The Home Care Evolution

When one looks over the past 25 years in the home care industry, moderation isn’t exactly a word that springs to mind.

Extreme is probably a better word choice, because, excluding our current decade, the home care industry has been all about extremes.

Take the extreme autonomy the industry enjoyed during the 1970s, for example. There was little government oversight, and profits, revenues and reimbursements for home care were large. Providers were left alone, for the most part, to run their own businesses the way they wanted.

Spilling over into the ’80s, this autonomy began to shift toward another extreme — government oversight — which came to a head in 1997, when Congress passed the Balanced Budget Act of 1997 and cut reimbursements significantly.

And what about the extreme consolidation of the 1990s? The copious mergers and acquisitions that took place from 1985 through 1996 resembled a white-collar feeding frenzy, as providers and manufacturers alike gobbled up different companies and competitors.

Another trend involved only a handful of unscrupulous providers, but it would be negligent not to mention the extreme amount of fraud and abuse that has blackened the eye of the home care industry.

But don’t take HomeCare‘s word for it, flip through the next 29 pages and see the home care industry’s roller-coaster ride.

From a 1979 Hallmark orthopedic specialties ad for the H-118 halter kit.

1996 Pride enters the power chair market with the Jazzy.

October 1987 As the Aids epidemic grows, so do home care provider concerns about treating the disease.

April 1995 Jeremy Jones and Timothy Aitken merged home care powerhouses Homedco and Abbey Medical, forming Apria Healthcare Group, one of the biggest mergers in industry history.

October 2002 Today, as always, the HME industry faces tough choices and legislation that could change the course of home care.

Through the Years Don Redman

The first president of NAMES in 1982, Redman started his career at the bottom, and worked his way up. After being fired as a sales manager from an independent oxygen manufacturing company, he bought Arizona Medical Supply, despite having little money of his own.

He spent the first six months sleeping on a hospital bed in the back room. In 1982, AMS was one of the largest independents in the country.

1979 The diaphragm compressor, by John Bunn, featured a 1/8-hp motor that delivered 0.25 cfm at 50 psi continuously.

Early 1980s the Pulmo-Aide, by DeVilbiss, weighed 6.5 pounds.

The 1985 Pacesaver, a slightly modified version of the 1984 original from Lesuire Lift.

Founded in 1986 to help independent HME providers, Van G. Miller & Associates forms the VGM Group.

1986 The ODAAT Medical Products walker transformed into a seat for its users.

1996 Sunrise Medical, manufacturer of the Quickie, was an official sponsor of the 1996 paralymics.

1998 The Pulsair^® Puritan-Bennett® Simplicity® Spirometry System.

Medtrade migrated to The Big Easy in 2000, and the offerings indeed were spicy.

1978-1979

November 1978 — HomeCare Rental/Sales launches and 4,000 dealers, 700 manufacturers, distributors and reps recieve the first issue.

November 1978 — The U.S. Department of Health, Education and Welfare (now the Department of Health and Human Services) publishes a final rule that says Medicare can base its reimbursements for durable medical equipment on a “25^th percentile” rule. As long as 25 percent of DME suppliers are charging a certain price for an item, Medicare can use that price to set the reimbursement level.

March 1979 — A blood-gas study now must accompany all oxygen claims — regardless of the physician’s prescription — and the services rendered must match the results of the study, according to a new directive.

April 1979 — Edward Roseman, NADMEC’s executive director, urges DME suppliers to become accredited. “The booming growth of home care needs makes it even more vital that certain standards be met.”

April 1979 — NADMEC’s first annual convention takes place in Las Vegas.

September 1979 — “Someone is going to emerge as the dominant national company in the home care field. We feel we have the best head start and the best position to become that company.” — Dick Chandler, president, Abbey Medical/Abbey Rents.

James Garland (1926-1980)

Founder of HomeCare Rental/Sales magazine. The day before he died of a heart attack, Jim, who had been traveling for the past month and consequently was not involved in the production of the issue, received his first off-the-press copy of the May/June issue.

As he flipped through the pages, Jim believed that an industry bible had been born. “I will never forget that moment,” his daughter, Denise said. “I will never forget his pride and satisfaction that the idea that had begun in his mind so many years before had really reached fruition.” And the future was beckoning.

