Among the effects of our current societal focus on health care
has been more awareness of health-related costs. In the case of
orthopedic softgoods, this trend is evidenced by a consumer who
tends to be both better educated about a product and more sensitive
to its expense.
Health care reform is also creating a general sense of
uncertainty among patients and providers alike, all wondering how
various ramifications may play out. But Mike Murphy, national
accounts manager for Alex Orthopedic, expresses an optimistic view:
"When and if all the health care changes take place, if more people
are covered, then more people would have access to the
products."
Advantage HME
Customers often get access to orthopedic softgoods through their
local home medical equipment provider. Although drugstores and some
mass merchants provide a limited number of these items, HME
providers are uniquely positioned to offer a broad selection along
with a level of expertise about the products that is sorely lacking
at the neighborhood Walmart.
Those who sell orthopedic softgoods are more likely to employ
qualified employees to fit the products, says Murphy, and they
should take advantage of that advantage.
A lot has to do with regulations (which vary by state) about who
can measure and fit these kinds of products, Murphy says. For
traditional retailers, given personnel turnover and the trend to
self-service, it is harder to have qualified people on hand. "HME
providers are likely to have a more stable workforce, and the owner
or a long-term employee can be certified to fit the products," he
says.
He adds that certification training can cost up to $1,200 in
some states. "A patient can walk into a retail environment and buy
an item, but if that same person walks in and someone takes a
measurement, it is illegal [unless the employee is certified],"
Murphy reminds.
Another advantage HMEs offer is variety — a whole aisle of
products rather than a handful likely to be displayed at the local
mass retailer. "People are going to need orthopedic softgoods, so
they are going to get them somewhere," says Murphy. "Mass retailers
cannot stock, and don't want to stock, the number of items the
category requires."
Walmart, for example, has high expectations about how many turns
a product can provide. With planograms available from manufacturers
such as Alex Orthopedic, providers can tailor a selection to meet
the specific needs of their market or choose the most popular
products. The basic two-foot planogram from Alex includes the most
sellable items, and each additional two feet increases customer
choice.
The variety of orthopedic products falls along a continuum. On
one end of the spectrum are custom-fabricated devices that require
fitting by specialized orthotists or prosthetists. At the other are
low-end, off-the-shelf products such as those sold by discounters
and drug chains. Levels within that continuum, according to the
American Orthotic and Prosthetic Association (AOPA) include
off-the-shelf high-fit products (fitted by heating thermoplastics
or by using screws or bending metal) and off-the-shelf low-fit
(which might include minimal adjustment or specific measurements
for an accurate fit).
Manufacturers say most HMEs find success working in between the
highly specialized O&P companies and the retail chains,
carrying an assortment of off-the-shelf softgoods for a variety of
uses and some products that require minimal fitting. There are
healthy margins on softgoods, Murphy notes, ranging from 50 percent
at the low end to 70 percent on more expensive items.
Conditions that call for these devices don't have to be chronic
or debilitating. For a condition such as plantar fasciitis or tears
in a foot ligament, a simple orthosis placed in the bottom of a
shoe can help, or a night splint can be used to keep the foot at a
proper angle.
Many consumers are turning to the Internet for orthopedic
products, but "if you're brand new to an item, the Internet can be
a confusing place," says Murphy. Here again is where HME companies
can offer the expertise and service that today's customers want,
especially when it comes to medical products. Web-based purchases
also don't provide any help with fitting, and returns can be
difficult.
"When somebody shops on the Internet, they should consider the
costs of shipping. On a $7 item, the shipping might be $5," says
Murphy.
While cost is a consideration for consumers and part of the
market is shifting to lower-priced products, experts point out the
overall market for orthopedics will only grow, driven in part by an
increasingly active and aging baby boomer population. In softgoods,
for example, the emphasis may shift from use for sports injuries to
use for geriatric issues such as arthritis.
"There are a lot of products, from softgoods items to more
complex items, but there are also a lot of players. Everybody will
see growth, but a lot will depend on your piece of the pie," says
Murphy.
Cash, Anyone?
While some providers have built a solid business model around
reimbursable, higher-end products, "more and more businesses are
being successful by not emphasizing the reimbursement arena," says
Barbara Mauss, sales manager of Swede-O, which offers orthopedic
supports to prevent and rehabilitate sports injuries, arthritis,
repetitive strain injury and soft tissue injuries.
"We have cash items and a significant number of items that are
reimbursable because that's what the market has mandated," says
Mauss, who notes that Swede-O has put a lot of effort into getting
its products coding-verified.
But reimbursements can become moot for items under $250, a price
point at which consumers are usually willing to pay out-of-pocket.
Moreover, the need for a product doesn't go away if the
reimbursement is decreased.
