Wendell Matas is down, but he's sure not out. Like many home medical equipment and rehab providers, the owner of Wheelchairs Northwest in Bellevue, Wash.,
by Susanne Hopkins

Wendell Matas is down, but he's sure not out. Like many home
medical equipment and rehab providers, the owner of Wheelchairs
Northwest in Bellevue, Wash., is feeling the effects of legislative
and regulatory changes that have rained down on the mobility sector
of HME, dampening not only the market's business but also its
spirit.

Matas is, he admits, having a hard time finding much good in the
current market, which appears to be besieged from all sides. But
he's not giving up. “At my soul, I love it,” Matas
says. “I've been doing this most of my life. I have
long-term, if not life-long, business relationships with many of
our customers.

“We are very good at what we do, and there aren't many who
excel at high-end rehab. It's hard to say the heck with
it.”

Even so, he and other providers are reeling from the effects of
new codes for power wheelchairs that were issued, rescinded and
reissued again; from reimbursement that took a drastic hit; from
increased government scrutiny that at times slowed payments to a
trickle; from accusations of rampant fraud that involved only a
small percentage of companies but tarred and feathered the entire
industry; and from coming federal mandates like accreditation and
national competitive bidding.

“It's death by a thousand cuts,” says Matas, who is
also president of the Pacific Association of Medical Equipment
Services.

Most recently, President Bush's 2008 budget proposal includes a
13-month rental period for power wheelchairs that would eliminate
the current first-month purchase option and, say industry
stakeholders, significantly affect beneficiary accessibility (see
accompanying story this page).

That proposal, which has drawn vehement industry opposition, has
contributed to an even greater sense of unease in the market,
particularly in power mobility.

“I perceive the power mobility market as uncertain at the
moment,” says Wallace Weeks of Weeks Group, a strategy
consulting firm based in Melbourne, Fla. “Complex changes
have been announced, rescinded, restated and implemented so fast
that many providers have [hardly] had time to react.”

The effect has been that long-time providers find themselves
questioning whether or not they should stay in the mobility
business — or, for that matter, in the HME business
altogether.

Indeed, the American Association for Homecare released an
economic survey in November that predicted 1,500 wheelchair
suppliers would exit the industry over the next eight years, forced
out by under-market-price reimbursement. Providers remaining in the
market could reduce their services to beneficiaries as a way of
breaking even, the survey suggests.

“It seems like a constant battle,” acknowledges Tom
Polston, owner of Specialty Medical Sales in Lewisville, Tenn., and
president of the Medical Equipment Suppliers Association, which
serves Texas and several other states. “A lot of it seems to
be out of control. But you can't give up on it.”

Bolstered by the idea that mobility is still a viable business
and the belief that someone needs to care for people who need
mobility products, many providers are pulling up their bootstraps
and determining to keep going — somehow.

“It's survival of the fittest,” says Miriam Lieber
of Sherman Oaks, Calif.-based Lieber Consulting. She refers
especially to the power mobility market, which has taken the brunt
of the government's regulatory changes. “I think that with
everything there is always a period of shakeout and then it calms
down. It may be appropriate to get out of the market and then get
back in. And those that are really eager can get back
in.”

THE BIG CHANGE

There is good reason to want to get back in, or stay in,
stakeholders say. As always, the demographics foretell a growing
need for mobility products that will continue far into the future.
And efficient providers can still make a profit, albeit not as much
as in the past.

“I think the major crunches in reimbursement have
occurred. The smart companies have figured out how to navigate
Medicare and make money at it,” says Alison Cherney,
president of Cherney & Associates, a Brentwood, Tenn.-based
marketing and sales consulting firm.

Still, say Lieber and others, the mobility market has seen a sea
change. Those who survive — and thrive — in it,
particularly in the power sector, are not going to be doing
business as usual.

It used to be that mobility providers routinely accepted
Medicare assignment for canes, walkers, rollators, manual
wheelchairs, scooters (sometimes) and power wheelchairs. They
enjoyed reasonable (some have even said “generous”)
reimbursement. They offered free servicing of that equipment, as
well as free delivery. Many even sponsored special days where they
offered free wheelchair washes.

But those days are gone, observers say, done in by recent CMS
reimbursement cuts from 10 to 30 percent for some products.

“The service component has been completely neglected [by
CMS], and I think that is going to hurt a lot of people. If we are
in the business of selling power mobility devices, we have to be
lean and mean,” says Polston.

“Service is a particularly troublesome issue,”
echoes Matas. “It takes almost as much processing effort to
get approval and payment on a minor repair as it does for a big
power chair. Our service department is getting dragged down because
there is no way you can get a profitable model.”

