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
