Looking for Oxygen Stability? Don't Hold Your Breath

Quiet stability fled the oxygen market so long ago that providers are all but committed to living with strife. Manufacturers are no different as they feel the effects of the uncertainty with fluctuating bottom lines.

From smaller equipment makers all the way to Ohio-based giant Invacare, legislative and regulatory edicts continue to influence buying patterns as providers wait for an elusive calm that will allow them to catch their breath.

"We've often had peaks and valleys in response to bad news in the marketplace," says Joe Lewarski, vice president of clinical affairs at Invacare, Elyria, Ohio. "You will see some retraction in purchasing, and we'll hear from some customers that they are being cautious in their capital spending until they get more information."

A recent presentation from Lewarski and John Lescher, director of Invacare's Respiratory Group, reported that 2008 government numbers showed approximately 1.5 million distinct annual Medicare oxygen patient claims, with a monthly average of 1.12 million patients. Lescher and Lewarski concluded that the combination of claims, patient life cycle and annual net growth of approximately 5 to 7 percent (net meaning new starts minus discontinuations) suggests about 45,000 to 55,000 new patient starts per month.

Despite the consistent numbers, it has been no easy ride. Instead, providers who have managed to maintain steady (or better) growth in 2010 have had to deal with the 36-month oxygen cap and the 9.5 percent DME cut brought on by the competitive bidding delay. Both factors have impacted cash flow and profit, a twin hit that challenged even the most efficient providers.

In many cases, a population of patients who went off service at 36 months also remained on oxygen. "Adjusting to that as a new benchmark and a new attrition rate was one thing that affected the market, so people had to get an understanding of their oxygen traffic, because capping changed the traffic pattern," says Lewarski.

"Providers had to understand who was capping, who was staying, average lengths of stay, and what was the overall turn rate. Where and when in the rental cycle was the equipment coming in and out? How can you lower the cost of doing business?"

Lewarski believes technology will prove to be the provider's best response to continual turmoil, with elimination of routine delivery and other non-value-added services as a crucial first step. By allowing technology to replace non-reimbursed labor and expenses, the profitability math can work out — even in a volatile market.