The New Mobility Market

Wendell Matas is down, but he’s sure not out. Like many home medical equipment and rehab providers, the owner of Wheelchairs Northwest in Bellevue, Wash., is feeling the effects of legislative and regulatory changes that have rained down on the mobility sector of HME, dampening not only the market’s business but also its spirit.

Matas is, he admits, having a hard time finding much good in the current market, which appears to be besieged from all sides. But he’s not giving up. “At my soul, I love it,” Matas says. “I’ve been doing this most of my life. I have long-term, if not life-long, business relationships with many of our customers.

“We are very good at what we do, and there aren’t many who excel at high-end rehab. It’s hard to say the heck with it.”

Even so, he and other providers are reeling from the effects of new codes for power wheelchairs that were issued, rescinded and reissued again; from reimbursement that took a drastic hit; from increased government scrutiny that at times slowed payments to a trickle; from accusations of rampant fraud that involved only a small percentage of companies but tarred and feathered the entire industry; and from coming federal mandates like accreditation and national competitive bidding.

“It’s death by a thousand cuts,” says Matas, who is also president of the Pacific Association of Medical Equipment Services.

Most recently, President Bush’s 2008 budget proposal includes a 13-month rental period for power wheelchairs that would eliminate the current first-month purchase option and, say industry stakeholders, significantly affect beneficiary accessibility (see accompanying story this page).

That proposal, which has drawn vehement industry opposition, has contributed to an even greater sense of unease in the market, particularly in power mobility.

“I perceive the power mobility market as uncertain at the moment,” says Wallace Weeks of Weeks Group, a strategy consulting firm based in Melbourne, Fla. “Complex changes have been announced, rescinded, restated and implemented so fast that many providers have [hardly] had time to react.”

The effect has been that long-time providers find themselves questioning whether or not they should stay in the mobility business — or, for that matter, in the HME business altogether.

Indeed, the American Association for Homecare released an economic survey in November that predicted 1,500 wheelchair suppliers would exit the industry over the next eight years, forced out by under-market-price reimbursement. Providers remaining in the market could reduce their services to beneficiaries as a way of breaking even, the survey suggests.

“It seems like a constant battle,” acknowledges Tom Polston, owner of Specialty Medical Sales in Lewisville, Tenn., and president of the Medical Equipment Suppliers Association, which serves Texas and several other states. “A lot of it seems to be out of control. But you can’t give up on it.”

Bolstered by the idea that mobility is still a viable business and the belief that someone needs to care for people who need mobility products, many providers are pulling up their bootstraps and determining to keep going — somehow.

“It’s survival of the fittest,” says Miriam Lieber of Sherman Oaks, Calif.-based Lieber Consulting. She refers especially to the power mobility market, which has taken the brunt of the government’s regulatory changes. “I think that with everything there is always a period of shakeout and then it calms down. It may be appropriate to get out of the market and then get back in. And those that are really eager can get back in.”

THE BIG CHANGE

There is good reason to want to get back in, or stay in, stakeholders say. As always, the demographics foretell a growing need for mobility products that will continue far into the future. And efficient providers can still make a profit, albeit not as much as in the past.

“I think the major crunches in reimbursement have occurred. The smart companies have figured out how to navigate Medicare and make money at it,” says Alison Cherney, president of Cherney & Associates, a Brentwood, Tenn.-based marketing and sales consulting firm.

Still, say Lieber and others, the mobility market has seen a sea change. Those who survive — and thrive — in it, particularly in the power sector, are not going to be doing business as usual.

It used to be that mobility providers routinely accepted Medicare assignment for canes, walkers, rollators, manual wheelchairs, scooters (sometimes) and power wheelchairs. They enjoyed reasonable (some have even said “generous”) reimbursement. They offered free servicing of that equipment, as well as free delivery. Many even sponsored special days where they offered free wheelchair washes.

But those days are gone, observers say, done in by recent CMS reimbursement cuts from 10 to 30 percent for some products.

“The service component has been completely neglected [by CMS], and I think that is going to hurt a lot of people. If we are in the business of selling power mobility devices, we have to be lean and mean,” says Polston.

“Service is a particularly troublesome issue,” echoes Matas. “It takes almost as much processing effort to get approval and payment on a minor repair as it does for a big power chair. Our service department is getting dragged down because there is no way you can get a profitable model.”

