Portable Oxygen: The Next Step

Portable oxygen concentrators have ushered in a revolution, with use having skyrocketed over the last five years, but what does the future hold? Industry experts are optimistic about the future of portable oxygen in general.

• By Joseph Duffy
• Apr 04, 2013

The explosive growth of portable oxygen has helped redefine the HME oxygen industry. Not only are patients enjoying a higher quality of life, but also it has helped HME providers to rethink business and work through some of the cuts, caps and competitive bidding pervading home healthcare.

According to Medicare HCPCS claims data, the portable oxygen concentrator (POC) code E1392 has been in use since 2007, giving the industry five years of claims data (2011 data is the last complete year). In 2007 there were an estimated 1,500 patients receiving a POC billed to Medicare and in 2011, approximately 26,000 patients. Payments for POCs in 2007 were about $2 million and almost $16 million in 2011.

“This is significant growth, which includes the impact of the cap in 2009,” says Joe Lewarski, BS, RRT, FAARC, Vice President of Clinical Affairs, Invacare Corp. “It’s important to note that these data only include the POCs billed as a portable system to Medicare. This does not include the thousands of POCs sold directly to self-paying patients, as well as the many POCs provided by HME companies solely for travel.”

Bob Hoffman, Vice President, Nationwide Respiratory, VGM Group, says POCs have become an integral part of the HME oxygen business model.

“They have provided options and efficiencies that were not possible with the tank delivery systems,” he says. “In addition, many providers are looking at the POCs as a retail opportunity, thus providing an additional cash flow stream. Providers are getting better at showing their patients options that can make dealing with their disease more manageable and knowing that many are willing to spend the money to accomplish this.”

So arguably off to a good start, portable oxygen begins to breath some life into the HME industry, adding business value to providers and a higher quality of life to patients. But as Dave Baxter, President, Medical Necessities, aptly points out: portable oxygen is still evolving. Companies manufacturing POCs, home fill systems, and different conserving devices are still fighting for market share to prove their products are better than others and their modality is the best for the industry. How will it all shake out and where will this evolution take these devices? Our experts weigh in on the future of POCs and portable oxygen in general.

Oxygen Today

Understanding the future of POCs starts with knowing where they are today.

Hoffman says that just by looking back 10 years and then five years and then finally to the present, it’s easy to see the tremendous gains that continue in all areas of POCs. Today, they are smaller, lightweight and more durable; have longer battery life; are easy to carry; and offer continuous flow with 92 percent plus oxygen concentration. These qualities, he says, are all on the forefront of POC development. 

“The role of innovative, portable oxygen devices continues to be a central element of long-term oxygen therapy (LTOT),” says Lewarski. “Clinically, improved compliance to therapy in conjunction with increased activity and ambulation has been shown to increase the life expectancy for LTOT patients. Modern LTOT patients are more active and more informed about their choices, as are many of the physicians prescribing oxygen. Of the portable oxygen device options available today, POCs definitely get the most attention. The popularity among patients, prescribers and providers continues to grow. Although there is no accurate data regarding the number of HME providers using POCs in their business, I think it is safe to say that nearly every HME company owns and uses POCs in some way.”

According to Robert Jacobson, vice president of CAIRE Sales, North America, the POC market is the fastest growing segment within the oxygen therapy market, and there is sustained high demand and double-digit growth for the smallest and lightest POCs.

“Oxygen patients are extremely sensitive to the weight of portable oxygen systems, and lighter POCs provide greater patient acceptance,” he says. “Wearable POCs, less than five pounds, are in the most desirable class. Transportable oxygen concentrators (TOCs) can supply both pulse and continuous oxygen delivery, but they are substantially larger and heavier (by a factor of four to five times) than wearable POCs. Therefore, carts are a requirement for moving these 15-pound to 20-pound devices. Since most COPD patients are not using continuous flow during ambulation, TOCs burden the oxygen user with unnecessary weight.”

Baxter says that he feels only 20 percent of providers use POCs currently.

Caleb Umstead, Director of Customer Education, 1st Class Medical Inc., says POCs are very much still in its genesis, but every day they become more popular.

“As technology becomes more reliable and more compact, the number of users on POCs will increase,” he says. “Many providers are looking to POCs as a new model of business; however, given the current state of healthcare reimbursement and the decline in the number of providers, these have put a serious damper on many providers paying the rather costly investment of POCs.”

Another benefit for providers, says Lewarski, is that POCs empower HME providers to eliminate nearly all of the non-value added operational costs associated with the provision of portable oxygen therapy, without compromising patient care and quality of life. POC oxygen users get unprecedented independence and are no longer limited to the capacity of the device, he says, and access to a power source means access to oxygen.

“For HMEs it is about economics, patient acceptance and marketability,” says Jacobson. “POCs can represent the lowest cost model for providing portable oxygen while the technology can better satisfy patient requirements. Reliability and overall equipment costs are also driving factors. POCs provide HMEs with a marketing advantage over other portable equipment due to added patient benefits, including overnight travel, air travel, and being able to stay out longer without the fear of running out of oxygen.”

Oxygen Tomorrow

Portable oxygen technology is ever-evolving and improving, with POCs at the heart of advancement. But even as demand for these devices grow, it seems advancement will come with a give and take.

“When you talk with patients and clinicians, they all want smaller, lighter, quieter devices with higher oxygen output and longer battery life,” says Lewarski. “Providers want all of that and demand more durability, reliability and of course, a lower cost. For the moment, many of these requested features are often conflicting; as you move in one direction it adversely impacts another feature. POCs offer a unique technological challenge; they live the brutal life of an oxygen cylinder, yet have the technological sophistication of more complex and expensive medical devices. I often refer to them as laptops that make oxygen.”