1979 The U.S. government estimates that 87.5 million adults engage in some form of athletic activity, and DME suppliers are beginning to see home fitness equipment as a viable revenue generator.

1979 Bunn ad

From the late ’70s, FAMCAR, developed by one of the founders of Vantage Minivans, used a ramp rather than a wheelchair lift, to accommodate wheelchaired passengers.

30% TO 50% Of consumers did not want to be in nursing homes or other institutions after congressional hearings revealed poor conditions, abusive activities and inappropriate institutionalization. Consumers expressed a tremendous satisfaction with home care.
— Vero Home Care

1980s The ‘Golden Age’ of HME

If you take a dash of what the home medical equipment industry was like in the 1970s and combine it with a pinch of what the industry was like in the 1990s, then you have a good understanding of what it was like to be in the HME industry during the 1980s.

The early 80s is better known as the “Age of the Golden Commode.” HME product reimbursements were at least adequate, and HME providers could rent an item and keep billing Medicare for that item indefinitely. Since that time, the federal government has strengthened its regulatory grip on Medicare HME expenditures almost annually, enacting such pivotal legislation as the National Association of Medical Equipment Services’ 1987 “Six-Point Plan.”

It was also a time when the HME industry was introduced to industry icons of the future: A. Malachi Mixon was a relatively new president of Invacare, which was still a private company until its initial public offering in 1984; the first industry trade show was held in Atlanta, which soon would become the National Home Healthcare Conference & Exposition, and later Medtrade; and Dick Chandler, president of one of the largest providers in the industry at the time, Abbey Medical, soon would start a $50 million home care products manufacturing company, better known as Sunrise Medical.

Definitely a mix of the HME industry’s past and future, the ’80s lit the fire for the industry’s consolidation and wrote the recipe for increasingly heavy fraud scrutiny.

1980 The Rolls Rollite DLW200 series by Invacare.

1985 Sullivan’s glue-on mask.

CHAD’s conserver technology was first introduced with the OXYMATIC electronic oxygen conserver (model 201) in 1985.

February 1984 The home nutrition market has exploded during recent years.

November 1988 Physicians in home care are walking a fine line between pending government regulations and angry independent dealers.

April 1989 ConvaCare’s employees stand behind its CEO and president Michael Robbins incoming chairman of NAMES.

Mergers & Acquisitions Dick Chandler

1981 American Hospital Supply Corporation aquires Abbey Medical.“I don’t think this will mean significant change in Abbey’s current or future position in the industry. We have a very aggresive growth plan and would have continued it in any event.”

1980 — Abbey Medical buys three top rehab companies, bringing the total number of Abbey stores to 55, with annual revenue of $55M.

1981 — American Hospital Supply buys Abbey Medical, just as Abbey was poised to go public.

1982 — Foster Medical acquires Johnson Rents, adding 17 regional locations to its stable.

1982 — Glasrock sells GP Medical Services to Airco for $100M.

1983 — Abbey Medical focuses on expanding into respiratory, which “is not a business where you can put your toe in the water and then immerse [yourself] slowly,” says Bruce Hoesman, Abbey’s president.

1983 — National Medical Oxygen acquires Rios Medical and Respiratory Products.

1984 — Avon Products acquires Foster Medical for $239M in stock.

1984 — Everest & Jennings expands its DME offerings by acquiring Carrom/Thompson-Blair, a home care and hospital bed company.

1985 — Puritan Bennett buys oxygen concentrator manufacturer Biocare.

1986 — Sunrise aquires J.E. Nolan & Company. (L to R: Linda and John Nolan, Bob Marsh)

1986 — Sunrise Medical acquires Walton Manufacturing, a fitness products manufacutrer.

1986 — Sunrise Medical acquires Motion Designs.

1986 — Charles Blanchard of Travenol Home Care and Bill Hefferman of American Abbey Homecare discuss how their once rival — now sister — companies will operate together, creating a $5 billion company.

1987 — Pride Health Care, an investment group led by Stanley Meuser, acquires Pride Equipment & Furniture. The new company, Pride Health, continues to manufacture lift chairs, and adds a line of exercise equipsment and a hip chair.

1987 — Primedica buys Beverly HomeHealth Services, becoming the 5th largest HME provider, by number of locations.

