Anyone who has spent a Sunday afternoon struggling to decipher The New York Times' crossword puzzle understands the challenges that HomeCare's editors
by PILED BY BROOK RAFLO, PAULA PATCH AND LYNN SCHENKMAN

Anyone who has spent a Sunday afternoon struggling to decipher The New York Times' crossword puzzle understands the challenges that HomeCare's editors face each year as we compile the home medical equipment industry's latest statistics. Like crossword aficionados everywhere, we know that the answer to No. 2003 Across — “The HME industry is _____” — exists. We read the clues all around us in news stories, market reports and health care studies. We hear the clues when we interview HME experts, attend trade show conferences and receive letters from our readers.

To crack The New York Times' puzzle, one must have a breadth of knowledge. No individual can be an expert in every field, but if he wants to solve the puzzle, then he had better know a few experts — or at least be on a first-name basis with the local librarian. The same is true for HomeCare's annual Facts & Figures feature. In a market that covers everything from sleep-disordered breathing to pressure ulcers, oxygen conservers to compression hosiery, no individual can have all the answers. And of the firms that track general health care trends, only a few attempt to keep up with HME. Even then, the industry's defining statistics often are fragmented or lumped into more general reports.

So to solve No. 2003 Across, this year we tapped all our resources. Pulled from the federal government, industry associations, private research firms, company financial records and our own extensive files, the hard numbers in this HME snapshot offer providers the baseline they need to determine business goals, set strategies and measure performance.

In compiling the following pages, HomeCare's staff found many answers to this year's puzzle. Our research confirms that the HME industry is …

growing
vital
resilient
creative
tenacious.

In 2002, CMS spent a total of $7.7 billion on durable medical equipment, prosthetics, orthotics and supplies.

Source: Centers for Medicare and Medicaid Services

The HME industry generates approximately $19.74 billion annually.*

*Estimate based on the total amount that the Centers for Medicare and Medicaid Services spent on durable medical equipment, prosthetics, orthotics and supplies in 2002; and on information from the American Association for Homecare's 2002 Financial Survey Report, published in 2002. Statistics from the latter are reprinted by permission of the American Association for Homecare (AAHomecare), and are based on fiscal year 2001 information provided by 119 firms of varying sizes and home care services. Visit www.aahomecare.org for more details.

Durable Medical Equipment made up 1.3% of public health care expenditures in 2001.

Source: Centers for Medicare and Medicaid Services

NUMBER OF DURABLE MEDICAL EQUIPMENT SUPPLIER NUMBERS ISSUED

Year Total
1999 11,400
2000 10,706
2001 11,450
2002 14,334
Source: Pametto GBA, Columbia, S.C., National Supplier Clearinghouse

NUMBER OF MEDICARE BENEFICIARIES IN 2003

Category Total
Aged Persons 34,457,024
65 to 74 17,764,379
75 to 84 12,303,987
85 and over 4,388,658
Disabled Persons 5,568,693
Under 45 1,658,257
45 to 54 1,727,547
55 to 64 2,182,889
All Persons 40,025,717
Source: Centers for Medicare and Medicaid Services

ACCREDITATION BY JCAHO, CHAP OR ACHC

72% of respondents to AAHomecare's 2002 Financial Performance Survey are accredited by JCAHO, CHAP or ACHC. Accreditation is related to company size, with all firms above $10 million in revenue being accredited.

Size of Firm Percent of Firms in Survey
Less Than $1,000,000 41%
$1,000,000 - $2,999,999 50%
$3,000,000 - $10,000,000 81%
More Than $10,000,000 100%
Reprinted by permission of the American Association for Homecare (AAHomecare). Based on fiscal year 2001 information provided by 119 firms of varying sizes and home care services. Visit www.aahomecare.org for more details.