Harvey Diamond, executive president and CEO of Drive Medical Design & Manufacturing, Port Washington, N.Y., started out as a home health provider 35 years ago. He, too, is concerned about service.

“We are at a place right now where we have to make a lot of changes in the way we do business,” Diamond observes. “We are at a tough time right now, where the government has reduced allowables and they are not fair. They are strictly looking at everything from a dollars and cents [view], and they’re not looking at the service that is needed to provide [this equipment].”

According to Polston, that means “you have to continue to service [the equipment], and you’re not going to get paid for it. So now, you’re going to have to say to your customers, ‘We’re going to take care of you, but it will be every other week. We have to put you on a schedule.”

Ross Charest, director of product management-power products, North America, for Longmont, Colo.-based Sunrise Medical, points out that in their previous life, providers often did more than just service and wash wheelchairs. “Most providers are partners with their users, often providing minor fittings, customization and service for no cost,” he says. “This will no longer be economically feasible for them, and they will struggle to provide complete access to users.”

Matas also agrees that providers will need to change the way they do business. “We as an industry have to forge a more business-like model. We either do it voluntarily or begrudgingly. But so many practices can only be seen as bad business.”

Many HME companies routinely write off patient copays or throw in for free what Medicare might deny as a luxury accessory, he says. It has not been uncommon for providers to give away special metallic finishes on wheelchairs rather than charge the customer.

Now, asserts Matas about non-productive business practices, “some things will have to go. If not, it might be us.”

Lieber thinks providers will also be smarter about what they sell and whom they sell it to. “Perhaps the provider will be more selective in the type of customer they choose and the type of product they choose,” she suggests. “‘Selective’ is the operative term here.

“Two things I think people are looking for: alternate ways to drive revenue if they have a mix of both Medicare and private business; and, for Medicare patients, they are looking for a clean claim and an appropriate product for that patient. It has to be very safe.”

She expects that providers will do more prescreening before accepting a Medicare client. And they’ll need to look at alternative markets. “Maybe the scooter market is back,” Lieber says. “However, you can’t neglect the fact that for every power wheelchair, you’d have to sell three or four scooters.”

CONTINUING CONCERNS

Even as mobility providers struggle to find their balance on Medicare’s rocky road, there are other threats.

Mandatory accreditation and the implementation of national competitive bidding go hand-in-hand. CMS has said a provider can’t be awarded a bid contract if it is not accredited. At some point , a provider won’t even be able to hold a Medicare supplier number if it is unaccredited (at press time, CMS had not announced a firm date).

Providers who are not yet accredited are understandably nervous about when the accreditation mandate will be implemented. And waiting to see how the first round of competitive bidding will turn out this year has everyone on tenterhooks.

While those are industry-wide concerns, there’s a more immediate worry for providers who deal in high-end mobility products, should complex rehab be included in the list of products that are subject to competitive bidding (also unknown at press time).

“With complex rehab, you require a high level of expertise and a high service level,” says Mark Sullivan, vice president, category manager-rehab, for Invacare, Elyria, Ohio.

“We feel that [complex rehab] is the wrong thing to put on competitive bidding; we think it is too service-dependent to be put up for bid. We would like to see that carved out of competitive bidding.”

Rehab stakeholders have also objected to the fee schedule for power mobility devices, which went into effect Nov. 15.

Indeed, in December, the National Coalition for Assistive and Rehab Technology wrote to state Medicaid directors, warning that further reduction in reimbursement for power wheelchairs, particularly high-end rehab, would result in decreased accessibility (see related story on page 4).

“Studies show that [rehab] providers have less than a 5 percent margin,” says Sullivan. “A 10 percent cut will make them look at how they run their business and how they can run them differently.”

State associations are also concerned about the impact the new fee schedules will have on accessibility.

“We are communicating with the state Medicaid departments about our concerns with providing medically necessary equipment to dually eligible beneficiaries,” says Karyn Estrella, executive director of the New England Medical Equipment Dealers Association, which serves six states.

“There is great concern about funding for Group 4 chairs for duals since Medicare will not pay for these chairs,” Estrella says.

In addition, since most states are trying to find ways to cut Medicaid costs, providers must be alert to what is happening in their Medicaid business, too. Weeks believes they can expect some curtailing of costs.

