When Mike Marnhout wanted to start his own business, he sat down with his parents and made a promise. They had put a second mortgage on their home to secure enough capital. The success of his business would affect not only his future, but the future of his parents.
“Before they handed me the check, they said, ‘You have to promise to take care of every patient, regardless of whether you get paid or not,’” said Marnhout, the CEO and founder of Bluegrass Oxygen, a durable medical equipment (DME) supplier based in Lexington. “We’ve always done that. We always will. That’s what we do.”
The dedication and work ethic needed to keep that promise has earned big dividends over the last 32 years, but it has also come with a price. One of the biggest rewards came in September of this year when Bluegrass Oxygen was awarded one of three top awards in the industry, the Excellence Award for Best Home Respiratory Provider from HME News, the leading publication for DME providers.
“This means that we’re doing things correctly and that we’re at the top of the chain,” Marnhout said. “We want to always strive to stay there. I am only as good as my people, and we have a good team.”
Bluegrass Oxygen has six locations, services more than 100 counties and offers durable medical equipment to patients in six states. Marnhout said the company employs 40 people and takes care of about 2,400 oxygen patients, more than 3,000 patients who need C-PAP machines, and more than 7,000 patients who need basic supplies, including everything from walkers and wheelchairs to hospital beds and home oxygen equipment. The company accepts Medicare, Medicaid and third-party insurance. And, yes, they help people regardless of the patient’s ability to pay, making good on Marnhout’s original promise.
“Obviously, we are a large part of taking care of patients in their homes,” Marnhout said. “It is without a doubt more cost effective to treat people in their homes than in hospitals. They want to be around their loved ones, in an environment they are used to. That’s where people want to be.”
But with the changes in health care, offering this level of customer service to patients has come with a price. In 2003, Congress instituted a competitive bidding program through the Medicare Prescription Drug, Improvement and Modernization Act. According to the CBIC website, this new competitive bidding process is intended to reduce patient out-of-pocket expenses, save the government’s Medicare system money, and ensure items and services of high quality for patients.
Marnhout said that Bluegrass Oxygen placed bids during the first phase of the program and won the right to take care of Medicare patients in Cincinnati, one of nine cities included in the initial bidding phase. The second phase will include 91 cities across the United States, with the entire country being blanketed by the bidding process by 2016. Winning the bid in Cincinnati earned Bluegrass Oxygen the rights to all Medicare patients there, but at a 32 percent reduction in Medicare reimbursement. It was a major decrease, but one Marnhout said he is willing to accept, because 60 percent of his business comes from Medicare patients. And with an estimated 10,000 people per day turning 65, this bid award — even with a reduction — can only help the business in the long run.
“DMEs are only 1.6 percent of the Medicare budget. There are a few really big companies, but the rest are made up of mom-and-pop companies,” Marnhout said. “For a lot of people, Medicare is 80 to 90 percent of their business. If they don’t win the bidding competition, they will go out of business.”
Going out of business is not something Marnhout will accede to readily. But that meant some tough internal decisions and major business model changes.
“Oxygen patients used to use portable oxygen tanks. We don’t do that anymore,” Marnhout said, emphasizing that they now use portable oxygen concentrators that patients can wear on a belt around their waists. The concentrator, made by AirSep, extracts oxygen from room air, providing it to patients at a purity level of 92 percent to 94 percent.
“Instead of taking oxygen tanks to patients once a month, we see patients only once a year,” Marnhout said.
When asked if this decreased his company’s ability to offer a high level of customer service, Marnhout said the patients aren’t complaining.
He did add that the devices are very expensive, but he recoups the cost by saving in labor, insurance and travel expenses. The added expense of the concentrators, plus the loss of revenue from Medicare reimbursements, did take a toll on the business.
“We have downsized. It was extremely difficult. Everybody multitasks — you have to, any more,” Marnhout said. “And we also don’t do our own billing; it is contracted out, so that was also a big part of the layoff.”
Though the industry has seen major changes with technology and health-care rules and guidelines, there are some changes Marnhout said he will never make.
“We are still giving people a better quality of life, and they can rest assured that if they have a need, all they have to do is pick up that phone and call us, and we will take care of them,” Marnhout said. “That is what we do.”