The New Power Wheelchair Market

It might be down, but it’s not out.

The power wheelchair segment of the home medical equipment industry took some major hits last year as CMS initiated wholesale changes in Medicare codes, fee schedules and local coverage determination guidelines.

And while manufacturers acknowledge that many of those changes left the market segment battered and bruised, nevertheless, they say, there’s still room for profit and growth.

But to make the most of this market, both manufacturers and power mobility providers will need to reconsider the way they do business — and that could mean tough decisions.

Taking Stock

Like providers, manufacturers are still cautiously sorting out the changes and trying to figure out what they will mean.

“We’re still in a hunkering-down mode trying to become a leaner industry,” says Mark Sullivan, vice president and category manager, rehab, for Invacare. “People will be really busy in the next year or so trying to refine their businesses because it is really a marginally profitable industry.”

Some stakeholders say the profit margin for providers is less than 5 percent. CMS, which initially released fee schedules with cuts as high as 40 percent, ultimately boosted fees in Groups 2 and 3. Still, some categories have been cut by 10 to 30 percent.

Ross Charest, director of product management-power products, North America, for Sunrise Medical, agrees that the cuts will prompt everyone in the industry to redefine how they do business. “In the short term, everybody will be trying to figure out how to do product in this new environment and get the right certification,” he says, adding that they’ll be focused on the delivery model as opposed to the product. “Everybody is being very cautious trying to figure out how to make [power wheelchairs] less expensive, more efficient [and] de-feature some of the options.”

Most manufacturers say they began reassessing their businesses three years ago when, stung by numerous cases of fraud and abuse, CMS began its efforts to reconfigure the way it handles reimbursement for power mobility. But trying to anticipate what CMS would do proved to be not only troublesome but nearly impossible, particularly as changes in coding, fee schedules and LCD guidelines were released, then revised, then revised again.

Until the current 64 power wheelchair codes were firm, manufacturers weren’t even sure they had products that would be covered.

Andy Jones, sales manager for Access Point Medical, reports that manufacturers have been “drowning in reworking and submitting all current and new products to ensure we meet the proper codes so our customers will be paid.”

Production slowed at many factories as manufacturers waited to hear exact coverage specifics.

“I have a bunch of power chairs waiting in the wings — what do I do? … I have to be very careful not to get stuck with millions of dollars in inventory,” says Mike Serhan, executive vice president of Drive Medical Design & Manufacturing.

The question that manufacturers are asking themselves, says Charest, is “What kind of products can we truly offer that fit the code sets out there?” The answer, he adds, may not be what was on the drawing board several months ago.

It is likely, manufacturers say, that power wheelchairs will come with fewer bells and whistles.

“In order to be able to deliver power wheelchairs at a cost that allows providers to stay in business, chairs will have to be offered with [fewer] features and options,” Charest says. “New designs will be migrating to minimum requirements of the new codes as opposed to stretching to exceed requirements.”

Still, without the revised fee schedule, things could have been much worse, Sullivan believes. Indeed, he says he would have classified the power wheelchair market as a “complete disaster” prior to CMS’ mid-November revisions.

The agency’s changes put a new spin on things, Sullivan says. “With the changes we have gotten in reimbursement, we think it is vastly improved. We are very happy. [The revisions] took care of some of the fee schedule issues in Group 3, which is for the most disabled people.”

In mid-December, CMS revised the schedule again, raising reimbursements for most codes, with a few exceptions. While the increases are welcome, however, some say they still may not be enough. (For more on the most recent fee schedule increases, see this issue’s “Headline News” section.)

The Biggest Challenge

As challenging as the power wheelchair segment is internally for manufacturers, some say the greatest challenge centers around providers and their businesses.

One of the challenges, according to Ted Raquet, vice president, domestic sales, for Pride Mobility Products, is to “assist our providers in making the transition to the new environment.” That means, he says, “providing products of proven quality that deliver unmatched performance and versatility while delivering positive income opportunities for our providers within the new code environment.”

While manufacturers can help by offering providers good price points and quality products, Access Point’s Jones believes providers will also have to do some reconfiguring of their own if they are to survive in the new market.

