Change Is in the Air

The last several decades have shown monumental advances in home oxygen therapy. Remember the original concentrators? One former provider recalls a unit that weighed 170 pounds and took two technicians to deliver. Imagine that!

Product designs have changed dramatically, too. Early versions resembled console-style television sets, complete with faux wooden exteriors.

Skip a few decades to today, and the market is focused on portability, with lightweight versions that encourage mobility, ease of use and sleek styling. Most notable, the move to a non-delivery model continues to take hold, and experts say the benefits both to patients and providers are unparalleled.

New Model Gains Interest, but There Are Challenges

“Home oxygen providers are moving in greater numbers to portable oxygen concentrators to meet their patients’ ambulatory needs, as these products represent a more cost-effective solution by eliminating the ever-rising costs associated with delivering oxygen,” says Robert K. Jacobson, vice president and general manager of medical products, AirSep Corp.

“In the past year, due to growing sales and acceptance and subsequent manufacturing efficiencies, these devices have shifted from expensive, luxury items to affordable standard offerings under the Medicare paradigm.”

Adds Ron Richard, CEO of SeQual Technologies, “Providers are embracing non-delivery. They understand they cannot continue to do business as usual. Even with the economic issues and financing and credit crunches we are experiencing, providers are pushing ahead with non-delivery systems and understanding they need to make changes sooner than later.”

Kimberly Snyder, Philips Respironics‘ U.S. marketing manager for home respiratory, says, “Home care providers are closely looking at ways to reduce the rising operating costs associated with oxygen therapy.

“For that reason, non-delivery technology is very attractive for providers, since those systems can significantly eliminate recurrent delivery costs. And, with rising fuel and salary costs, delivery costs continue to increase,” says Snyder.

New product development efforts also continue to refine operationally efficient equipment that delivers freedom and independence to patients and reduces total service costs for providers.

“The number of new portable oxygen concentrators that have been introduced to the market in the past 18 months is evidence that manufacturers realize they need to deliver lower total cost solution oxygen equipment options to secure any future market share for themselves,” says Scott Wilkinson, Inogen‘s senior vice president of sales and marketing.

Kristin Mastin, director of marketing, DeVilbiss Healthcare, agrees there is a growing acceptance of limited delivery and non-delivery models.

“With the pending reimbursement cuts, reduction of operational expenses is top priority for many providers,” she adds.

According to Joe Lewarski, vice president, respiratory group, Invacare Corp., the trend to move ambulatory patients to some form of non-delivery oxygen technology is increasing, but there are still hesitations.

“Some providers continue to operate their businesses based primarily on traditional oxygen technologies, such as concentrators and cylinders, and some are still using liquid, although many are widely embracing the various non-delivery solutions,” he says. “For many companies, the challenges to changing their oxygen models are based in the combination of several things.”

Lewarski explains those challenges include:

• Overcoming “sunk” costs on existing technology and infrastructure, even when it is fully depreciated and inefficient;
• Confidence in cash flow and ability to fund the change; and
• The common obstacle of simply changing behavior.

While providers understand they must embrace a more efficient model, they continue to struggle as most are fully invested in a delivery model, notes Wilkinson.

“Knowing that they need to change does not make change easy. If you have built a business to efficiently deliver ice, it is difficult to adopt the refrigerator, and this challenge faces home care providers today,” he explains. “I think the majority of providers know that a non-delivery model is the only one that will exist over the long term, but they struggle with changing their current model to the future model.”

Mastin acknowledges that up front capital costs can be intimidating, but points out providers can look at “spreading that cost over years and weighing it against the operational costs associated with delivering cylinders.”

According to AirSep’s Jacobson, “the challenge for the HME provider is deciding on the system that meets the patient’s clinical, size, weight and ambulation time requirements while proving economically prudent [products] given today’s reimbursement structure.

“Although providers are now seeing more choices in the non-deliverable portable arena, POCs have the undeniable advantage over all other portable oxygen systems when factoring in travel,” he continues. “The Federal Aviation Administration recognizes seven POC models total that can be used onboard passenger aircraft.

