Breathing Room

Many successful HME providers have maintained a certain work plan when it comes to providing oxygen therapy: Take care of the patient first and figure out how to get paid later. Although this may sound like a poor approach to sustaining a successful business, in the HME industry it has enabled providers to increase patient and referral source satisfaction, thus increasing orders and market share.

But current and proposed legislation surrounding the oxygen industry is changing this attitude, leaving providers with more questions than answers.

The Deficit Reduction Act of 2005 caps the rental period for oxygen equipment at 36 months, at which time title for the equipment transfers to the beneficiary. Prior to the DRA, oxygen equipment was rented indefinitely.

The industry has rallied strongly against the cap, arguing that it could put beneficiaries in danger if they are responsible for upkeep and maintenance of oxygen equipment — a service many companies provide as part of the rental fee.

Last year, the Home Oxygen Patient Protection Act was introduced to strike the rental cap, but Congress took no action on the bill before it adjourned. The legislation has since been reintroduced, and stakeholders are hopeful about its prospects this term.

But in his proposed budget for 2008, President Bush recommended that the rental period be restricted even further, to just 13 months.

“I won’t dispute the fact that it’s confusing and challenging,” says John Frank, vice president and general manager of Respironics’ home respiratory business. “We certainly don’t have a crystal ball, but if providers are not involved with the American Association for Homecare and other groups that are trying to address this through a lobbying effort, that’s discouraging.”

Frank adds that CMS’ oxygen policy and reimbursement overhaul has sent a very strong message that the value of the service element of oxygen delivery is not appreciated or important. “That should be a concern for everybody from the patients to the providers to the manufacturers,” he says.

One of the first points of anxiety facing the industry is whether the cap on oxygen rental could actually be reduced to 13 months.

“Thirteen months is really ridiculous,” says Joe Priest, president and COO of AirSep Corp. “This would literally eviscerate the home care provider industry in home oxygen and the patients would get nothing in service.”

Ralph McBride, vice president of HME/RT for Advanced Home Care, believes the cap will stay at 36 months. “Thirteen months is too radical, and I honestly don’t believe the beneficiaries will stand for that,” he says. “That really shifts so much of the burden onto them, and there would be an uproar in this country.”

Priest also believes the industry has a good chance of stopping any further erosion below 36 months. “I have been up on Capitol Hill frequently and have met with enough representatives and senators to get … a good feel that they understand and recognize the situation,” he says.

“They also have a good appreciation that we are not the problem — we are the solution for health care expenditures.”

Bob Fary, vice president of sales for Inogen, concurs that the message provided by AAHomecare and individual providers is being heard in Washington. “Also, I believe that the support from the clinical community is there, and therefore the possibility of some positive changes is there.”

With a three-year counter that began on Jan. 1, 2006, for patients already on oxygen, the DRA’s equipment title transfer provision has also created a strong debate. Fortunately, industry experts also have optimistic projections regarding its outcome.

“We have found tremendous receptivity on Capitol Hill and within the Bush administration that the idea of patients owning complex medical technology is a bad policy, which is encouraging,” says Cara Bachenheimer, vice president of government relations for Invacare. “We are working very hard this year to get the ownership transfer provision of the law repealed. We’re fairly optimistic that we’ll be able to get that accomplished before the 2009 deadline.”

While reversal of this policy would relieve many uncertainties, Kelly Riley, director of The MED Group’s National Respiratory Network, says there are many issues that CMS has not clarified if the title transfer remains intact. For example, providers question how repairs will be handled and how equipment “change-out” will work when a patient’s condition changes, she says.

Bachenheimer agrees that these are troubling issues, especially regarding the supplier’s responsibility. In November, CMS issued a final rule implementing the DRA’s oxygen provision.

While CMS stressed that Medicare will continue to make monthly payments for oxygen contents for beneficiary-owned tanks and cylinders for as long as the patient medically needs oxygen, Bachenheimer said the rule makes things “more fuzzy than even the proposed rule” in that there is complete carrier discretion to determine when a supplier is going to be held financially responsible for replacing a piece of equipment.

