Tuesday, July 16, 2024

Hanger

Forest R Sexton CPO

My turn

I appreciate it when the list discusses general topics, (such as Hanger’s

business practices). This provides as much value to me as the many times I

have posted questions and received multiple replies (thank you to all those

who have helped me). I have recently seen many posts regarding Hanger and

it’s business practices. Most posts discussing the business ethics of Hanger

appear to be coming from non Hanger colleagues. I then see responses from

Hanger staff in defense claiming that the essence of product delivery and

patient care is not determined by the name on the door. The field is not

questioning the ethics of care providers within Hanger it is questioning the

policy makers. There is no guilt by association. Most reasonable people

understand that prosthetists/orthotists within Hanger are colleagues and

subject to the same factors desires pressures and rewards that define how we

practice. Most people in any branch of medicine are there because they feel

satisfaction from helping other people.

So I say that responses from Hanger staff stating that they are good people

and practitioners does nothing but confirm the obvious and divert attention

from the real question. When am I going to see a post from Hanger management

defending their business ethics.

What, if any thing, should the field do to protect itself from what may be

considered questionable business practice? It seems likely Hanger is

diverting profit from its supply and manufacturing divisions into it’s

facilities, creating an unrealistic profit scenario at the branch. It rewards

the branch staff for exclusive buying practices by unrealistically favorable

product pricing structure and a profit driven bonus system. On the surface,

who cares? Can’t Hanger do what it wants with it’s money? The danger lies

down the road when large government, or private institutions, begin awarding

contracts based on price of goods at the branch. This is dangerous, we need

to remember that we are in a mature industry and on paper we are all selling

the same mouse trap. None of us can effectively argue that we have access to

technology that our competitors don’t. We know that there is a distinct

difference between practitioners skills strengths and weaknesses, but we

can’t prove it on a solicitation to contract form. I am afraid that we then

compete on cost and access.

Hanger should be profitable it’s has a requirement to it’s stockholders to

make money. Is it a fair playing field for them to divert profit into the

branches, or are they exercising their monopoly power to restrict effective

competition. Should they be broken up into distinct divisions that have equal

requirements to display profitability? I would think that Knit Rite and

others would compete quite nicely as suppliers to Hanger facilities if SPS

were required to run profitably.

Please understand that there appears a strong likelihood that the trend for

gov. and private exclusive agreements may be coming around the corner. So I

am understood, my biggest fear is Medicare. All that my facility is asking

for is an opportunity to compete on an even playing field. Allow us to prove

that we can provide good care as efficiently as any body else.

Lets remember that Hanger got into this position by borrowing huge amounts of

money. Hundreds of millions of outside dollars have been introduced into the

industry if you count Novacare. This was obtained first from private

investors in the form of selling stock then from financial institutions in

the form of loans. This has been a financial boon for our industry from which

everybody has benefited. Owners cashed out their equity industry salaries

have gone up, facility access and product technology R&D have benefited the

consumer. Insurance companies have enjoyed substantial discounts on our

product cost. Unfortunately, it has created an unrealistic appearance of

profitability in O&P in general. The problem is, this is not a sustainable

revenue source. Private investment is down, you can only do an IPO once and

loans need to be repaid. I don’t hanger has not yet proven that they are any

more efficient in running O&P offices than the average Mom and Pop. They have

just been better at bringing outside revenue into the industry. I don’t

believe that they have financed their growth through profitably run

businesses. In fact, I believe their stock prices indicate that the financial

world believes they are not run efficiently. Unfortunately, they may win

anyway by default if they are allowed to continue there current practices. I

don’t honestly believe that patient care will ever suffer. I do believe that

innovation and development will be impacted salaries will spiral and consumer

access will diminish if current apparent trends away from free enterprise

persist. This may be why antitrust law exists.

There are three or more distinct aspects to providing O&P care.

Manufacturing, supply, and fabrication/delivery. If Hanger wishes to operate

in all three arenas it should compete equally and independently in each arena

and not “Bundle,” them as one. Solve this problem now before Uncle Sam

decides to expand it’s exclusive contracting practices and more entrepreneurs

go under. I’ve seen good O&P facilities go broke based on M-care policy

changes. If you don’t believe this can affect you ask your Physical Therapy

friends. M-care controls cash flow in medicine.

Forest R Sexton CPO

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