With every new oxygen patient referral, HME providers must determine what oxygen delivery technology will be the most effective and appropriate for that patient.
by Thomas J. Williams MBA, RRT, and Robert L. Chatburn, BS, RRT-NPS, FAARC

HME providers who supply home oxygen are under siege.
Reimbursement is declining and threats of further cuts occur with
increasing frequency. There are constantly changing rules, a rebid
of competitive bidding — and the lack of clarity and
communication from CMS is truly alarming.

Coupled with these problems is the fact that new oxygen delivery
technology continues to be introduced that must be evaluated for
purchase, and patients are beginning to request new and different
equipment so they can travel with their oxygen on airplanes, rail,
bus and cruise ships.

Providers who wish to stay profitable must now be very astute
businesspeople. This requires a thorough understanding of the types
of oxygen patients they serve, their clinical requirements,
referral source preferences for technology and the oxygen modality
choices available within the current reimbursement system.

With every new oxygen patient referral, the HME provider must
determine what oxygen delivery technology will be the most
effective and appropriate for that patient. Their oxygen delivery
choices are as follows:

Stationary concentrator only;

  • Stationary concentrator and multiple aluminum cylinders with an
    oxygen conserving device (OCD) that has been titrated to meet the
    patient's clinical requirements and activities of daily living;

  • Liquid oxygen delivered through one base unit or two base units
    (tandem system) and one liquid oxygen portable device;

  • Transfilling concentrator that allows in-home filling of one or
    more portable cylinders;

  • Portable oxygen concentrator (POC) that delivers pulse doses
    only and that weighs less than 10 pounds;

  • Stationary oxygen concentrator plus POC;

  • POC capable of pulse dose and continuous flow and that weighs
    between 10 and 20 pounds.

    Some would say that matching the patient with the device is an
    art. We would suggest it can be based upon empirical data and
    science.

    Types of Oxygen Patients

    The entire population of oxygen-dependent patients can be
    described and placed into four convenient and easy-to-understand
    groups.

    1. Nocturnal patients, those that require oxygen only at
      night

    These patients have a myriad of clinical disorders that require
    them to have supplemental oxygen to minimize their oxygen
    desaturation during sleep.

  • Homebound patients, those in the latter stages of
    advanced chronic lung disease
  • These patients typically lack the mobility that they enjoyed
    earlier in their disease process. While most of them require 5
    L/min or less, a small percentage requires higher flows.

  • Ambulatory patients who have standard portability
    requirements
  • Standard portability is defined as a movable oxygen source and a
    consumption requirement no more than 40 "liter hours," where the
    hours are defined as prescribed L/min multiplied by the estimated
    number of hours of use per week.

  • Ambulatory patients who have high portability
    requirements
  • High portability is defined as a movable oxygen source and a
    consumption requirement more than 40 "liter hours" per week.

    We can show these patient groups as a typical bell-shaped curve
    as illustrated in Figure 1.

    To better understand the percentage of oxygen patients who fit
    within each group, we reviewed 2007 Medicare data and compared it
    to a market research study in which we collected data from a
    stratified random sample of HME providers.

    The Medicare data tells us that in 2007, 38 percent of the
    patient population was nocturnal use only. This group has been
    growing year after year and is likely a result of aggressive
    efforts to identify early-stage COPD patients who desaturate during
    sleep but not while awake or during exertion.

    Our own empirical research suggests that 5 percent of the market
    is homebound. This means that 57 percent of the population is
    ambulatory. These results allow us to see the percentage of oxygen
    patients in each group as shown in Figure 2.

    This data will vary from year to year as the patient population
    changes, and each provider's patient population may look different
    based upon the company's referral base and target market. This will
    cause the slope of the curve to change from year to year and from
    provider to provider.

    Figure 2 is useful because it allows us to break down the total
    oxygen market into segments. Each segment has different technology
    requirements because of the activity levels of the patient
    population. As can be seen from Figure 2, the nocturnal group (38
    percent) and the homebound group (5 percent) generally do not
    require portability. An exception would be the nocturnal patient
    who travels frequently.