Harvey Diamond, executive president and CEO of Drive Medical
Design & Manufacturing, Port Washington, N.Y., started out as a
home health provider 35 years ago. He, too, is concerned about
service.

“We are at a place right now where we have to make a lot
of changes in the way we do business,” Diamond observes.
“We are at a tough time right now, where the government has
reduced allowables and they are not fair. They are strictly looking
at everything from a dollars and cents [view], and they're not
looking at the service that is needed to provide [this
equipment].”

According to Polston, that means “you have to continue to
service [the equipment], and you're not going to get paid for it.
So now, you're going to have to say to your customers, ‘We're
going to take care of you, but it will be every other week. We have
to put you on a schedule.”

Ross Charest, director of product management-power products,
North America, for Longmont, Colo.-based Sunrise Medical, points
out that in their previous life, providers often did more than just
service and wash wheelchairs. “Most providers are partners
with their users, often providing minor fittings, customization and
service for no cost,” he says. “This will no longer be
economically feasible for them, and they will struggle to provide
complete access to users.”

Matas also agrees that providers will need to change the way
they do business. “We as an industry have to forge a more
business-like model. We either do it voluntarily or begrudgingly.
But so many practices can only be seen as bad business.”

Many HME companies routinely write off patient copays or throw
in for free what Medicare might deny as a luxury accessory, he
says. It has not been uncommon for providers to give away special
metallic finishes on wheelchairs rather than charge the
customer.

Now, asserts Matas about non-productive business practices,
“some things will have to go. If not, it might be
us.”

Lieber thinks providers will also be smarter about what they
sell and whom they sell it to. “Perhaps the provider will be
more selective in the type of customer they choose and the type of
product they choose,” she suggests.
“‘Selective’ is the operative term here.

“Two things I think people are looking for: alternate ways
to drive revenue if they have a mix of both Medicare and private
business; and, for Medicare patients, they are looking for a clean
claim and an appropriate product for that patient. It has to be
very safe.”

She expects that providers will do more prescreening before
accepting a Medicare client. And they'll need to look at
alternative markets. “Maybe the scooter market is
back,” Lieber says. “However, you can't neglect the
fact that for every power wheelchair, you'd have to sell three or
four scooters.”

CONTINUING CONCERNS

Even as mobility providers struggle to find their balance on
Medicare's rocky road, there are other threats.

Mandatory accreditation and the implementation of national
competitive bidding go hand-in-hand. CMS has said a provider can't
be awarded a bid contract if it is not accredited. At some point ,
a provider won't even be able to hold a Medicare supplier number if
it is unaccredited (at press time, CMS had not announced a firm
date).

Providers who are not yet accredited are understandably nervous
about when the accreditation mandate will be implemented. And
waiting to see how the first round of competitive bidding will turn
out this year has everyone on tenterhooks.

While those are industry-wide concerns, there's a more immediate
worry for providers who deal in high-end mobility products, should
complex rehab be included in the list of products that are subject
to competitive bidding (also unknown at press time).

“With complex rehab, you require a high level of expertise
and a high service level,” says Mark Sullivan, vice
president, category manager-rehab, for Invacare, Elyria, Ohio.

“We feel that [complex rehab] is the wrong thing to put on
competitive bidding; we think it is too service-dependent to be put
up for bid. We would like to see that carved out of competitive
bidding.”

Rehab stakeholders have also objected to the fee schedule for
power mobility devices, which went into effect Nov. 15.

Indeed, in December, the National Coalition for Assistive and
Rehab Technology wrote to state Medicaid directors, warning that
further reduction in reimbursement for power wheelchairs,
particularly high-end rehab, would result in decreased
accessibility (see related story on page 4).

“Studies show that [rehab] providers have less than a 5
percent margin,” says Sullivan. “A 10 percent cut will
make them look at how they run their business and how they can run
them differently.”

State associations are also concerned about the impact the new
fee schedules will have on accessibility.

“We are communicating with the state Medicaid departments
about our concerns with providing medically necessary equipment to
dually eligible beneficiaries,” says Karyn Estrella,
executive director of the New England Medical Equipment Dealers
Association, which serves six states.

“There is great concern about funding for Group 4 chairs
for duals since Medicare will not pay for these chairs,”
Estrella says.

In addition, since most states are trying to find ways to cut
Medicaid costs, providers must be alert to what is happening in
their Medicaid business, too. Weeks believes they can expect some
curtailing of costs.