“What CMS appears to be saying is that they have complete discretion for the carrier to determine whether or not the item that was provided at the outset wasn’t essentially in good enough condition and they’re saying that everything you provide needs to last at least five years,” Bachenheimer explains.

Moreover, she adds, providers can submit claims for repairs down the line, “but at some point the carrier may make the decision they are spending too much on repairs. What we tell our customers is the way to avoid the uncertainty of potential future financial liability is to make sure you’re providing a quality piece of equipment at the onset because you will be responsible.”

The service and repair fee schedule is also troubling. Riley explains that CMS will reimburse providers for two units of the service and repair code. “One unit equals 15 minutes and the rate is somewhere between $8 and $12 per 15 minutes … Everybody knows you can’t take your trucks out for that,” she says.

Amid the confusion, however, there is some encouraging news.

According to some manufacturers, the Bush administration has indicated that the 13-month cap would not apply to “new technology” such as home-filling systems or portable oxygen concentrators.

Stakeholders spent months trying to educate the administration about the effects of capping oxygen equipment, according to Bachenheimer, one of them being that if new technology were capped, “no one would buy it” and no one would develop it. We still oppose the cap on the traditional technology,” she said, though she added that an exemption puts the oxygen market in a “much better position.”

“Administration and legislative staff have made it clear in ongoing discussions that they are supportive of new technology that is patient-friendly and saves taxpayers’ money,” says Jim Bixby, chairman and CEO of SeQual Technologies. “They are looking at incentives for providers to adopt new technology.”

This is a good thing, according to Fary. “One of the things that we’ve gleaned through this process is an acknowledgment by CMS that it is willing to reimburse for new technology and it is interested in technology continuing to progress. I think that’s a great positive, not only for providers but also for patients,” he adds.

Planning for the Future

Priest says that while the legislative and regulatory issues affecting the industry are disappointing, he advises providers to begin making changes now to prepare for them. “The key is to control costs long-term,” he says. “Other than that, it involves continuing to operate your business through marketing, acquiring more patients, determining how to better service your patients and driving referral sources to bring business to you.”

Bachenheimer agrees. “What we are fighting for is that providers start looking at their business models to see what changes they need to make so the new payment rules make sense from a business perspective,” she says.

Respironics’ Frank mentions that data collected by AAHomecare clearly demonstrates that more than 70 percent of home care providers’ oxygen costs is in operations, not the equipment. Inventory management, deliveries and service are all elements that must be considered.

“The obvious message to us is that where the providers could have the most benefit is to consider the operational side of their business and try to gain efficiency in that area,” he says.

“To put it bluntly,” Frank continues, “saving $2 on a concentrator isn’t going to get you there, but substantial savings on your operations might at least help balance the cuts Medicare has in mind.”

Reducing deliveries can reduce a provider’s overall costs in many ways, including storage and delivery of cylinders, which makes investing in new technology more appealing, says SeQual’s Bixby. “Providers are analyzing how to eliminate older technology that comes with many built-in costs,” he adds, noting that weekly delivery of oxygen cylinders “requires employees, delivery vehicles and gasoline as well as time to refill the cylinders once they are empty.

“Additionally, older technology requires more maintenance and patient training on multiple systems.”

Manufacturers point out that some providers hesitate to invest in new technology, most often due to cost.

“Many providers are unwilling to take a closer look at these new technologies because they may have a higher acquisition cost than traditional oxygen therapy options,” says Kristin Mastin, director of respiratory marketing for the DeVilbiss respiratory products division of Sunrise Medical. “However, if providers were to perform a business analysis, they may determine that converting to a non-delivery model may allow them to more than recoup the cost of these devices.”

Priest says such a transition does not have to become a complete system overhaul all at once. “It is a process of introduction, bringing it to your highest-flow users to begin with,” he explains.