    This graph clearly shows that 57 percent of oxygen-dependent
    patients are ambulatory to some degree and thus require oxygen
    devices that can provide portability. Each HME provider can
    construct a similar graph for the company's existing patient
    population so the patient requirements can be easily seen.

    Understanding Portability

    The terms “ambulation” and “portability”
    are often used interchangeably when discussing a COPD patient's
    requirements. Webster's dictionary defines “ambulation”
    as “to move from place to place.” It defines
    “portability” as “the quality or state of being
    portable,” and “portable” is then defined as
    “capable of being carried or moved about.”

    This is an important designation and one that goes beyond the
    recommendations of the Fifth Long-Term Oxygen Therapy Consensus
    Conference in 1999. This group recommended that “portable O2
    be defined as equipment that can be carried by most patients on
    their person during activities of daily living, weighs 10 pounds or
    less and provides 2 L/min for at least four hours.”

    Following that definition would rule out use of continuous
    flow/pulse flow concentrators that typically weigh over 10 pounds
    but less than 20 pounds. These devices are typically provided to
    the patient on a rollable cart with an extension handle, much like
    conventional rollable luggage. These devices clearly provide
    portable oxygen.

    In the Sixth Long-Term Oxygen Therapy Consensus Conference, it
    was agreed that “portable or wearable” devices should
    be a size and weight that allow the patient to do the activities of
    daily living suitable to his or her own lifestyle while maintaining
    proper oxygen saturation.

    A portable oxygen device can be further defined as something
    that can be used around the home, around the city and outside of
    the HME provider's service or anywhere in the world. This implies
    that a truly portable oxygen device could be used by patients
    wherever they go, using all methods of transportation such as an
    automobile, airline, boat, rail or bus.

    Most patients who require long-term portable oxygen have some
    common requests:

    They want a reliable and dependable source of oxygen.

  • They don't want to run out of oxygen.

  • They don't want to have to schedule their day around a delivery
    of oxygen cylinders or liquid oxygen.

  • They want the freedom to lead as normal a lifestyle as possible.
    Most want their oxygen to move with them when they are doing their
    normal activities of daily living around their home, around their
    community and around the world.

  • They do not want to be tethered to their oxygen device via 50
    feet of tubing when at home.

    Matching Technology to Patient

    With each new oxygen patient referral, the HME provider must
    determine what oxygen delivery technology will be the most
    clinically effective for that patient. In other words, it must
    provide adequate oxygen saturation with oxygen conservation.

    Providers must also provide an oxygen device that is acceptable
    to the patient. In other words, it must match the patient's
    lifestyle. Last, providers must provide a device that is
    cost-effective so that they can stay in business to provide care
    for the next oxygen-dependent patient.

    Some of the equipment choices are easy. Patients who require
    nocturnal oxygen typically use a standard stationary 5 L/min oxygen
    concentrator. Those patients who are in the end stage of their
    disease process and are essentially homebound either use what
    equipment they have been previously provided or they use a
    stationary 5 L/min oxygen concentrator.

    The problem is determining what device to provide to the patient
    who requires portability. Our suggested guidelines are described
    below. Ambulatory oxygen patients with high and standard
    portability requirements should receive one of the following two
    oxygen modality choices:

    A transfilling concentrator with refillable cylinders; or

  • A stationary concentrator plus POC.

    These devices are preferred because they can provide continuous
    flow for the oxygen-dependent patient who requires it during sleep,
    and pulse dose oxygen and portability during the day.

    In our opinion, pulse dose-only POCs that weigh less than 10
    pounds are best used for patients who travel and who have undergone
    an overnight oximetry test to ensure they do not desaturate during
    sleep.