1988 — Abbey Medical acquires Foster Home Health Care for $228M, the largest single acquisition in HME-industry history.

August 1988 — Sunrise Medical acquires I.C.E. Down.

1989 — Wessex, the HME division of American Home Patient Centers, merges with Diversicare Corp. of America, marking AHPC’s focus on HME.

1980-1981

March 1980 — HCFA says, “The most widespread problem we have encountered [with the DME industry] is the long-term rental of equipment for months or even years after the rental allowances have exceeded the purchase price of new equipment.”

May 1980 — To prevent “excessive payments” for rentals, HCFA allows Medicare carriers to determine whether a beneficiary should rent or purchase an item.

July 1980 — Everest & Jennings breaks ground on a new manufacturing facility in Camarillo, Calif. (From left to right) David Jennings, vice president of E&J International; Mary Gayle, mayor of Camarillo; Joe Cain, executive vice president of E&J Inc.; and Gerald Jennings, president of E&J International.

January 1981 — NADMEC sponsors an amendment that allows DME suppliers to accept assignment for claims higher than the “reasonable charge,” as long as the supplier explains to the beneficiary that Medicare will not cover the entire cost of the item.

July 1981 — Various manufacturers say they are ready to introduce a “demand cannula” that will revolutionize the respiratory industry, reducing concentrators’ weight to 25 pounds, they explain.

The 10,000th Amigo is built on April 30, 1981.

Mark-Clark Products’ ad for incontinence pants HomeCare Reader Polls 1981

What are the fastest-growing product categories?

Wheelchairs & Acces. 14%

Hospital Beds & Acces. 10%

Bathroom Aides 9%

When no longer needed as a bedside commode, the HIDE-A-MODE, from Peters Manufacturing Company, became an occasional chair.

Glasrock Medical Services employees carry a concentrator to a West Virginia patient who lives on the other side of a river.

10% TO 15% Of the country’s 5,000 home care firms use computers to manage their business in 1980.

1982-1983

February 1982 — Seventy percent of all diabetics use urine testing to monitor their blood glucose levels, but Miles Laboratories’ new monitor measures glucose levels more accurately, using only one drop of blood.

March 1982 — NADMEC convinces HCFA to reimburse variable-height hospital beds.

May 1982 — NADMEC and AIMES merge to form the National Association of Medical Equipment Suppliers.

March 1982 — Invacare sues Everest & Jennings, charging that E&J violated the Sherman Anti-trust Act by implementing monopolistic practices and unfair competition.

April 1982 — HCFA considers reimbursing all durable medical equipment under Medicare Part B.

July 1982 — Don Redman, president of Arizona Medical Supply, becomes the first president of NAMES. “To hell with what is good for AIMES or what is good for NADMEC,” he says. “I’ve tried to make it very clear and upfront that, in terms of this group, continuity is everything.”

April 1983 — Southern Exposition Management launches the first annual western trade show, in Reno, Nev.

April 1983 — HCFA adopts a universal procedure-coding system for durable medical equipment.

May 1983 — President Reagan’s 1984 budget proposes competitive bidding for durable medical equipment, as a way to control Medicare costs.

Reader Poll

What computer capabilities does your company now use (1982) ?*

Accounts Receivable 78%

Billing 73%

Cash Receipts 60%

*These figures do not include companies using service bureaus.

The BEC-PAC manual-to-electric conversion pack, by A-BEC, included direct drive and automatic 2-stage breaking.

1983 John Enright traveled from Wildwood, N.J., to Santa Monica, Calif., in an Everest & Jennings wheelchair.

1983 The original OXYMIZER, from Chad Therapeutics, with the oxygen-conserving reservoir in the facepiece

18% OF AMERICANS Knew about home care in 1982. After NAHC launched a campaign to heighten awarness, a poll indicated that public awarness had climbed to 38 percent in 1985.
— Vero Home Care

1984-1985

January 1984 — The Annals of Internal Medicine says intermittent positive pressure breathing therapy is as good as nebulizer therapy.

January 1984 — Research firm Frost & Sullivan says incontinence products comprise the largest home care product category, with $686 million in sales during 1983.

February 1984 — The U.S. GAO releases a report that says regional differences make the development of a single national standard on the rental or purchase of DME difficult.

