you must continually change your product and service offering to match or out-do your competition. If your competition starts offering pull-ups or Ensure, you may need to start offering it as well or risk losing some referrals. This is why you should be comparing your cost PPD to your local competition and your vendor should know what the average is in your city or region. 

The products and services that hospice providers offer to their patients can vary by region. For example, in cities such as Phoenix, AZ and Las Vegas, NV, there are hundreds of group homes that require additional products on a weekly basis that would cover each patient for two weeks. In these instances, provider costs for medical supplies tend to be much higher than in other cities because of this higher demand. 

Not all geographies suffer from higher average costs PPD. Florida is a Certificate of Need state which means it has much lower cost PPD because there is not as much competition. Geography plays a much larger role in your cost PPD than you might think.

The patient mix and type of facility can impact cost PPD as well.

Providers that have a high mix of patients in skilled nursing facilities, such as nursing homes and assisted living facilities, are going to have higher costs than providers that serve most of their patients in the home. Why? Mostly because products tend to “disappear” or end up being used for other (non-hospice) patients within the facility. These facilities typically have per diem clinicians working and aren’t aware that some of the patients in the facility are hospice patients. But these facilities can be great referral sources and are probably not worth jeopardizing the relationship over a few extra supplies. 

Hospice providers that have IPU’s are going to have much higher cost PPD for medical supplies because patients generally have higher acuity. These patients need more products such as hygiene and other necessities that are typically provided in a home setting.  IPU’s cost PPD is roughly 5 times the cost of respite patients. That’s probably a bit more than you expected, right?

What can we do about our cost PPD?

There are multiple ways you can reduce your cost PPD for medical supplies.

A great starting point is to work with your medical supply vendor and begin utilizing their value-added services. These partners should have tools that can provide you with your cost PPD by item category and they should be more than willing to help you analyze these costs on a regular basis. Your partners can also help provide training to your clinicians on the proper use of your selected product mix. Remember, improper usage is one of the biggest opportunities for reducing your cost PPD when it comes to medical supplies. Unfortunately, training your entire staff is much more difficult than negotiating lower prices with your medical supply vendor, so guess which lever is pulled more often?

Proper usage goes further than saving you more money. It can actually increase patient comfort as well. Talk about a win, win.

A great medical supply vendor can help you identify which products to use for each patient and understand the costs associated with the products. Inventory control systems can also help control costs by utilizing par levels and budgeting tools.

If you’re in a region or a city that has a higher patient mix in skilled nursing facilities and an abundance of competition, you’re going to have higher costs. It’s just the way it is. Be sure to understand your market and know what your competition is doing. It’s vital in securing your referrals and referral sources as well as knowing how to budget your money appropriately. If you’d like to learn more about the opportunities to save money on your cost PPD for medical supplies, I’m happy to speak with you about it anytime. Drop me a note at our contact page and I’ll set up a time for us to chat.

Billy Bindel

Concordance Healthcare Solutions