ATLANTA — Nationwide, the average gas price crept over $3.50 per gallon this week according to fueleconomy.gov, and predictions put the price at $4 or more by the summer. That's a burden sure to be felt by already cash-strapped HME providers across America when they pay at the pump.
Dallas Jackson, CEO of Jackson Medical Supply, lives in California, where pain is most acute at $3.90 per gallon — tops in the nation.
Jackson and his wife Wendy Jackson, who run locations in Vacaville and Woodland, Calif., have responded to the rising prices by scheduling deliveries and house calls more efficiently in an effort to minimize road time. "We are also keeping our vehicles tuned up and maintaining tires at the optimum pressure for the best gas mileage," said Dallas Jackson. "In time, we may have to raise our delivery charges for our private-paying customers."
With no real way to predict when prices will top out, more providers in the delivery-intensive home oxygen sector may also begin an earnest transition to the non-delivery model, long touted for its ultimate efficiencies and cost savings.
"Many providers are setting patients up on the newer small portable oxygen concentrators," confirmed Helen Kent, CEO of Progressive Medical, Carlsbad, Calif. Along with eliminating patients' fears of running out of oxygen, she said, "the company saves on delivery costs and additional employee costs."
Oxygen technology that only requires delivery one time "is essential" to both protect and grow business profitably, agreed consultant Tom Williams, managing director of Strategic Dynamics. "Since 2006, gas prices have only been under $2.11 per gallon for seven months," he pointed out. "Since April 2008 they have steadily increased," and the cost could remain unpredictable for some time, he said.
Switching to the non-delivery model requires considerable start-up costs, but industry veteran Ron Richard, vice president and general manager, respiratory, SeQual Technologies, believes the change makes sense. "Instability in the oil and gas market will continue to worsen," he said, adding that prices in the $5 range may not be far off.
"This would have a huge impact on delivering oxygen to patients' homes," Richard said. "The other option is to switch all delivery vehicles over to Prius, hybrids or natural gas. This is a very costly option, but it could help offsets costs."
Eliminating non-value added, or "NVA," business activities can also help to lower costs and begin to cope, according to Joe Lewarski, vice president of Invacare's Respiratory Group.
"These NVA activities start with the order intake and include invoice generation, pick/pull, serial number and lot tracking, delivery coordination/routing, the physical delivery, the return of the cylinders and refill processes," Lewarski said. "Eliminating orders through the implementation of a non-delivery oxygen technology strategy has, and continues to prove over and over, to be the lowest-cost home oxygen therapy model. It not only eliminates the routine delivery of cylinder or liquid, it reduces the back-end workload, which is plagued with NVA activities."
Round 1 providers locked into competitive bidding contracts are in even more of a squeeze as pump prices complicate "winning" bid numbers that likely did not account for exorbitant gas prices.
"According to the Department of Energy, gasoline has gone up nearly a dollar a gallon since the time I placed my bid in December 2009," said Rob Brant of City Medical Services in North Miami Beach, Fla. "This is yet another risk you take when you accept a three-year contract.
"The real problem is when manufacturers increase shipping charges and cost of goods based on rising fuel costs," Brant added. "UPS and manufacturers can add fuel surcharges, but contracted suppliers can't."