July 1984 — New HCFA guidelines for home nutrition therapy take effect, allowing reimbursement under Medicare Part B and establishing only two national claims processors.

January 1985 — Marilyn Hamilton, president of Motion Designs, represents the home care industry at Ronald Reagan’s inaugural ceremony. She is one of only six representatives chosen to participate.

February 1985 — Medicare carriers now can recommend that beneficiaries purchase DME costing less than $120, if the total monthly rental fees would exceed the purchase price.

June 1985 — HCFA publishes a “request for proposals” for a 60-month DME competitive bidding demonstration project.

July 1985 — Opposition from oxygen suppliers prompts HCFA to amend its February portable oxygen directive and to base reimbursements for portable gaseous oxygen on the recommended allowance for 80 cubic feet of gaseous oxygen.

November 1984 — The tile of the magazine changed from Homecare Rental/Sales to HomeCare

January 1985 — Marilyn Hamilton, president, Motion Designs represents the home care industry at Ronald Reagans

Feb 1985 page 28 picture was actually from 1984

The 1984 Bruno Independent Living Aids’ Scooter-LiftTM is designed to stow a three-wheel scooter inside a full-size van or minivan, while maintaining space for five passengers.

This Applied Medical ad for the SYSTEM 105 seat cushion explains, “you’ve got to get their butt out of the sling.”

Respironics’ Sleep Easy 1985 Reader Polls

What are the fastest growing product categories (1984)?

Oxygen Therapy 20%

Incontinence 15%

Wheelchairs 15%

April 1985 HCFA publishes home oxygen therapy guidelines that establish a range of blood-oxygen levels to determine patients’ eligibility for Medicare coverage.

One of 1985’s top products, the bath aid by Homecare Products was a 74-inch-long, soft-vinal tub.

$4.5 BILLION The amount federal, state and local governments spent on home-based services in 1985. Families spent an additional 2 to 4 times this amount for privately purchased home-based care in 1985.
— Vero Home Care

OXYMATIC Electronic Oxygen Conserver Introduced: November 1985

CHAD’s state-of-the-art conserver technology was first introduced with the OXYMATIC electronic oxygen conserver (model 201) in November 1985. The OXYMATIC model 301 conserver was later introduced in April 1995 and it became the most popular oxygen conserving device in the market. The home oxygen industry was revolutionized when CHAD first marketed the OXYMATIC Electronic Oxygen Conserver. This unique device was the first product of its kind, specifically designed to increase the duration of portable oxygen cylinders. When the OXYMATIC conserver was combined with small lightweight cylinders, it provided homecare dealers with the first superior, cost effective alternative to liquid oxygen. This combination of lightweight cylinders and a highly efficient conserver allowed dealers to offer patients maximum mobility with minimum weight and bulk, which resulted in increased revenues and profits.

1986-1987

Spring 1986 — HMOs are emerging as an important new payer source in the HME industry, experts tell HomeCare.

May 1986 — At NAMES’ annual meeting, HCFA officials tell attendees about the agency’s plans for DME competitive bidding demonstration projects that will take place in six cities this fall.

June 1986 — HCFA directs Part B carriers to pay claims within 27 days. HME dealers are skeptical.

April 1987 — Home care dealer Anand Chitlangia purchases Union Carbide’s Mark 4 concentrator and form’s Nidek Medical.

May 1987 — HCFA invites Medicare carriers to apply “inherent reasonableness” to home oxygen concentrator rates.

Spring 1987 — After acquiring Huntco Health Care’s Smith & Davis division, Invacare becomes the industry’s largest DME manufacturer, with as much as $130 million in product revenues.

December 1987 — President Reagan signs into law a six-point plan, designed to stabilize Medicare reimbursements for the next three years. The law also increases the rent/purchase cap from $120 to $150.

1987 — While awaiting a double lung transplant, Rep. Floyd Spence, S.C., becomes an oxygen and wheelchair user. “Unless [a member of congress] has some firsthand knowledge about home care, they lack knowlege,” he says. Spence died in 2001 at age 73.

The AutoFlex II from Chattanooga is a CPM unit for post-operative treatment of knee and hip joints.