To succeed in the retail sector, HME providers should emphasize
their expertise to consumers as a way of differentiating themselves
in the market, suggests Scott Schneider, chief marketing officer,
Otto Bock Healthcare, which provides a range of prosthetic,
orthotic and rehab products. There may also be opportunities to
expand the business to higher levels of the product continuum,
whether through certifying employees or by employing a licensed
professional.
A retail storefront is also an essential element in selling
orthopedic softgoods, notes Murphy. Providers hiding in the back of
a business park or specializing in larger equipment sales are less
likely to find success in this sector. "You need a retail
environment with walk-in traffic, whether it's in a medical
complex, a doctor's building or a strip mall," he says.
"The tough market makes you more creative," adds Mauss.
Providers should "try to give the market what they are looking
for," and manufacturers are helping "with designs and materials to
fit the marketplace."
Reach Out to Sell More
The key to growing business on both the retail or referral sides
is to reach out to the community, whether through advertising or
participating in a health fair or traditional sales calls on
referral sources. Physical and occupational therapists are likely
to see people who need these items, so providers should be sure
local professionals are familiar with their business and product
line.
"If a patient walks out and doesn't know where to get these
items, he or she may go to a drugstore, which might have three
different items," says Murphy.
"Of the stores I have gone into, the ones that are most
successful are the ones where floor staff is knowledgeable and
actively selling. They aren't waiting for the customer to come in
and choose a product from the wall," notes Mauss. "There should be
interaction with the consumer."
The best strategy for HME providers moving forward is to carry a
mix of reimbursable and cash items, she suggests. To promote retail
merchandising, Swede-O has developed retail packaging for some of
its products; others are packaged in basic polybags. HME providers
have the option of choosing the packaging they want.
"Finding new customers requires having a sales force in the
marketplace looking for referrals," says Mauss. "Go to local high
school sports teams. Have a relationship with the local hospital.
Go into the community looking for potential customers, and don't
just rely on Medicare. It's a continuous effort to aggressively
build business. You can't just do it for a month; you need to be
constantly out there."
Product Trends
Product changes in the softgoods area include less use of latex
(because of allergies), with Spandex and similar products taking
over much of the market. The use of Neoprene closed cell foam has
leveled off, Murphy says. The most significant development in the
orthopedic field was the invention of Velcro, which is now
ubiquitous in a product line that formerly depended on laces. There
are also some other product design changes, but they tend to be
minor variations.
"A back brace or a collar provide the same function regardless,"
says Murphy.
Mauss cautions providers to look at product quality. "You want
to get a quality product for your patients," she points out.
"Products are changing, with more and more being made in China. The
quality varies depending on the product. In some situations, the
quality is noticeable, but in other situations it is good enough,
especially if the product is only being used for three or six
months."
Schneider of Otto Bock sees materials changing for the better,
getting stronger, lighter and able to make more complex shapes
easily. New materials contributing to better products include
polymers, plastics, strong and lightweight carbon fibers and more
use of electronics and sensors.
Especially in the O&P sector, he notes, there have been a
variety of technical advances that can either simplify a device
(and lower cost) or make it more complex (with added functionality
related to sensors, microprocessors, etc.). For example, Otto
Bock's stance-controlled knee-ankle-foot orthosis (KAFO) called the
E-MAG uses mechanisms that allow the leg to be stable or swing.
The E-MAG Active controller actually calibrates itself to
capture the user's unique gait pattern and can easily be
reprogrammed for changes. That feature adds a new dimension of
functionality for people who previously have had limited bracing
options, such as a locked knee brace or a manual device.
O&P by the Numbers
- In 2008, Medicare approved payment for nearly 2 million
orthotic codes that accounted for more than $482 million in
Medicare expenditures. - The orthotic code with the highest Medicare expenditure in 2008
was for a prefabricated lumbar, sacral orthosis (LSO) or back
brace. Medicare approved payment for 40,000 braces for more than
$35 million. - In 2008, Medicare allowed nearly 2.3 million prosthetic
services for $704 million in expenditures. - The prosthetic code with the highest Medicare expenditure in
2008 was for a basic lower limb prosthesis. Medicare approved
payment of more than $54 million for these components. - Medicare approved nearly 6.4 million pedorthic codes for $257
million in payments in 2008. - The pedorthic code with the highest Medicare expenditure in
2008 was an off-the-shelf diabetic shoe. Medicare approved payment
for 1.6 million shoes for expenditures of $107 million. - More than $60 million in government funds have been earmarked
for research related to orthotic and prosthetic needs by
veterans.
Source: American Orthotic and Prosthetic Association
(AOPA)
Experts Interviewed
- Barbara Mauss, sales manager, Swede-O, North
Branch, Minn. - Mike Murphy, national accounts manager, Alex
Orthopedic, Arlington, Texas - Scott Schneider, chief marketing officer, Otto
Bock HealthCare, Minneapolis