“POC users enjoy unrestricted travel and love the liberating feeling of coming and going as they please, including doing unscheduled overnight stays. “They embrace the new concept of managing power instead of contents.”

Because of this, Jacobson says, HME providers, in addition to benefitting economically, “have discovered the power of marketing portable systems that command and attract attention.”

Matching Equipment to Need

Regardless of innovations and convenience, however, it is important to match the equipment to the individual oxygen patient’s needs.

Dan Easley, president and CEO of Inspired Technologies, says providers need to understand patient needs, become the patient’s advocate and partner to help them improve their quality of life.

“When you understand that, you are able to accomplish it as your starting point, which is where alignment occurs,” says Easley.

“The provider has a responsibility to be both their service partner and their clinical advocate,” he continues.

“You need an advocate to partner with the patient to help them understand what is best for them. If you only look at it from an equipment standpoint, you won’t be able to have the vision to see what the market opportunity is and be able to react to it. It has to start with the patient.”

The concept is taking hold.

“A number of providers are putting formal systems in place to match equipment to the unique characteristics of each patient,” informs Snyder. “For example, a patient who leaves home or travels frequently may be an ideal candidate for a combination stationary and portable oxygen system, which gives the patient the ability to produce oxygen as needed while eliminating recurrent delivery costs for the provider.”

Wilkinson agrees, and adds that from a clinical perspective, providers need to understand which products are appropriate for different patients.

“There isn’t a single oxygen product that works for every patient. Understanding conserving devices and the differences between conserving devices is critical for providers. All of the new non-delivery equipment employs conserving technology, and they are all different,” he says.

“Some work at night and some don’t. Some have a fixed bolus and some have a fixed minute volume. Some trigger slowly but deliver a large bolus, while others trigger quickly and deliver a smaller bolus. All of these devices work if they are put on the right patient, and they will all fail if they are put on the wrong patient.”

DeVilbiss’ Mastin encourages providers to consider individual needs. “Each patient has different clinical requirements, so there really isn’t one solution that will work for everyone,” she says.

Easley of Inspired Technologies stresses that the most critical component is to determine what is going to offer the optimum outcome for the patient, referral sources and payers.

“What device is compatible with the person’s need for a lightweight product that keeps them mobile? Ease of use is important for the patient and data and measurements are equally important,” he says.

“Can you collect data on these patients that allow you to make better decisions? If providers can segment the risk of exacerbations of their patients and understand what the patient is doing in the home, they can begin to understand the data and segment the risk of patient based on the clinical data.”

Easley advises providers to use this information to inform physicians and payer sources to demonstrate which patients need greater intervention.

“Data and measurements give you an insight that allows you to react with a service that can potentially impact the most costly part of COPD, which is hospitalization. This is the opportunity for the provider,” he says.

Likewise, as patients get used to using the newer devices, they have the potential to become more compliant.

“When products that match their lifestyle are easier and more convenient to use and produce good results, patients are going to want to use them. This will also result in a positive result in health care costs,” says SeQual’s Richard.

Plenty of Challenges All Around

Although product innovation remains strong, HME providers face continual decisions regarding the financial, clinical and service aspects of their businesses.

“There are challenges on all fronts,” says Mastin. “However, I feel manufacturers are stepping up to ease this pain.

“Not only have we expanded the preventive maintenance schedules for oxygen equipment but we are also offering competitive leasing programs that can help soften the capital cost associated with transitioning to a non-delivery model.”

Although providers may be cautious about increasing expenses, the credit crunch has not hit the health care sector as hard as it has other businesses, Richard points out.

“Health care is still a good, solid investment,” he says.

And Inogen’s Wilkinson adds that providers’ financial challenges are not going away. They are “easy to understand, but not easy to solve,” he says.

“Reimbursement has been falling for the past 10-plus years, and it’s going to continue to fall with time. So, providers must adopt lower total-cost oxygen therapy solutions,” he reasons.

“From a service standpoint, the newer technologies allow for more self-service by the patients. Some providers think that self-service is poor service, but I don’t agree. Sometimes the best service occurs when you can do things yourself, and I think that is true for oxygen therapy.”

