Market Q&A: The Changing Oxygen Market

RESPONSIVE RESPIRATORY

Sara Lippold, Marketing Manager respondo2.com What is your company’s specialty? LIPPOLD: Responsive Respiratory is focused solely on high-pressure oxygen products. We design and manufacture products for use with oxygen therapy, including regulators, conservers, cylinders, carts and racks. Homecare providers are our largest customer segment. How has the market for oxygen products changed during the last three years? LIPPOLD: There has been an industry push for portable oxygen concentrators (POCs). However, when speaking with providers, we are seeing a group that endorses POCs, and a group that does not see the value. The high upfront cost creates a challenge in terms of cash flow, and the alternative leasing programs pull cash away from future opportunities. Patients with low O2 needs likely do not warrant the POC investment from a provider, and POCs cannot satisfy high O2 consumption. Other than competitive bidding, what forces have put the most pressure on oxygen products? LIPPOLD: Currently, raw material price changes pose the greatest challenge. Competitive bidding led to decreased pricing from manufacturers to support the providers’ decreased revenue. Now, the cost of raw materials is escalating, which will impact the market again. How do you differentiate your products from others in the category? LIPPOLD: We feature customized product solutions that offer value-added referral source marketing for providers. How can HME providers realize profitability with this category? LIPPOLD: For products, the providers should look at the value and quality of the product to last a minimum of five years, and ensure the quality will enable extended and multiple use opportunities. There is an untapped market that is willing to pay for product upgrades including higher-end cannulas (ultra-soft design), alternative carry-styles (back packs, fanny packs), as well as options to transport the cylinders securely in the patient’s vehicle. What trends and innovations have you identified for oxygen products? LIPPOLD: POCs are getting a lot of attention, but are limited in their output and longevity with patient use. POCs are viable solutions for newly-diagnosed patients, but as the disease progresses, these patients shift back to aluminum cylinders as the electronics are not adaptable to meet these later-stage needs. As such, the oxygen cylinder market continues to grow. What are the key considerations patients should know about oxygen products? LIPPOLD: Not all products are the same. An example is oxygen regulators using aluminum and plastic internal components and those only meeting a 2200psi rating. How do you approach product development? LIPPOLD: We look at the current market to introduce products that our customers are having trouble finding. We also look five to 10 years into the future to determine where gaps will form, and what new technology is being developed. What tools do you provide to help educate dealers and potential product users? LIPPOLD: We provide a full library of catalogs, literature and instruction guides for every product. Our online website is a resource for this product information. We also offer a free O2 To Go app and online web calculator to assist providers and patients in the estimation of available oxygen, given their cylinder size, device and liter flow, and fill level.

APPLIED HOME HEALTHCARE EQUIPMENT

Victoria Marquard-Schultz, Managing Director applied-inc.com What is your company’s specialty? MARQUARD-SCHULTZ: Oxygen—we do anything and everything oxygen. Our reputation is that we put our providers first. We have everything a provider needs to move to the profitable smart delivery model of oxygen, including our OxyGo portable oxygen concentrators (POCs), transfill systems and resources to enter into the retail market to serve more patients. What market segment is best served by your oxygen product(s)? MARQUARD-SCHULTZ: We take care of providers. We do not sell direct to patients, and we strive to serve every provider with our signature service. We service, support and take care of all our customers, whether they buy once a year, or they buy a significant amount per day. We help all our provider customers look at their businesses in a new economic light by helping them to evaluate their delivery models and to make better decisions to be more profitable. How has the market for oxygen products changed during the past three years? MARQUARD-SCHULTZ: Medicare reimbursement data shows that the population of patients receiving oxygen therapy continues to grow in sizable chunks. The reimbursements are for either stationary concentrators, portable oxygen in tanks or for portable concentrators. Not only are we seeing the market grow overall, but we are seeing a significant shift to POCs as being the fastest growing segment within the home oxygen supply market. Baby boomers are fueling market growth. There has been a quantifiable increase of new patients with COPD and other issues that need oxygen. The pulmonologists that actually write prescriptions are becoming more aware of product choices and brand selection. There is more patient awareness of options as to how they consume oxygen, and being tethered to tanks is not high on their list of preferred choices. Other than competitive bidding, what forces have put the most pressure on oxygen products? MARQUARD-SCHULTZ: There is tremendous pressure to adopt the “non-delivery” model because today, equipment is not really the main cost—it’s the cost of paying drivers and the associated costs of fuel, maintenance, insurance and the like. Demand for a more mobile lifestyle while being on oxygen also puts pressure on oxygen products. How do you differentiate your products from others in the category? MARQUARD-SCHULTZ: We provide strong field support and education to providers and their patients. We see fewer POC service calls and maintenance issues than other POCs on the market, and we see that as a critical differentiating factor. We make POCs affordable through our OxyCare Total Advantage credit program, which allows patients to make low monthly payments, get the product they want and, at the same time, allows the provider to get paid right away. Our POCs have field-serviceable batteries and sieve beds. These can be changed by patients and require no tools. How can HME providers realize profitability with this category? MARQUARD-SCHULTZ: They can implement smart delivery models. Smart delivery is not non-delivery. The non-delivery model is to put POCs on every patient. Smart delivery is to use non-delivery only for patients where it makes the most sense. If providers can get customers to bring in products for service and evaluation, that’s a huge win on the cost containment front. What are the key considerations patients should know about oxygen products? MARQUARD-SCHULTZ: Few consumers know they have a choice in switching providers to get the product that they want. Not all POCs allow the same amount of oxygen to flow per minute, regardless of the patient’s breathing rate. Patients considering POCs need to know how to operate their POCs and not fear technical issues. What tools do you provide to help educate dealers and potential product users? MARQUARD-SCHULTZ: We educate providers by doing in-services, product demonstrations, webinars and the like. We provide up-to-date literature for patient use. We distribute our own magazine, Home HealthCare TODAY, to providers and patients. It allows us to educate, instruct and provide the latest health care information.