“Then as you start to bring new patients on, you start putting those new patients on the [newer technologies], and you do this over time through attrition. Again, our expectation is not that people are just going to 100 percent switch over, but that it becomes a gradual introduction.”

McBride says Advanced Home Care did a careful analysis of its oxygen patients. “We looked at what percent of our patients were reimbursed by Medicare and what percent of our patients will meet that cap,” he explains. “Once we figured that number out, we knew we had an issue. We looked for what will be the most efficient method to make sure that patients are provided oxygen during their stay with our company.”

The model the company used factored in economic, lifestyle and reimbursement issues. “Our approach to the market involves making sure that we deliver oxygen in the most efficient manner that best meets the patient’s lifestyle,” explains McBride.

“To do this, we developed what’s called the ‘Best Fit’ model. Four days after set-up, we actually revisit that patient and figure out which system best meets their needs. Those systems can include oxygen-generating equipment, liquid equipment, the old tank systems or a portable concentrator.”

Considering New Technology

The industry’s need to gain efficiency through automation and new technology is not disputed. Yet, the non-delivery mode for ambulation offers potential for providers, says Priest. “It is the silver bullet,” he says.

“Portable concentrators are going to do for ambulation what the stationary concentrator did for in-home use,” he says. “The question is not if, it’s when. We like to think in the next three to five years portable concentrators will be more than 50 percent of the ambulatory market, because we think it is the best and most desirable for the patient and the most cost-effective for the home care provider in the long run.”

Bixby touts patient preference as a driving force behind the success of portable concentrators. “Today’s senior maintains a much more active lifestyle than previous generations and is unwilling to be tethered to a traditional, stationary concentrator,” he says.

“The use of a portable concentrator restores a level of freedom that patients basically lost when they went on oxygen originally,” Fary adds. “It gives them the ability to come and go as they please and be active and maintain the quality of life and the level of activity they had before they became tethered to an oxygen tube.”

He notes that for providers, portable concentrators offer an efficient way to provide oxygen to a patient. “It is efficient for the providers and it’s life-changing for the users,” he says.

Home-filling oxygen systems represent the latest in portable oxygen convenience, providing unmatched flexibility and ease-of-use, says Mastin. “Patients can enjoy a greater sense of independence — no longer will they be dependent on home cylinder delivery schedules or fear running out of oxygen,” she says. “For providers, it is an opportunity to easily convert to an operationally efficient equipment model, and it is a great technology to market to referrals.”

Fary also points to another plus. “There are a number of providers that have gotten into the business of offering short-term rentals of portable concentrators for people who travel,” he says. “It is a new opportunity for providers, and they’ve taken advantage of that.”

So, for providers of oxygen therapy, is the glass half-full or half-empty?

“At the end of the day, the patients are still there; they are not going away. In fact, all projections are that there are going to be more, and those patients need to be served,” says Respironics’ Frank. “We believe this will work itself out, and strongly encourage providers to get involved with their associations and contribute to the effort to demonstrate that the services are legitimate.”

HME providers are the “eyes and ears” of the physician, says McBride. “Quality providers will continue to care about the patient,” he says.

Fary adds that the reimbursement situation will continue to be dynamic. “There is a chance that some of these things may positively change for providers during the course of this year, but you can’t count on it until it happens.”

Hit the Road — or Skies — Jack!

The last couple of years have been phenomenal for oxygen users who want to travel — whether by boat, car or plane. New technologies and relentless industry efforts to change airline policies have resulted in a giant step forward in the process of traveling with oxygen.

The portable oxygen concentrator is the driving force behind this freedom. “There is not another product out there that can do what a portable concentrator can do for travel, specifically, airline travel in particular,” says Joe Priest, president and COO of AirSep.

More airlines continue to change policies to allow portable oxygen concentrators on board, says Bob Fary, vice president of sales for Inogen. “We are working with the international airlines as well, and some of the larger transatlantic carriers that are based in Europe have approved use of POCs,” he says. “Cruise lines are tending to allow them onboard and people continue to take them. There is really not any place somebody can’t take a portable oxygen concentrator if they really want to.”

