Have Oxygen, Will Travel

Portable oxygen use is on the rise, and experts expect the trend to continue. Are you ready to take care of patients on the go?

• By Linda Kossoff
• Mar 01, 2010

In some ways, it’s a no-brainer: Baby boomers have started to reach their 60s and beyond and, therefore, are developing respiratory conditions. Baby boomers tend to be youth-oriented, active people and, therefore, aren’t about to let respiratory conditions restrict their lifestyles if they can help it. Finally, baby boomers represent a huge chunk of the population and, therefore, we are at the beginning of a greater demand for portable oxygen concentrator (POC) options.

In other ways, it’s not so simple. POCs require some investment. They vary widely in weight and capacity. They are still evolving technologically. And who can be sure what CMS is going to do to affect the cost-effectiveness of their purchase and rental for HME providers?

Now more than ever, respiratory providers need to be well versed in an equipment category before taking the plunge. (See our Survey on page 23 for more about provider purchasing trends.) To help you sort out the pros and cons for your provider business, we spoke to some of the experts in the manufacture and use of POCs about the key issues surrounding portable oxygen equipment.

Popular Demand

“With POCs it’s not a matter of ‘if’ but ‘when,’” asserts Joseph L. Priest, President and COO of AirSep Corp. Priest, who has been in the industry since 1983, supports his assertion with a historical perspective. “In the 1970s, stationary oxygen concentrators began to take the place of liquid or cylinder oxygen for obvious reasons: They were more cost-effective to provide because they eliminated the need for delivery, and they were less worrisome for the patient. By the late 1980s, with the help of modality-neutral Medicare reimbursement, these concentrators enjoyed about 90 to 95 percent of the market.

“I believe that POCs are doing for ambulatory oxygen what stationary concentrators did for in-home oxygen,” Priest continues. “Like the stationary concentrators, POCs end the need for deliveries. Costs are saved on trucks, refilling, certification of cylinders, etc., and providers and therapists are freed up to focus on taking care of patients. Meanwhile, the oxygen patient is now managing power instead of contents, and doesn’t have to go back to a home, as with any cylinder-based system. Patient freedom goes way up.” While Priest is not predicting a marketshare of 90 to 95 for POCs, he believes that the category will eventually climb to 60 to 75 percent.

The appeal of POCs isn’t lost on any major respiratory manufacturer. In addition to AirSep, SeQual, Invacare, and DeVilbiss have all weighed in with the same general assessment for the future of POCs, and that future is bright. “We’re seeing an increase in POC use, especially since the baby boomers started Medicare,” affirms Adrian Knight, RT, former homecare and sleep lab business owner, and currently Director of Sales at SeQual. “These people are not going to sit at home and live with their respiratory disease.”

“In the heart of the market is patient demand,” agrees Chris LaPorte, Product Manager of POCs at Invacare. “Due to the Internet, patients are now more savvy and they’re going to demand the most up-to-date oxygen technology available.”

It isn’t only respiratory patients who are seeking alternatives to their situations. Providers are also looking for a way to alleviate one of their primary problems, namely Medicare cutbacks. “We know that Medicare has cut back on the allowables so homecare providers are looking to the non-deliverable options to help them maximize profits,” Knight notes.

Cost and Purchasing

Not all HME providers are clamoring to jump onto the POC wagon, despite growing patient demand and manufacturer claims of a sunny future for the product category. Many are weighing the savings of non-delivery systems against the cost of POC units and are coming up with a question mark. Are today’s POCs truly a profitable investment for today’s respiratory providers? Like most profitability questions, the answer seems to lie in the variables.

“When we’re talking about profitability, we first have to ask, what does that mean?” says LaPorte. “If you’re talking about a retail sale, then it’s very profitable. If you’re talking about POCs and reimbursement, the situation will be similar to a transfilling model, where the profit comes from the efficiencies gained by not having to deliver oxygen.”