PHILIPS

Eli Diacopoulos, Respiratory Care Business Leader respironics.com What is your company’s specialty? DIACOPOULOS: Philips is a global health technology company that provides solutions across the health continuum: from prevention and diagnosis to treatment and home care. Our Sleep and Respiratory Care business group enables and partners with care providers to support a patient-centered and coordinated respiratory and chronic obstructive pulmonary disease (COPD) management approach. How has the market for oxygen products changed during the last three years? DIACOPOULOS: The need for patient mobility has always been a requirement or desire by oxygen-dependent patients. During the last decade, the HME industry has transitioned from home cylinder delivery to home cylinder transfil systems to portable concentrators as the primary choice for patient mobility. Adoption of portable concentrators continues to grow as it enables patients the freedom to recharge their concentrator wherever a power outlet is available. With patients’ ability to receive therapy at home or even on the go, these solutions provide patients the flexibility to live a full and active life without their chronic condition hindering their lifestyle. Other than competitive bidding, what forces have put the most pressure on oxygen products? DIACOPOULOS: COPD continues to be a growing challenge for the health care industry, as the third leading cause of death in the United States While millions of people have already been diagnosed with this deadly disease, an additional 12 million Americans may have the disease without even knowing it. The disease is among the most common, most underdiagnosed, most debilitating, most deadly and most costly to manage. Just in the U.S., direct and indirect costs of COPD are approximately $50 billion yearly. In addition to the economic burden, COPD hospitalizations are at an all-time high. The 30-day readmission rate for re-hospitalization of COPD patients rose from 20 to 39 percent, which is why the Centers of Medicare & Medicaid Services (CMS) is enforcing penalties to hospitals for COPD admissions. How do you differentiate your products from others in the category? DIACOPOULOS: Designing technologies that are patient-centric that improve comfort and treatment compliance are our differentiators in the market. HMEs today are under the pressure to operate more efficient businesses, especially where the oxygen market is concerned. At Philips, we see the future of health care delivering integrated and connected care for all respiratory products, including oxygen concentrators, to improve patient and economic outcomes. For example, our SimplyGo Mini is the smallest and lightest portable oxygen concentrator in our portfolio. It is designed with the patient in mind, offering a portable solution for on-the-go patients to conveniently travel. Additionally, SimplyGo Mini conforms to all applicable FAA requirements for in-flight use on board aircrafts. In addition to portable oxygen concentrators, Philips offers Patient Adherence Management Service (PAMS) that works to motivate and coach patients through their initial 90-day acclimation period and receive personalized care to help with compliance. This technology allows a patient management or engagement service to motivate the patient to become and stay adherent to their treatment regimen. With these insights, patients can track their progress or set reminders to take action, as well as receive motivational messages from their physicians to encourage them to adhere to therapy. Through this support, PAMS has increased patient adherence by 49 percent and empowered patients to comply with therapy. Why should oxygen products be attractive to HME providers? DIACOPOULOS: Portable oxygen concentration is not a new technology, but the devices and technology have evolved since they first hit the market. Within the past five to 10 years, reliability, portability and battery life has dramatically improved. This means that POCs can be an effective tool for HMEs to service their oxygen patients by both increasing patient satisfaction—largely thanks to the patient freedom they provide—and reduce operating costs. Startup costs may be higher initially, but the HME will ultimately eliminate costly tank deliveries and site visits. How can HME providers realize profitability with this category? DIACOPOULOS: Technology is continuing to emerge in the oxygen market. The potential around connected technology and mobile products can greatly impact the industry as well as patients’ lives. With the right technology, not only can HMEs ensure that a patient is being compliant and help them take advantage of resupply options, but they can have a positive impact on their own revenue stream by expanding into different markets outside of their local area. Technology can help them do their jobs more efficiently, while ensuring that patient safety and compliance still remains number one in the list of priorities. What trends and innovations have you identified for oxygen products? DIACOPOULOS: More and more consumers are becoming an active participant in their own health care. We see this being driven by patients’ increased access to their own health data through smartphone applications. That said, health care providers may need to answer more patient questions or put a greater emphasis on educating and engaging patients throughout their care process. What are the key considerations patients should know about oxygen products? DIACOPOULOS: Those who have been prescribed oxygen therapy should have very clear direction from their physician about the volume needs and have an understanding themselves of the battery life they may require based on their lifestyle or prescribed usage. There are also a variety of options of battery life as well as size and weight. Patients should discuss their desired level of activity and intended use with their physician and HME before making a decision. What are the key differences in portable oxygen concentrators and stationary systems patients should know? What are the similarities? DIACOPOULOS: Portable oxygen concentrators make it easy for patients to get around with portable oxygen. These devices are lightweight and portable, designed to endure the bumps and bruises of daily activity. It is powered for convenience for patients to adhere to therapy anywhere, whenever they need it. Stationary systems are designed to simplify patients’ oxygen needs and provide reliable COPD stationary oxygen therapy at the comfort of their own home. Stationary systems are typically sleek and small (around 30 pounds), user-friendly for patients and are quiet. What tools do you provide to help educate dealers and potential product users? DIACOPOULOS: Philips offers called Patient Adherence Management Service (PAMS). This helps support new patients transition to COPD therapy and uses Philips’s connected care management solutions to provide customers with insight from data to provide enhanced patient care. By combining devices, connectivity and Philips’s patient management expertise, the goal is to ultimately empower patients and clinicians to improve overall experience.