For patients, Umstead says that their desire for freedom will continue to guide the future of oxygen technology. He calls the independence that the POC affords the patient as the biggest benefit — the freedom to fly, drive, or boat without worrying about running out of oxygen. Freedom also comes from not waiting on deliveries from the oxygen supplier. He says all this gives patients the chance to feel normal again.

But inhibiting the growth that Umstead says most providers are expecting from portable oxygen technology is a number of factors, including low reimbursement, competitive bidding, and audits. He says the good news is that POCs are here to stay and even though reimbursement is lower than before, people are buying them and every day there are more POCs in use. And this helps to drive the cost down to the provider, allowing more patients access to portable products. 

“The competitive bid environment puts both the manufacturer and provider in a difficult position,” says Hoffman. “Technological advances cost money. As oxygen reimbursements decrease, providers are looking for the least costly means of providing the service. So if the cost of new technology exceeds reimbursement, there potentially could be some great innovations that could help patients better deal with their disease state, becoming inaccessible.”

Baxter hopes to see the size of POCs continue to get smaller and battery life longer. This is critical, he says, because in his opinion, the units on the market now that offer continuous flow are not as portable as they could be for end-stage COPD patients.

Hoffman agrees that POCs are still in their genesis but the ultimate goal is to have the ability for the POC also to be the primary oxygen concentrator for the majority of patients. However, he says, the word “portable” inherently makes this difficult due to the banging and dropping and other associated hazards when dealing with portable equipment.

“Making the POC bullet proof is a daunting task,” he says. “Providers have all dealt with equipment abuse when it comes to, for example, wheelchairs, but replacing an armrest or a bolt is much more manageable then sending a POC in for repair.”

In addition to incremental improvements in performance, Jacobson says that standards requiring the disclosure of oxygen delivery methodology will make it easier to compare devices for important characteristics, including triggering sensitivity and oxygen delivery time.

A Changing Business

The biggest drivers of the next steps in the evolution of oxygen technology and POCs are very much like many other technology companies.

“We are constantly looking to improve the performance, quality, clinical efficacy and cost effectiveness of the devices we produce,” says Lewarski. “The changing global healthcare environment, the growing population of patients with COPD and other cardiopulmonary conditions, healthcare consumerism and the shifts to provide healthcare outside of the walls of the hospital are some of the key drivers.”

According to Lewarski, future oxygen technologies will continue to be focused on clinically sound therapy but may incorporate much more software and intelligence in the design. In a future clinical world of evidence-based care, compliance and outcomes, data will continue to gain importance. Concurrently, as providers face higher operational costs and lower payments, the technology will need to be more intelligent and continue to eliminate unnecessary and costly non-valued-added activities.

The main driving force for patients is the weight of the portable oxygen system, says Jacobson, and manufacturers are addressing this with lighter weight models. Lighter weight portables reduce the physiological burden for the patient and improve compliance.

“Either directly from the consumer or from the insurance provider, reimbursement will play a huge role in what manufacturers will be working on,” says Umstead. “Just like DME depends on insurance, these manufacturers depend on DME companies for revenue. I believe the next step in driving oxygen technology will be patient-based maintenance. With reimbursement falling more and more, companies are offering fewer and fewer services to make up for the cuts.”

Also, Umstead cites patient accountability with regards to patients’ own healthcare and equipment as another driving force for technology. He points out that this is already happening with a POC that has quick change sieve beds, which patients can change instead of having to take it to a provider or sending it back to the manufacturer. “I believe we will see more reduction in repair time and cost with patient-based maintenance,” he says.

Future Treatment

The global trends in chronic lung disease will continue to create demand for home oxygen therapy, says Lewarski.

“Early identification and treatment of chronic lung and cardiopulmonary disease will reveal more patients with untreated hypoxemia,” he says. “Intervening and treating these patients earlier will help reduce morbidity, mortality and the overall costs associated with managing chronic disease.”

At the end of the day, the most important message is to ensure that the selected oxygen technology meets the patient’s clinical and lifestyle needs. Lewarski says that the significant variability in device performance (maximum oxygen output, pulse-dose methodology, etc.), particularly among POCs and oxygen conserving devices means providers and clinicians need to use their knowledge and clinical expertise to ensure that patients receive a clinically appropriate and efficacious device.

At some point we have to get Medicare on board to support a code for batteries,” says Baxter. “POC use is great but the batteries do not last the full five years so you have to figure a replacement battery into your acquisition cost, which is unfortunate because Medicare allows for new batteries for power chairs and scooters annually.”

Umstead says he strongly believes that the future of oxygen includes a consolidation of manufacturers and suppliers all in an effort to reduce cost.

“Trends will depend on our ability as suppliers and manufacturers to juggle costs and benefits of new technology in an effort to reduce the overall cost of providing oxygen,” he says. “This is where I see POCs on the surface doing well because they can establish a static monthly cost to a patient. This is generally good; however, the problem that suppliers are facing with the POC model is that they are afraid to take the risk of a $250,000 investment of a non-delivery model with the ever-reduction in reimbursement and the audits that never seem to stop. So I believe the trends of many oxygen suppliers will be to remain doing business as usual until the storm runs out of rain and we can get back to patient-centered care and not cost reduction care. On the flip side of this, I see the trend of patients or family members just paying cash for healthcare. This is a trend we see with doctor concierges and we are seeing this more and more with oxygen users and people in need of medical equipment. This is a trend that I see growing big. Baby Boomers and others a like want the best and are willing to pay for it.”

This article originally appeared in the April 2012 issue of HME Business.