1986 John Weber displays the 1 millionth Tall-Ette^® Elevated tiolet seat, produced by Maddak.

1987 Cleveland-area home care dealer Larry Crane and others picket Nationwide Insurance, claiming the carrier has unfairly rejected Medicare claims on the basis of religious discrimination. Crane publicly compares the Ohio medical carrier’s tactics to those in Nazi Germany. Denial Rates

Highest denial percentage from 1985-1987.

Three-Wheeled Vehicles 32%

Blood Glucose Monitors 27%

Seat Lift Chairs 27%

*Data in the BMAD files is only as accurate as are the carriers’ collection and reporting mechanisms.

From a 1986 Smith & Davis ad

Respiratory therapy equipment and hospital bed Medicare claims had the lowest level of denial in 1987.

$52 BILLION Was spent on home care in 1987.
— National Medical Expenditures Survey

1988-1989

June 1988 — The Joint Commission on Accreditation of Healthcare Organizations publishes standards for the accreditation of home care providers.

July 1988 — President Reagan signs into law the Catastrophic Coverage Act of 1988, which allows Medicare reimbursement of infusion therapy, increases poor people’s Part B coverage and increases dealers’ odds of collecting coinsurance payments.

January 1989 — Michael Robbins — who, along with his brother, Patrick, runs ConvaCare — becomes chairman of NAMES. “We are one of the best trade associations, in terms of professionalism, ethics and the representation we give our industry,” Robbins says.

Spring 1989 — HCFA clarifies instructions for oxygen fee calculations in response to the HME industry’s complaints about frequent misinterpretations.

July 1989 — HCFA requires the use of a national certificate of medical necessity form — a form that only a physician can fill out — for all oxygen claims.

September 1989 — Sunrise Medical consolidates its rehab business under the name Quickie Designs, and consolidates its home care business under the name Guardian Products.

October 1989 — Linde Homecare Medical changes its name to Lincare, expanding its respiratory therapy product lines, and adding infusion therapy and perinatal services.

1988 Industry experts estimate that 12,000 CPAP units are sold every year and that there is a growing potential of 2 million candidates for treatment. Below is Sullivan’s Nasal CPAP System, APD1.

The 1989 Chariot, which allows users to drive their wheelchair inside the Chariot, can travel at speeds up to 40 mph and can cover up to 70 miles on one tank of gas.

Invacare’s Mal Mixon and Lou Tabickman break ground on a new warehouse designed to trim dealers’ inventory costs.

The first OXYLITE systems by Chad Therapeutics were introduced in 1988.

1988 NAMES president Tom Antone with Sen. Bob Dole. Health care is a priority issue that must be addressed before the next election, Dole says. “There are no quick fixes, no easy solutions. There is no money laying around we haven’t discovered.”

S5.9 MILLION Individuals, or 2.5 percent of the U.S. population, received formal home care services between 1986 and 1989.
— Vero Home Care

1990s Biting Off More Than the Feds Can Chew

If one word could describe the HME industry in the ’90s, that word might be consolidation … or scrutinization, depending on how one looks at it.

Reading the entire list of home care provider and manufacturer mergers and acquisitions would sound a lot like reading the lineage of Man, at the beginning of the Old Testament. Particularly telling is HomeCare‘s 1990 Top HME Provider rankings. Of the top 10 HME providers on that list, only one — Lincare — remains today.

Although most ’90s industry experts considered the merger between Homedco and Abbey Medical to be the decade’s signature merger, home infusion was the largest home care market segment, totaling $6 billion in revenues in 1997. Infusion’s glory days were numbered, however. In March 1994, T2 Medical, Curaflex Health Services, HealthInfusion and Medisys merged to form home infusion provider giant Coram Healthcare, which in six years — marred by litigation, botched mergers and reimbursement cuts — would file for bankruptcy.

And what would a synopsis of the ’90s be without mention of the 1992 formation of the durable medical equipment regional carriers? Even more pivotal was President Clinton’s Balanced Budget Act of 1997, which slashed home health care reimbursements so acutely that more than 70 percent of home health agencies didn’t exist three years after the legislation’s implementation.

For some large HME providers, the ’90s provided plenty of Medicare fat to chew on, but for most providers, the fat just didn’t make up for the government’s trimming.