“[Providers] have to start now adjusting their business practices and clinical practices to ensure that they can make money on the equipment and services they provide in the current environment,” he says. “The old idea that you can supply certain products or services at break-even, or worse, a loss, because you make good margins in other areas is terribly risky today.”

Sunrise’s Charest says service will likely have to decline. “Most providers are partners with their users, oftentimes providing minor fittings, customization and service for no cost. This will no longer be economically feasible for them and they will struggle to provide complete access to users.”

Serhan of Drive agrees and says that some providers might need to rethink their product mix. “We’ve been able to educate ourselves over the last few years and we have a good plan for the future. I think that is something a good provider needs to mimic. If you are just a provider of power, you may find it very difficult to survive in this market.”

Providers must also be wary of unscrupulous manufacturers that could flood the marketplace with “junk,” notes DuWayne Kramer, president of Leisure-Lift.

“That’s going to hurt the dealer, because he will probably have to go out and fix this stuff,” says Kramer. “[CMS is] really keying in on the up front costs.

“There is nothing that says what you are going to do if you have to replace a motor 10 times. There is not really a performance test or standards to ensure that the motors or controllers are any good. There is nothing that forces you to have a really good motor that’s going to last or a really good controller that’s going to last.”

In other words, provider beware.

What Happens to R&D?

While manufacturers early on speculated that research and development in power wheelchairs might die, killed by the new fee schedule and coding, most now say that R&D will continue. But it might not be at the pace it once was.

There will be “less investment on the part of the provider in un-reimbursed technology,” asserts Jones, noting that manufacturers also will be reluctant to invest time and money to create a product that will not be reimbursed.

And Charest says that the cuts will likely stymie real innovation. For example, because of the lower reimbursement, some of the features that were just starting to emerge — joysticks outfitted with technology that allowed an end-user to turn on the TV or lights, use a computer mouse or dial a phone, for example — are likely going to be hard to come by.

Helping end-users gain more independence, he says, will no longer be the primary consideration in product development. Instead, Charest says, “it will be how much will it cost to manufacture, how much can we sell it for to the dealer and then can the dealer afford to provide it. It’s absolutely upside down from the approach we have taken for years.”

Pride’s Raquet says his company’s R&D efforts will continue with the focus on designing “high-quality, innovative and low-cost products.”

Serhan as well says Drive has no plans to curtail its R&D. “This is the Medicare Olympics,” he says. “[CMS is] asking us to take a chair and fit certain types of criteria, so we have had to put more R&D than ever into products.”

Invacare’s Sullivan also has a bright outlook. “I think innovation ultimately continues,” he says. “I think everybody is going to look for ways to continue to innovate … At the end of the day, we still have to provide our consumers with equipment.”

A Helping Hand for Power Providers

The good news for providers in the unsettled power wheelchair market is that they’re not alone. Most manufacturers have or are putting into place programs to assist providers.

“Giving our providers easy access to a full spectrum of business support services remains a top priority for Pride,” says Ted Raquet, vice president, domestic sales, for Pride Mobility Products. The company offers personalized reimbursement consultation, Raquet says, and “our reimbursement experts and provider education team work in conjunction to keep providers informed on the new codes through our annual seminar tour and a series of on-line webinars.”

In addition, he notes, the company has launched a physicians’ education program to help providers’ referral sources learn about products and the industry as a whole.

At Invacare, teams have been doing educational sessions for providers, says Mark Sullivan, vice president, category manager, rehab, for Invacare. The company is keen on working with providers to find ways to help drive down operating costs, he says.

Ross Charest, director of product management-power products, North America, Sunrise Medical, says the company is looking at several programs designed to help providers flourish in the new market. Those plans, Charest says, include shared service centers, consignment inventories, special payment terms and clinical and reimbursement education.

Experts Interviewed:

Ross Charest, director of product management-power products, North America, Sunrise Medical, Longmont, Colo.; Andy Jones, sales manager, Access Point Medical, St. Louis; DuWayne Kramer, president, Leisure-Lift, Kansas City, Kan.; Ted Raquet, vice president, domestic sales, Pride Mobility Products, Exeter, Pa.; Mike Serhan, executive vice president, Drive Medical Design & Manufacturing, Port Washington, N.Y.; Mark Sullivan, vice president, category manager, rehab, Invacare Corp., Elyria, Ohio.