A burgeoning population, health conditions and diseases that are merely treated not cured and more efficient diagnostic practices make the respiratory
by DENISE H. MCCLINTON
July 1, 2003

A burgeoning population, health conditions and diseases that are
merely treated — not cured — and more efficient
diagnostic practices make the respiratory market a solid profit
center that continues to increase.

Jacquelyn McClure BS, RRT, director of Lubbock, Texas-based The
MED Group's National Respiratory Network, says home oxygen and
treatment for sleep-disordered breathing are the segments of the
respiratory market that are bringing providers the most revenues,
but adds that information technology is also making a strong
impact. According to McClure, technologies that can replace routine
activities to free up labor for complex problem-solving and
assessment activities are on the rise.

Baby boomers are moving into an age group or category where they
are needing or requiring supplementary oxygen, says Ron Richard,
Poway, Calif.-based ResMed's vice president of marketing.
“Based on statistics, there are close to 10 million people
who suffer from chronic lung disease in this country, and if you
look at that, you're probably going to have at least 300,000
diagnosed per year that will require either partial or full-time
support with some form of oxygen,” he says. “Regarding
sleep disorders, an increasing number of links are being discovered
between sleep and other chronic conditions, such as type 2 diabetes
and obesity.”

TECHNOLOGY TO THE FORE

To meet the ever-increasing needs of home respiratory patients,
manufacturers are taking steps to improve existing products as well
as developing new technologies that make treatment easier, safer
and more comfortable. “Clinical studies have shown that the
more active a home oxygen patient is, the healthier he or she will
be,” says Earl Yager, president of Chatsworth, Calif.-based
Chad Therapeutics. “Thus, the goal for the home oxygen market
should be to provide products that reduce costs while at the same
time increase the quality of life for patients.”

According to Joe Priest, president and chief operating officer
of Buffalo, N.Y.-based AirSep, advances in technology, such as
AirSep's LifeStyle, a portable oxygen concentrator, are making a
strong impact on the home oxygen market.

“Over the past two decades there have been advances in
oxygen concentrators — great advances in reliability, sound
reduction, and other positive aspects — but there has not
been a real revolution from the market's perspective,” Priest
says. “It has been sort of an evolution.”

Longmont, Colo.-based Sunrise Medical's DeVilbiss Respiratory
Group is focused on using technology to help providers overcome the
profitability pressures in home oxygen therapy and obstructive
sleep apnea, says Rich Kocinski, senior vice president and general
manager.

“HME providers' businesses are highly service-oriented,
and finding ways to lower their operating costs is a significant
challenge,” Kocinski says. “A good example is our
eCompliance system that allows dealers to provide the information
that they are being asked for, at a fraction of the cost of old
technology systems. Better information and quicker exception
reporting … is naturally less expensive.”

Sunrise also has a CPAP mask and conserver in development, both
of which address patient and provider needs, according to
Kocinski.

The market for sleep-disordered breathing is one of the most
high-tech in the HME industry — and the fastest-growing.
Sleep apnea affects more than 12 million Americans, reports the
National Institutes of Health. However, a lack of awareness by the
public and health professionals means a majority of those affected
are undiagnosed and untreated, according to the American Sleep
Apnea Association.

Currently, advances in the treatment of sleep apnea and
sleep-disordered breathing are apparent in mask technology.
Materials, engineering processes and the understanding of patient
needs have all driven product innovation.

“There have been tremendous breakthroughs made in mask
technology that are obviously improving patient comfort, which
results in increased compliance,” ResMed's Richard says.

He adds that better quality masks are also more cost-effective
for providers because they reduce the need for multiple
callbacks.

Other technological advances for the treatment of sleep
disorders include heated humidification and enhancements to
positive pressure modality. Respironics, located in Murrysville,
Pa., recently released a mask with features that address current
needs. Its C-Flex mask modulates the application of pressure,
relaxing air pressure during expiration and improving patient
comfort and compliance.

The pediatric respiratory market also has seen improvements that
are revolutionary, says Bob Fary, director of respiratory therapy
for Apria Healthcare, Lake Forest, Calif., referring to the advent
of small pressure support cable ventilators.

ENCOURAGING FUTURE

The respiratory business has long been the stronghold of the HME
industry. However, legislative and reimbursement trends have
affected its status. Where it once may have subsidized other
product categories and enabled providers to be a
“one-stop-shop,” that is no longer feasible.
“Many companies have figured out a way to adjust, but [the
Balanced Budget Act of 1997] may have created more
specialists,” Priest says.

Some experts say reimbursement for respiratory services is at
least adequate, but challenges do exist. Managed care and Medicare
alike are slow to reimburse for new technology, and too often
reimbursement decisions are not completely logical.

“[Payers] will pay for a CPAP machine, but they won't pay
for a mask. Or, they will pay for a CPAP machine and a mask, but
they won't pay for any replacements,” Richard says.
“Right now the payers are the biggest obstacle in trying to
help improve compliance.”

Overall, the future for respiratory care looks encouraging. Marc
Rose, a partner with Paragon Ventures, a mergers and acquisitions
firm in Newtown, Pa., says it is the leading route chosen by most
people entering the HME industry.

“To be profitable in the respiratory business, you have to
put procedures in place … and make sure you're in
compliance,” he says. “If you can command the referrals
and get the business, it's the way to go.”

Oxygen concentrators and CPAP/Bi-level devices will be the
fastest-growing respiratory products for HME providers in 2003.



Rank Product % of Providers
1 Oxygen Concentrators 33.4
2 CPAP/Bi-level Devices 29.4
3 Liquid Oxygen Systems 5.6
4 Portable Oxygen Systems 4.8
5 Oxygen Conserving Devices 3.5
6 In-home Fill Systems 2.1
7 Sleep Therapy Devices 1.9
8 Sleep Diagnostic Equipment 1.6
Source: HomeCare 2003 Forecast
Survey