“Medicaid programs will continue to add new cost
containment measures,” he predicts. “We are [in] the
state legislative season, so we should be looking for new bills to
be introduced in the state legislatures that affect
providers.”

THE GOOD NEWS

While there are serious issues, both current and coming, for
mobility providers to grapple with, it's not all bad news.
Stakeholders point to several market pluses:

With baby boomers turning 60 at the rate of about 8,000 a day,
according to statisticians, the demand for mobility products can
only rise, experts say. According to a recent report from research
firm Research and Markets, the market for wheelchairs and scooters
is expected to grow to $5.3 billion by 2012.

  • CMS' new power wheelchair codes appear to be working, providers
    say. “The coding is better; it's more specific,” notes
    Tim Pederson, CEO of WestMed Rehab in Rapid City, S.D., and vice
    chair of AAHomecare's Rehab and Assistive Technology Council.

    “It allows us providers to provide an appropriate product
    and know that it is appropriate for the person's
    condition.”

  • There is still business to be done in this market sector.

    “As with all product lines, this one is maturing from a
    reimbursement standpoint, but there is still a solid market
    opportunity for those who want to get serious and play ball by the
    rules,” says Cherney.

    Polston thinks so, too. “I'm hopeful. I think it will be a
    rough period. But if you can maintain the proper attitude and not
    get too burned out, you can make it,” he says.

    And Matas? Well, he's in it for the long haul. “I've never
    been one to give up too easily,” he says.

    Bush Budget Gets Thumbs Down

    A groundswell of opposition on the part of HME stakeholders
    continues toward President Bush's plan to establish a 13-month
    rental period for power wheelchairs.

    Bush revealed the proposal in early February as part of his
    budget for 2008. Other home health care provisions include a
    13-month cap on oxygen rentals and a five-year freeze of the
    Medicare market basket payment update for home health agencies.

    The $2.9 trillion budget provides nearly $700 billion for the
    Department of Health and Human Services, but would carve out $66
    billion in savings from Medicare and $12 billion in savings from
    Medicaid.

    Within hours of the proposed budget's release, the American
    Association for Home-care weighed in with a statement decrying the
    plan. Walt Gorski, vice president for government affairs, pledged
    that “AAHomecare will mobilize to fight these draconian cuts
    that simply undermine access to and quality of home
    care.”

    A 13-month rental period for PWCs would eliminate the
    first-month purchase option for the equipment.

    “Currently, Medicare permits a beneficiary to choose to
    purchase a power mobility device,” AAHomecare explained in
    its statement. “When the beneficiary chooses to purchase a
    power mobility device, Medicare payment is made on a lump-sum
    basis.”

    The association urged Congress to “reject the
    administration's proposal and maintain the first-month purchase
    option for power wheelchairs to ensure beneficiary access and cost
    savings to the Medicare program.”

    Cara Bachenheimer, vice president of government relations for
    Elyria, Ohio-based Invacare, called the budget proposal
    “ridiculous.”

    While the administration says the proposal would save about $500
    million over five years, Invacare estimates that, in reality, the
    provision would end up costing Medicare and beneficiaries 5 percent
    more over five years than they are currently expending under the
    first-month purchase option.

    “Obviously, that's unacceptable,” says Wendell
    Matas, president of Wheelchairs Northwest in Bellevue, Wash., and
    president of the Pacific Association of Medical Equipment Services,
    about the president's proposal.

    “I don't think people ever think in terms of renting a
    power wheelchair. I can understand a capped rental for people who
    may need it for a short while. But when you get into rehab, those
    chairs are custom built for each individual. You just don't turn
    'em around [and give them to someone else].”

    Kurtis Blunt, owner of Santa Barbara Healthcare in Santa
    Barbara, Calif., says Bush's plan would hurt not only the
    beneficiary but also the company providing the power chair.

    “People aren't going to want to provide them,” he
    says. “These are expensive chairs. If they do a 13-month cap
    on the power wheelchair and if the patient only has it a month,
    then the company is only going to get a month's
    reimbursement.”

    Providers would be forced to reuse those chairs that do come
    back, he says, “and it may not fit another person who needs a
    chair. It can definitely pose problems for the company and the
    patient.”

    Blunt says he's already selective about the power wheelchairs he
    bills Medicare for, but if Bush's proposal goes through, it would
    quash that business entirely.

    “If they're going to do a capped rental on a power
    wheelchair, I am not going to do it at all. It's not worth it to
    me,” he says. “Unfortunately, the people who are going
    to be hurt by it are the patients because they are going to need
    equipment and they aren't going to be able to get it.”