A widgit, a $650 wheelchair driving and braking system, was developed in 1991. Employing dual attachable levers, the Widgit amplifies the force on wheelchair wheels 55 percent.

The 1994 Action Ranger X Storm^® series rear-wheel-drive power wheelchair by Invacare^®

The 1996 Pulsair^® 0.5 liquid oxygen portable device, from Devilbiss

November 1994 Despite the risks, home care providers are signing capitated contracts to stay competitive.

October 1997 HomeCare explores the misconceptions, the awful truths and the hopeful predictions about fraud and abuse.

November 1999 Burdensome regulations are tying HME providers’ hands.

Mergers & Acquisitions Jeremy Jones

Currently chairman of Byram Healthcare, Jones entered the home care industry in 1971, helping found Med-X Health Services, and leading Homedco to an IPO of $63M in 1991.

1990 — AirSep acquires John Bunn/Xorbox Corp.’s Spectrum 3001 and Spectrum 5001 oxygen concentrators.

1991 — Graham Field acquires Temco Healthcare.

1992 — Homedco buys Glasrock Home Health Care.

1992 — Invacare acquires Perry O2 Systems for $50M.

1992 — Sunrise acquires Comfort Sleeper.

1992 — Pediatric Services of America merges with Children’s Health Care of Dallas.

1993 — Sunrise Medical acquires DeVilbiss.

1993 — Abbey Healthcare buys Total Pharmaceutical Care.

1994 — Caremark International acquires Critical Care America, a subsidiary of Medical Care America, for $175M.

1994 — T2 Medical, Curaflex Health Services, HealthInfusion and Medisys merge to form Coram Healthcare, the second-largest infusion provider in the U.S.

1994 — DeVilbiss acquires Pulseair.

1994 — Coloplast acquires Ameona.

1994 — Equiconcept acquires the spower chair division of Fortress Scientific.

1994 — Sunrise acquires Jay Medical.

1995 — Permobil acquires Colours ‘N Motion.

The Boing! is a new manual wheelchair line from Permobil.

1995 — Nellcor merges with Puritan-Bennett.

1995 — In perhaps the largest provider merger in home care history, Homedco and Abbey Healthcare Group merge to form what would soon be called Apria Healthcare Group.

1996 — Nellcor Puritan Bennett acquires Aequitron for $61M.

1996 — Respironics buys Lifecare International for $50M.

David Miller (left), president and CEO of the new Med Group, and Nagle Bridwell

1996 — The Med Group and Universal Management Systems merge.

1997 — Graham-Field finalizes Everest & Jennings acquisition.

1997 — VGM Group acquires U.S. Rehab.

1997 — Graham-Field acquires LaBac Systems for $9M in stock.

1997 — Mallinckrodt acquires Nellcor-Puritan Bennett for $1.9B.

1998 — Invacare acquires Suburban Ostomy in $130M deal.

1998 — Homecare Providers Co-op merges with VGM Group.

1998 — Respironics acquires Healthdyne for approximately $337M.

1998 — Simione Central Holdings acquires Dezine Healthcare Solutions for $9.5M.

1998 — McKesson acquires Red Line HealthCare for $230M.

1999 — McKesson’s merger with HBOC gets the green light.

1999 — Simione Central Holdings acquires MCS for $26M in stock, and later buys CareCentric Solutions for approximately $8.9M.

1990-1991

January 1990 — The U.S. Congress votes to stabilize DME reimbursements for two years and cuts oxygen reimbursements by only $75M, instead of an anticipated $225M. HME leaders celebrate the budget as a grassroots-lobbying victory.

March 1990 — The Rehab Industry Task Force chooses NAMES to represent rehab suppliers’ concerns in Washington.

April 1990 — Medicare implements a 15 percent cut in lift-chair reimbursements, a cut mandated by Congress.

August 1990 — Thomas Antone resigns as NAMES president, after five years of service.

Fall 1990 — The Americans with Disabilities Act becomes law.

May 1991 — Homedco goes public.

May 1991 — The U.S. Senate investigates fraud and abuse in HME, and NAMES testifies in support of ethical operators. After the hearing, ABC Nightly News, The Today Show and Good Morning America profile the industry as one riddled with fraudulent operators.

Spring 1991 — The NAMES