Opportunity knocks on home health's door

Drug Store News, Dec 9, 1996 by Marie Griffin

Being in the drug store business, I don't have to tell you how the aging population and the dramatic reconfiguring of the nation's healthcare delivery system represent huge opportunities for retail pharmacy. And yet, I am amazed at how quickly drug chain people focus on obstacles rather than opportunities when they look at the closely related home healthcare market.

Most drug chains are still deterred by maxims - or myths - like, "Chain drug stores will turn their employees much quicker than DME (durable medical equipment)." Not only is it an overstatement to equate the rate of employee turnover to turns for home healthcare products, there are also plenty of drug store items - in cosmetics for instance - that turn more slowly than DME.

And yet, what drug chains have discovered with the cosmetics department - notorious for low turns - may stand as a model for a select home healthcare department. When a retailer becomes a destination for beauty care, and especially when personal service is added, the traffic increase, sales growth and margin gains more than compensate for the slow movement.

Today, managed care is driving pharmacy sales within most chains, which means rapidly escalating prescription counts and quickly slipping margins. It's imperative that chains maximize the value of the prescription-or health@ car - customer in other parts of the store. While the home healthcare category isn't easy to manage (like cosmetics, perhaps?), it is a relatively high-margin, high-ticket business that logically fits within the drug store environment. And, not unlike cosmetics, it attracts and keeps a customer - such as a diabetic, an asthmatic or an active senior - whose long-term value to the drug chain is far above average.

Other than Walgreens, American Stores, and, until Revco's takeover bid, Big B, most drug chains have been unwilling to dedicate the time or resources-in space, people or inventory-to figuring out what products and segments might work in a chain drug store, or how. And, even those leading chains have moved with great caution.

There's a reason for that. Home health care is a broad, complex and highly specialized business that doesn't lend itself quickly and easily to retail, as I quickly discovered while walking the 850,000 square feet of exhibit space covered by the Medtrade show in Atlanta last month. The largest trade show for home healthcare dealers, Medtrade attracted more than 1,200 exhibitors and 50,000 attendees - only a handful of whom represented drug chains.

Among the 250,000 products displayed at Medtrade were many that were too large, too specialized or, for the want of a better description, too medical, to be retail products, including specialized wheelchairs and scooters, hospital beds and lifts, and oxygen therapy equipment. On the other hand, there were hundreds of items that would be perfectly appropriate and probably successful for drug stores, including canes and walkers, bedpans, elastic supports, bath chairs and grab bars, incontinence products and aids to daily living.

I know many of those items have found their ways into drug stores, with limited success. But, there is help, advice and advertising support on the way as more and more large home healthcare suppliers develop product lines and divisions specifically aimed at retail-including Invacare with Frohock-Stewart, Graham Field with Cane A Able, and Sunrise Medical with Guardian, as well as familiar names like Rubbermaid, which purchased Carex a few years ago, and Beiersdorf, which now owns both Futuro and Jobst.

Most of these retail divisions were kept under wraps at Medtrade, however, because home healthcare dealers are fiercely afraid of drug chains. I find this fascinating because drug chains, for the most part, seem blissfully uninterested in taking a nibble at the dealer's business.

Because of the complexities of getting reimbursement for home health aids drug chains have tended to let the dealers handle the hassles - and corner the market. But, as Medicare and Medicaid populations get moved to managed care, the climate is bound to change quickly. Drug chains with the buying clout, centralized billing and reporting, and numerous locations would have a real edge with managed care payors, especially if the chains combine DME capability with an existing drug benefit.

Meanwhile, managed care is also likely to limit reimbursement. "As the industry gets less and less reimbursement [because of managed care], it's got to go retail," noted one Medtrade exhibitor. While a discretionary purchase rather than a medical necessity, products that give comfort and greater quality of life to an aging baby boomer will undoubtably rise in demand in the next century. When it comes to merchandising and promotion, as well as buying power, drug chains have a significant edge over medically oriented home healthcare dealers-although the savvy dealers are learning fast.

Home healthcare products represent a burgeoning industry that's only going to get bigger. Drug chains are starting to look at the business, but they're not alone. WalMart, Home Depot and the new breed of home healthcare superstores are making headway-and more competition is on the way.