Richard advises providers to educate their patients on self-service.

“As you start to move to non-delivery, patients have to be more aware of issues such as battery life and capability. Also, if there is an alarm indicated, they need to know to call,” he says. “If they are not doing the traditional every-other-week delivery, providers may consider going to appointment-style preventive maintenance check-ups.”

As reimbursement declines and operational costs continue to increase, providers will continue to be faced with the need to drive cost out of their business, agrees Lewarski.

“Efficiency and the elimination of non-value added processes are central to this. Oxygen equipment is a very small part of the total cost of providing home oxygen therapy, so the gains are captured in improving operational efficiency and cash flow, which is typically associated with streamlined and efficient billing and collection processes,” he says.

Consumer Considerations

COPD patients are increasingly becoming connected through support groups, online groups and consumer publications and appear to be taking more control of their disease. As they become more aware of their choices in oxygen equipment, HME providers must work with them to ensure they receive not only what they want, but what they need, manufacturers say.

“There is certainly a trend known as ‘the consumerism of health care’ that is growing with time,” says Wilkinson. “Patients have more access to information regarding their disease and treatment and equipment options through the Internet, advertising and their physicians.”

He notes many of the newer oxygen patients are baby boomers, a group that is more demanding and affluent than their predecessors.

“Many are beginning to ask for specific products by name after doing their own research or seeing a product at a support group meeting. Providers can help patients by explaining the pros and cons of a product they request, and by ensuring the product is appropriate for the patient through proper evaluation,” Wilkinson says.

Richard cites a recent USA Today article that stated more than 60 percent of people with a chronic disease get a second opinion over the Internet. “People are looking for different options, and the Internet plays a large role,” he says.

He also notes there is a “big push to create awareness of the benefits of using oxygen earlier as well as the use of a combination of medication, exercise and oxygen.”

According to Snyder, another focus area is on retail opportunities. “Aging baby boomers, in particular, have greater disposable income and are used to product range of choice. Oxygen providers are increasingly focusing on retail opportunities in the sale or rental of portable oxygen concentrators,” she says.

“Patients are certainly much more savvy today,” adds Jacobson. “They are eagerly learning about the choices in technology and are much more participatory in seeking out product offerings. As expected, they research and compare different devices, and the POC becomes an overwhelming first choice due to its oxygen-making capability.”

Size and weight, ambulation time, and sound level continue to be the most important factors.

“Not surprisingly, as they consider important features of the POC, the same considerations continue to surface. Understanding these desires, HME providers are presented with opportunities. Those willing to break the old model and offer the most desirable and sought after equipment in today’s market can satisfy the patient’s requirements while actively promoting and marketing their products and services in an expansive way to gain greater market share,” he explains.

“An educated health care consumer is part of the future of medicine. This has been evidenced by the pharmaceutical companies’ direct-to-patient advertising and its impact on drug choice and utilization,” says Lewarski.

“I think health care consumerism is going to change demand for products, particularly as consumers become more responsible for copays and deductibles. They are going to want choice and products that meet their clinical and lifestyle needs. That stated, a little information can create havoc if the patient is seeking choices that are not clinically appropriate, so providers will benefit from good communication and open discussions about products and choices.”

Future Focus

Although it is not always easy to make changes, there are rewards for those who are focused on innovation.

“This is an opportunity for providers, but it is also a challenge. It is a growth market, and in any growth market you are going to fight change. It is the innovative folks that will emerge,” says Easley. “Innovation comes from realizing the problem, thinking of a new way to do it and adopting it. It is incredibly fun. There is no one besides a home care provider who is capable of delivering these types of services to this patient population.”

He stresses that the most important thing for providers is to create that vision of how they are going to grow. “Yes, the operational difficulties will force you to think about how to better utilize your resources. How do you take advantage and improve your share of the patient demographic that is coming? Ultimately, it is about a better patient story,” he says.

“Providers are very capable of attacking and addressing operational issues, and they have proven this year after year. What they need to get clear on is what their growth strategy is. The challenge is to visualize the growth and not get hung up on the cost piece.”