Bidding climate drives POC growth

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Friday, June 22, 2012

Portable oxygen concentrators have been a part of the respiratory category for several years now and, after a slow start, they are finally picking up steam, manufacturers say.  

“Providers are adopting POCs now more than ever before,” says Dikran Tourian, CEO of Oklahoma City-based O2 Concepts. “With competitive bidding, providers are taking a much harder look at what revenues will drop and POCs make sense because overall they reduce their cost model. It makes more sense for the provider and offers benefits to the patients.”

Similarly, Elyria, Ohio-based Invacare has seen a spike in provider interest for POCs, said Chris LaPorte, Invacare’s business manager for portable oxygen concentrators.

“The appeal of the POC is it represents a way to strip operational costs out of day-to-day business, similar to a transfilling system,” he said. “On an overall basis, POCs can cut out 70% of (conventional oxygen) overhead costs.”

Scott Wilkinson, executive vice president of sales and marketing for Goleta, Calif.-based Inogen says provider interest in POCs should take off in earnest once the smoke from competitive bidding clears.

“No matter how it is resolved, it will mean a reimbursement reduction,” he said. “That will drive providers to change their business. POCs will no longer be a ‘nice to have’ product, but a ‘must have’ product.”

It is the POC’s self-sufficiency and versatility that make it appealing to providers looking to eliminate the logistics associated with conventional oxygen delivery, added Mitch Yoel, executive vice president of business development and government affairs for Port Washington, N.Y.-based Drive Medical Design & Manufacturing.

“Rather than scrambling for a solution when a patient calls with an impending trip they want to take, more providers are preventing the issue from ever coming up,” he said. “That is not to say that any one POC or the category as a whole is a panacea—it is still important to match a particular product’s strengths with the needs of an individual patient.”

Price backlash over?

One of the primary inhibitors of the POC’s growth as an oxygen modality has been provider reticence over the higher acquisition price. 

Yet as Medicare financial pressures weigh more heavily on providers, vendors are seeing a gradual change of attitude.

“Providers are increasingly recognizing that these products have a big place in the future with the non-delivery model,” Wilkinson said, adding that he also understands provider reluctance to adopt POCs. “Converting your business model is a huge investment, and the bigger your delivery fleet is, the bigger the investment will be.”

Yoel is also seeing a moderation in provider price objections.

“Many providers are now asking about flexible financing programs that boost cash flow as early into the 36-month cap as possible,” he said. “Reliability and durability of POCs are frequent topics as well, as many providers have felt burned by quality problems that have plagued some units.”

Patient demand high

The more portable units that appear in circulation, the higher patient demand becomes, manufacturers say. 

“Once people see these new systems, they instantly become dissatisfied with dragging a cylinder around,” Wilkinson said. “If their insurance won’t cover them, they will pay cash—especially the baby boomers.”

This desire to have a POC regardless of insurance coverage is opening a major new retail door for respiratory providers, Wilkinson said.

“With providers increasingly looking to retail sales to offset reimbursement losses, the POC fits squarely into that sandbox,” he said.