HOSPITAL OWNERSHIP OF FIRMS*

Percent of Responding Firms Owned by Hospitals
By Size of Firm
Less than $1 million 29%
$1 million - $2.9 million 35%
$3 million - $10 million 21%
More than $10 million 21%
By Type of Firm
Respiratory 25%**
Home Infusion 40%**
HME 0%**
Rehab 0%**
Mixed-Market 33%***
*Based on firms participating in AAHomecare's 2002 Financial Performance Survey.
**More than 50% of firms' revenue was from respiratory, home infusion, HME or rehab.
***No one business segment represented at least 50% of firms' total revenue.
Reprinted by permission of the American Association for Homecare (AAHomecare). Based on fiscal year 2001 information provided by 119 firms of varying sizes and home care services. Visit www.aahomecare.org for more details.
TOTAL DIABETES SELF-MONITORING DEVICES MARKET: REVENUE FORECAST (U.S.), 1999-2009
Year Revenue ($ Millions) Revenue Growth Rate (%)
1999 1,720 14.0
2000 1,961 14.0
2001 2,235 14.0
2002 2,555 14.3
2003 2,923 14.4
2004 3,311 13.3
2005 3,698 11.7
2006 4,095 10.7
2007 4,497 9.8
2008 4,918 9.4
2009 5,379 9.4
All figures are rounded; the base year is 2002.
Source: Frost & Sullivan
PUBLIC HME-RELATED COMPANIES 2002 FINANCIAL PROFILES
Company Name NYSE/Nasdaq Symbol Fiscal Year-End 2002 Net Income in Millions 1-Year Net Income Growth 2002 Net Revenue in Millions 1-Year Net Revenue Growth No. of Employees 1-Year Employee Growth
Abbott Laboratories ABT December $2,794 80.2% $17,685 8.6% 71,819 0.6%
AmerisourceBergen ABC September $345 175.7% $45,235 179.4% 13,700 0%
Apria Healthcare AHG December $115.6 60.8% $1,252.2 10.6% 10,553 8.8%
Cardinal Health CAH June $1,056 23.2% $51,136 6.6% 50,000 2.2%
CareCentric CURA December $.3 N/A $22 7.9% 158 20.6%
Chad Therapeutics CTU March $1.2 N/A $18.7 53.3% 107 16.3%
Gentiva Health Services GTIV December ($49) N/A $768.5 (44.2%) 16,400 (3%)
Invacare IVC December $64.8 84.1% $1,089.2 3.4% 5,300 1.9%
Johnson & Johnson JNJ December $6,597 16.4% $36,298 10% 108,300 6.4%
Lincare Holdings LNCR December $190.4 41.1% $960.9 18.3% 6,700 9.8%
Matria Healthcare MATR December ($16.3) N/A $277.6 5.2% 2,213 16.4%
National Home Healthcare Corp. NHHC July $5.3 26.2% $82.2 10.3% 3,500 25%
Option Care OPTN December $14.1 41% $320.5 47.6% 1,859 11.9%
Pediatric Services of America PSAI September $14.1 156.4% $197.5 7.3% 4,104 (13.8%)
Praxair PX December $409 4.9% $5,128 (0.6%) 25,010 3%
ResMed RMD June $37.5 223.3% $304.1 31.5% 1,250 31.2%
Respironics RESP June $38.4 14.3% $494.9 17.2% 2,600 23.8%
Tyco International TYC September $9,412 (4.7%) $35,6 43.7% 267,500 10.3%
Walgreen WAG August $1,019 15.1% $28,681 16.5% 141,000 9.3%
Parentheses indicate a loss. Source: Hoovers.com
NATIONAL EXPENDITURES IN 2002 FOR THE TOP 20 HME MEDICARE CODES
2002 Rank 2001 Rank Code Description Allowed Charges
1 1 E1390 oxygen concentrator $1,858,331,759
2 3 K0011 power wheelchair $820,159,701
3 2 A4253 test strips $743,077,701
4 4 J7644 ipratropium bromide $605,170,873
5 5 J7619 albuterol $420,521,660
6 6 E0260 hospital bed $326,612,622
7 9 B4150 enteral formula I $218,221,504
8 7 E0431 portable gaseous oxygen $215,656,659
9 8 B4035 enteral feeding kit $213,287,551
10 10 E0277 powered mattress $129,790,932
11 11 E0439 stationary liquid oxygen $129,696,108
12 12 K0001 standard wheelchair $111,862,679
13 14 K0004 lightweight wheelchair $90,523,632
14 15 E0601 CPAP $89,924,179
15 13 K0533 noninvasive assist device $81,197,592
16 18 B4154 enteral formula IV $78,183,213
17 16 A4259 lancets $77,937,498
18 19 E0570 nebulizer $72,530,911
19 20 E0143 folding walker $71,229,318
20 21 K0003 lightweight wheelchair $54,305,534
Source: Centers for Medicare and Medicaid Services
REGIONAL PAYMENTS IN 2002 FOR TOP 10 HME MEDICARE CODES
Code Description Region A Payment Region B Payment Region C Payment Region D Payment Total
E1390 oxygen concentrator $202,650,615 $336,526,974 $581,691,514 $296,536,645 $1,417,405,748
K0011 power wheelchair $71,355,846 $40,557,711 $440,572,583 $100,953,305 $653,419,445
A4253 test strips $78,115,182 $141,154,230 $234,882,582 $85,393,296 $539,545,290
J7644 ipratropium bromide $49,651,553 $93,894,599 $248,412,697 $79,982,543 $471,941,392
J7619 albuterol $32,676,443 $63,570,043 $178,813,723 $47,021,925 $322,082,134
E0260 hospital bed $40,656,604 $43,164,170 $118,707,690 $39,266,473 $241,794,937
B4150 enteral formula I $27,498,037 $30,321,494 $55,981,094 $42,509,323 $156,309,948
E0431 portable oxygen $23,878,155 $39,432,222 $67,359,093 $34,227,563 $164,897,033
B4035 enteral feeding kit N/A* $28,347,564 $65,441,059 $26,711,249 $120,499,872
E0277 powered mattress $15,073,046 $15,559,928 $44,928,753 $23,793,154 $99,354,881
*The amount for Region A was not provided.
Source: Centers for Medicare and Medicaid Services

The costs associated with treating chronic diseases account for 78% of the nation's total medical care costs, including almost 80% of Medicaid expenditures.

Source: Johns Hopkins University, Partnership for Solutions, Dec. 2002