No one denies that POCs carry a higher price tag. “Upfront costs are a concern because you’re outlaying cash,” acknowledges Knight. Over time Medicare reimbursements do recoup the money, he adds, but it takes time. “You’re looking at payment of less than $200 per month, so it may take 8 to 10 months to get that back.”

“It does not appear that CMS has any intention to dissuade HME providers from utilizing POCs,” says Jim Clement, Global Director, Oxygen Products at DeVilbiss Healthcare. “In fact, they seem to encourage the adoption of new technologies as defined by the higher reimbursement levels.”

And if reimbursements are cut more? This is likely, say the experts. “Right now, reimbursements for POCs are on the high side because the technology is fairly new and therefore more expensive,” notes Priest, “but the costs will eventually go down and the reimbursements will as well.” LaPorte agrees. “As more people need the therapy, the potential for cuts increases,” he says. However, both point to the counterbalance in play between patient demand and the drive for Medicare cuts and conclude that patient demand will continue to drive growth in the POC market.

As with any technological breakthrough, there is also a cost to doing nothing. Business owners who did not invest in efficiency-enhancing computer software, for instance, now find themselves behind the curve in areas such as billing and tracking. Is there a similar risk at stake here? “Because it appears that reimbursement for oxygen products and services will continue to be reduced over time, providers should act sooner rather than later toadopt the non-delivery model to reduce overall operational costs in preparation for reductions,” believes Clement. “Payback on equipment cost at current levels will most likely be better than it will in the future.”

Priest also stresses the advantages of early investment. “People who get in early might pay a little more, but they also learn more and are in a better position to take advantage of the technology before others,” he notes. He also reminds, however, that getting into POCs isn’t an all-or-nothing proposition. “Established providers might want to take on POCs incrementally, taking advantage of this time to learn and ultimately transition as the trend grows,” he suggests.

On the other hand, new providers or providers who are expanding into new locations might do well to simply start with POCs, says Priest. “With no built-up infrastructure of delivery, inventory or staffing, they can start clean with cost savings.”

Maintaining that advantage takes some effort, though. Advises Clement, “POCs can be profitable provided that the HME provider manages inventory closely and provides the right device to each patient. This can only be done with very careful assessment of the patient’s need and the device’s capabililty.”

Controlling Accessibility

There is another issue that providers and manufacturers must both keep in mind, and that’s the availability of equipment to patients, particularly online. SeQual’s Knight has noted an increase in direct purchases by consumers, and Invacare’s LaPorte echoes these concerns. “In a lot of ways, the Internet is the Wild West, and we have seen POCs pop up on eBay,” LaPorte reports. “Invacare has a lot of reputable online providers that we sell to, so we try to do everything we can to make sure that the product is distributed only to those dealers.We have to remember that this is a licensed device.”

AirSep takes a very aggressive approach against online sales of POCs. “We actively go after online retailers of AirSep POCs to shut them down,” says Priest. “We think that the homecare market requires personal attention, and selling these items online does consumers a disservice.We’ve seen people actually bootlegging our equipment for sale online and we go after them.We have also gone after providers who sell outside their service area via the Internet.We’re not a large enough industry to go directly to consumers with our message, so we try at the provider level. For consumers, the message has to be transmitted via word of mouth and oxygen user groups.”

Many providers share manufacturers’ concerns about online sales of POCs. Kim Wiles is Vice President of Respiratory Services, a provider with five locations throughout Pennsylvania, Ohio and West Virginia, serving approximately 3,500 oxygen patients. Her job is to oversee growing the business in the respiratory sector and deal with operations.Wiles is concerned over the trend toward online purchasing. “Demand for portable oxygen is greater now, and the equipment can get into the hands of the wrong people,” she says. “When patients are traveling, or when their insurance is charging too much, they can get desperate. When they purchase online, maybe it’s from a reputable source and maybe not. No one is checking to find out.”