“Medicaid programs will continue to add new cost containment measures,” he predicts. “We are [in] the state legislative season, so we should be looking for new bills to be introduced in the state legislatures that affect providers.”

THE GOOD NEWS

While there are serious issues, both current and coming, for mobility providers to grapple with, it’s not all bad news. Stakeholders point to several market pluses:

• With baby boomers turning 60 at the rate of about 8,000 a day, according to statisticians, the demand for mobility products can only rise, experts say. According to a recent report from research firm Research and Markets, the market for wheelchairs and scooters is expected to grow to $5.3 billion by 2012.
• CMS’ new power wheelchair codes appear to be working, providers say. “The coding is better; it’s more specific,” notes Tim Pederson, CEO of WestMed Rehab in Rapid City, S.D., and vice chair of AAHomecare’s Rehab and Assistive Technology Council. “It allows us providers to provide an appropriate product and know that it is appropriate for the person’s condition.”
• There is still business to be done in this market sector.

“As with all product lines, this one is maturing from a reimbursement standpoint, but there is still a solid market opportunity for those who want to get serious and play ball by the rules,” says Cherney.

Polston thinks so, too. “I’m hopeful. I think it will be a rough period. But if you can maintain the proper attitude and not get too burned out, you can make it,” he says.

And Matas? Well, he’s in it for the long haul. “I’ve never been one to give up too easily,” he says.

Bush Budget Gets Thumbs Down

A groundswell of opposition on the part of HME stakeholders continues toward President Bush’s plan to establish a 13-month rental period for power wheelchairs.

Bush revealed the proposal in early February as part of his budget for 2008. Other home health care provisions include a 13-month cap on oxygen rentals and a five-year freeze of the Medicare market basket payment update for home health agencies.

The $2.9 trillion budget provides nearly $700 billion for the Department of Health and Human Services, but would carve out $66 billion in savings from Medicare and $12 billion in savings from Medicaid.

Within hours of the proposed budget’s release, the American Association for Home-care weighed in with a statement decrying the plan. Walt Gorski, vice president for government affairs, pledged that “AAHomecare will mobilize to fight these draconian cuts that simply undermine access to and quality of home care.”

A 13-month rental period for PWCs would eliminate the first-month purchase option for the equipment.

“Currently, Medicare permits a beneficiary to choose to purchase a power mobility device,” AAHomecare explained in its statement. “When the beneficiary chooses to purchase a power mobility device, Medicare payment is made on a lump-sum basis.”

The association urged Congress to “reject the administration’s proposal and maintain the first-month purchase option for power wheelchairs to ensure beneficiary access and cost savings to the Medicare program.”

Cara Bachenheimer, vice president of government relations for Elyria, Ohio-based Invacare, called the budget proposal “ridiculous.”

While the administration says the proposal would save about $500 million over five years, Invacare estimates that, in reality, the provision would end up costing Medicare and beneficiaries 5 percent more over five years than they are currently expending under the first-month purchase option.

“Obviously, that’s unacceptable,” says Wendell Matas, president of Wheelchairs Northwest in Bellevue, Wash., and president of the Pacific Association of Medical Equipment Services, about the president’s proposal.

“I don’t think people ever think in terms of renting a power wheelchair. I can understand a capped rental for people who may need it for a short while. But when you get into rehab, those chairs are custom built for each individual. You just don’t turn ’em around [and give them to someone else].”

Kurtis Blunt, owner of Santa Barbara Healthcare in Santa Barbara, Calif., says Bush’s plan would hurt not only the beneficiary but also the company providing the power chair.

“People aren’t going to want to provide them,” he says. “These are expensive chairs. If they do a 13-month cap on the power wheelchair and if the patient only has it a month, then the company is only going to get a month’s reimbursement.”

Providers would be forced to reuse those chairs that do come back, he says, “and it may not fit another person who needs a chair. It can definitely pose problems for the company and the patient.”

Blunt says he’s already selective about the power wheelchairs he bills Medicare for, but if Bush’s proposal goes through, it would quash that business entirely.

“If they’re going to do a capped rental on a power wheelchair, I am not going to do it at all. It’s not worth it to me,” he says. “Unfortunately, the people who are going to be hurt by it are the patients because they are going to need equipment and they aren’t going to be able to get it.”