    Pulse/continuous flow devices are best used for patients
    requiring portability during travel and who desaturate at night as
    proven by an overnight oximetry test and who can lift or move a
    device that weighs 11-20 pounds. These devices are also very useful
    within hospitals and skilled nursing facilities.

    Due to their two- or three-year limited warranty, we do not see
    these devices or POCs less than 10 pounds as 24/7/365 devices. If
    the length of the product warranty improves or the cost to rebuild
    the pump/motor assembly decreases markedly, this would alter our
    thinking.

    But the warranty per se is not the problem. The issue is the
    cost to the HME provider for the routine repair and maintenance
    beyond the warranty period and up to the end of the product's
    useful life.

    We believe that if improvements in pump/motor designs can be
    made or if reimbursement was increased, then pulse/continuous flow
    devices or POCS have the potential to be the preferred product for
    the ambulatory patient. These devices have the advantage that they
    are a single source of oxygen and can operate on standard
    alternating current (AC) or direct current (DC) as found in most
    motorized vehicles or from a rechargeable battery.

    Until and unless improvements in either reimbursement and/or
    pump/motor design occurs, a transfilling concentrator with one or
    more refillable cylinders will cost the HME provider less money in
    total cost of ownership over the lifetime of the device. This will
    also be true for a stationary concentrator plus POC unless the HME
    buys a plethora of replaceable batteries.

    The two- to three-year limited warranty is less germane when a
    POC is used in conjunction with a stationary oxygen concentrator
    because it is only being used a portion of the day and the
    pump/motor assembly should last for several years.

    Liquid oxygen is still a very viable method of oxygen delivery
    for the HME company that can supply it economically. However, very
    few HME providers have the patient density and volume to do this
    consistently.

    Any time an oxygen device is used that incorporates an OCD, it
    should be titrated to the patient to ensure that the patient does
    not desaturate during rest or exertion. This is especially
    important when using POCs because their small size limits the
    amount of therapeutic oxygen the device can provide. As of this
    writing, the available range is 480 mL/min to 1,040 mL/min. Each
    device must be carefully matched to the patient, and it can be for
    many LTOT patients.

    Economics of Home Oxygen

    Our modality recommendations make particular sense when they are
    compared to the oxygen reimbursement by modality as shown in Figure
    3.

    title="Select figure to enlarge." />

    For convenience, each method of oxygen delivery is shown on one
    axis and then compared with their billing code, monthly revenue,
    acquisition cost, monthly operational cost, monthly net income,
    payment after 36 months and total payment in 36 months. Actual
    published values are used for monthly revenue, payment after 36
    months and total payment in 36 months.

    Since the product acquisition cost can change quickly and
    frequently, we used a range of dollar signs to show low to higher
    prices. To show the monthly net income, we compared them from best
    to worst when compared against each other. This is an important
    designation. When we say “best net income,” we are not
    implying that the reimbursement is best for that modality but it is
    best compared to the other oxygen delivery modalities.

    Conclusions

    Each year there are new oxygen delivery devices that are
    introduced to the market. The HME provider should review each new
    device carefully and objectively to determine how it will benefit
    their patient population clinically and their company financially
    before a purchase.

    Product standardization and limiting the number of different
    oxygen modalities offered drives down cost because it provides cost
    efficiencies in purchasing, distribution, training and repair.
    Matching the equipment to the patient can ensure a profitable
    business even in a tough reimbursement climate.

    Thomas J. Williams, MBA, RRT, is managing director of
    Strategic Dynamics Inc., Scottsdale, Ariz. Williams
    assists clients in strategy formulation, market research, sales
    training and clinical and benchmark studies. He can be reached at
    TWilliams@StrategicDynamicsFirm.com.

    Robert Chatburn, RRT-NPS, FAARC, is clinical research
    manager, Respiratory Institute, Cleveland Clinic; associate
    professor of medicine at Lerner College of Medicine, Case Western
    Reserve University, Cleveland; and vice president of research and
    clinical services for Strategic
    Dynamics Inc.