Jim Bixby, chairman and CEO of SeQual Technologies, notes that the company’s Eclipse has so far been approved for use in-flight by 11 airlines.

“In the past, providers had to arrange for the delivery of oxygen cylinders or a stationary concentrator to meet their patients’ continuous flow needs at their destination,” he says. “Likewise, patients had the logistical challenge of arranging for multiple oxygen cylinders for use en route, and the financial challenge of paying up to $100 more for each leg of a flight.”

To date, travel on airlines has been without complication. Priest says he has not heard of any incidents with security.

Fortunately for patients, manufacturers are not resting on their laurels. The next step, says Priest, is to get the airlines to allow oxygen-users to be able to plug in to a power source onboard.

“POCs can definitely run on laptop connectors. This adds a great benefit because then you’re not [depending on] battery duration, which is a little bit of a tricky thing,” he says. “We want to get to an ideal world in which every seat has a laptop connector.”

Today’s POCs are also making an important impact on automobile travel. “Patients who are using POCs are leaving home, getting in the car and going wherever they want to go,” says Fary. “There’s nothing but good news in travel with a portable oxygen concentrator. It continues to progress.”

Putting Oxygen in Its Rightful Place

In what stakeholders call a victory for the entire respiratory industry and the patients it serves, AirSep Corp. executives say that giant Internet marketer eBay will cease selling prescription oxygen devices.

The issue of what happens to concentrators and other oxygen delivery devices after an oxygen patient dies has long been a concern to industry stakeholders, according to AirSep and others, with many risks for consumers who assume ownership of used equipment via garage and Internet sales. There is, for example, no assurance that the level of oxygen is appropriate for the user, and the absence of clinical oversight can lead to dangerous outcomes.

In the fight to eliminate sales of prescription respiratory equipment on eBay, the industry has finally won, says AirSep’s Joe Priest, president and COO.

“Kathy Sanchez and our staff did yeomen’s work to change eBay’s policy regarding the sale of prescription oxygen devices on the site,” Priest says. “Every time we saw one up, they sent an e-mail and told them it was a medical device, [that oxygen is] an FDA-controlled drug, and it’s just not a device that should be on eBay.”

The effort took two years and involved weekly — or even more — phone calls and e-mails to eBay officials, says Sanchez, AirSep’s marketing and public relations manager. In February, she received an e-mail from Jack Christin Jr., eBay’s senior regulatory counsel, stating that the sale of oxygen concentrators, oxygen compressors, oxygen conservers and their accessories that require a prescription would not be allowed. The policy is applicable to the U.S. and Canadian eBay sites.

Nichola Sharpe, senior public relations manager, eBay corporate communications, says the decision came following contact between eBay and the FDA, as well as AirSep and other respiratory product manufacturers including Inogen, Hill-Rom and Invacare. “[We] worked both with the FDA and with manufacturers of prescription oxygen devices and decided that these devices should not be sold on eBay,” she says.

Since the policy change, Sanchez says she has noticed a remarkable decline in the number of oxygen products listed on the site. “We were thrilled that we received the notice that eBay was changing its policy,” she adds, noting that suppliers and patients alike have applauded the effort.

Experts Interviewed:

Cara Bachenheimer, vice president, government relations, Invacare Corp., Elyria, Ohio; Jim Bixby, chairman and CEO, SeQual Technologies, San Diego; Bob Fary, vice president of sales, Inogen, Santa Barbara, Calif.; John Frank, vice president and general manager, home respiratory business, Respironics, Murrysville, Pa.; Kristin Mastin, director of respiratory marketing, DeVilbiss, respiratory products division, Sunrise Medical, Longmont, Colo.; Ralph McBride, vice president of HME/RT, Advanced Home Care, Greensboro, N.C.; Joe Priest, president and COO, and Kathy Sanchez, marketing and public relations manager, AirSep Corp., Buffalo, N.Y.; and Kelly Riley, director, National Respiratory Network, The MED Group, Lubbock, Texas.