“Some purchases via online sources are inevitable, especially cash sales,” concedes Clement. “However, this will most likely not be the case for someone expecting the device to be covered by Medicare or other reimbursement, since online sellers are not typically set up for Medicare billing.”

Understanding the Equipment

As a provider,Wiles applauds the industry for having come up with a host of portable options. She does, however, voice some concerns over what she feels may be misconceptions over POC use. “The lighter, smaller and longer-lasting oxygen units are great, but I worry about not properly oxygenating the patient,”Wiles says. “We always thought smaller is better, but if it’s smaller, perhaps it isn’t putting out as much oxygen as it should. The clinician must be very careful to titrate patients appropriately, especially when they’re at high altitudes.”

Aware of clinicians’ concerns about POC function, manufacturers are making a push toward dispelling misconceptions with clear information and education. “We know that POCs haven’t been established as long as other products on the market,” says LaPorte. “People need to understand that a POC is a much different product. We can’t ask a POC to perform exactly like a cylinder.”

According to Wiles, some of the misconceptions about POCs may be tied up in the familiar “continuous vs. pulsed dose” discussion. POC users may base their expectations for oxygen delivery—two, three or five liters a minute—on a continuous dose model, and end up not getting the oxygen per breath that they expect.

AirSep’s Priest and Invacare’s LaPorte both acknowledge that there are some differences in the ways that manufacturers choose to deliver the pulse dose, but emphasize that the science behind the technology is consistent. “Pulsing has been widely accepted since the 1990s,” reminds Priest. “The issue is no different with POCs. than oxygen conservation with cylinders. For all devices, whether pulsing or continuous flow, the only absolute way to determine saturation is through oximetry.”

As with any respiratory device, a POC can only be as effective as its suitability for the individual patient. “Oxygen output, sensitivity and features can vary dramatically from one POC to another,” says Clement. “Each patient should be titrated on the device that the provider believes to be right for the patient to make sure that the patient is being properly saturated. In addition, it is critical that the patient has the aptitude to operate the equipment properly.”

“Use a monitor to determine how much the patient is getting per breath,” says SeQual’s Knight. “Maybe one device can’t keep him saturated beyond 80 percent and another keeps him at 95 percent. It’s a black eye on the industry when we say that patients can’t handle pulsed dose when it’s the way that the pulse is delivered. Ultimately in a pulsing device you want to see that 100 percent of that bowl is delivered within the first two second of the respiration. When you get outside of those ranges you have trouble. Oxygen can get stopped in the trachea, for instance.”

The key, then, to successful POC use rests with education, followed by customization. “As manufacturers, we must educate the provider, the RT, the physician, manager, nurse, etc., all the way to the patient,” says Knight. “We cannot advertise that a piece of equipment provides five liters per minute when it’s really a pulse setting of five.We cannot compare apples to oranges and say they do the same thing. Patients will misinterpret.” Knight stresses that POC information must be incorporated into respiratory schooling, and suggests that educators take actual devices into the classroom and demonstrate to students the changes and differences in oxygen delivery.

Because patients must be carefully assessed before a device is chosen, customization becomes the key to the future success of POCs. “We must tailor the equipment to the patient,” says Wiles. “All of the devices out there are great and have features, but none are right for everyone.”

Priest believes that manufacturers’ ability to customize unit weight to patients’ needs optimizes that future. “When stationary concentrators came out, there were two-, three- and five-liter capacity units, but then it was decided that it was less expensive to only produce five-liter units to effectively serve the whole market,” he explains. “However, with POCs, weight really matters and patients are going to—and should—look for the smallest, lightest concentrator that provides appropriate saturation for them.”

As for its advantages to respiratory patients, there is clear consensus. “POCs provide for a better life for patients, and the ultimate in flexibility and mobility,” concludes LaPorte. “That’s our job—to develop products that best serve the needs of patients and their providers.”

This article originally appeared in the Respiratory & Sleep Management March 2010 issue of HME Business.