How to Address a Changing Oxygen Landscape
Providing oxygen services to patients is a business that is currently fraught with uncertainty and chance. However, if providers can adjust their business models, and take advantage of new technologies, they might be able to negotiate the oxygen market’s shifting currents.
The most difficult thing about current changes in the oxygen market is that, for years, oxygen represented a stable business. Patients clearly needed oxygen and providers were there to provide the equipment and the refills. They also ensured the equipment was maintained and updated as technology advances were made.
Now the oxygen market has been turned upside down, and providers have had to go from stability to a massive gear change in the way they plan and carry out their businesses. Here are some key trends, developments, opportunities and strategies for dealing with these changes:
Know the regulatory changes. While competitive bidding has been delayed, it still might happen. As round one of competitive bidding was nearing implementation, the price drop of product categories covered by the program were averaging 26 percent. That is a massive drop.
And regardless, the purchase price for the delay in competitive bidding was a 9.5 percent cut in covered product categories, so one way or the other, oxygen is affect.
Also, the 36-month rental cap might be nullified with H.R. 6331, which would serve as a huge relief to oxygen providers. Those caps, which were underway as the competitive bidding delay was taking shape, stood to go into effect in 2009. Since the rental cap is associated with the patent, rather than the provider, that would have meant that the patient must keep their oxygen equipment. Regardless of what new, life-improving oxygen technologies become available; no government reimbursement will be available to those patients. While it is true that some patients will cycle off their therapy for one reason or another, many patients would have been left holding the “cylinder” as it were.
Section 144 of H.R. 6331 makes the transfer of ownership of oxygen
equipment that was enacted in the Deficit Reduction Act of 2005 obsolete. The
law does not repeal the oxygen rental cap of 36 months. Instead of transferring
ownership to patients, providers will maintain ownership of the equipment.
According to AAHomecare after the 36th month, the supplier will furnish
equipment during any period of medical need throughout the duration of the
equipment's lifetime, which is to be determined by the Secretary of Health and
Human Services.
There will be more patients to serve. While reimbursement might be dropping off, patient demand has nowhere to go but up. In fact, medical data points to a growing population of patients in need of oxygen services. For instance, Chronic Obstructive Pulmonary Disease affects approximately 12 million people, with an additional 12 million patients yet undiagnosed, according to American Lung Association estimates. Increased awareness and diagnosis of COPD will mean increased demand for oxygen services from HME providers.
Look at non-delivery. Technology might be a key saving grace for oxygen providers. Portable oxygen concentrators and transfilling systems slash overhead because they do not require refills, and thus the provider does not have to deliver nearly as many tanks as they once had to. While POCs and transfilling systems have higher up front costs, they can dramatically cuts traditional delivery vehicle, fuel and driver costs, which can typically account for up to 70 percent of an oxygen providers’ overhead.
Look at minimizing delivery. For providers that must continue to deliver oxygen to patients, large tank delivery is becoming an attractive option for axing overhead and equipment costs. Using a system such as Responsive Respiratory’s Cy-Fil, providers deliver large tanks to patients on a much less frequent schedule, but a special regulator is attached that lets patients easily and quickly refill their small tanks.
Increase delivery efficiency. If you haven’t looked into delivery management via GPS, now is the time. However much you reduce deliveries, you must still optimize their efficiency, especially considering the skyrocketing cost of gasoline and diesel fuel. Systems using GPS tracking let you monitor the course of every delivery vehicle and optimize routes. Furthermore you can plan routes to ensure rapid-response wile minimizing wasted time and fuel.
Explore cash sales. While reimbursement could continue to be a shifting landscape, there will be a market for patients who will pay for items such as portable oxygen concentrators out of their pockets. Also family members also might be willing to buy POCs for patients without coverage. Continue to educate patients on the benefits of these systems and they just might beat a path to your door, regardless of whether or not Medicare will cover them.
Points to take away:• Stay on top of regulatory developments.
• Explore non-delivery via POCs and transfilling systems.
• Look at reduced delivery modes of doing business.
• Increase your delivery efficiency using systems such as GPS tracking and route planning.
• Explore cash sales opportunities.
This article originally appeared in the July 2008 issue of HME Business.