Bill Kennedy turns to televison ads for O2 referrals

Saturday, July 31, 2004

LAWRENCE, Kan. - Bill Kennedy, the man who founded Rotech and sold it for $915 million in 1997, is back with a new company that offers a peek at what the future of home respiratory therapy may look like, or at least one version of it, say industry watchers.

Home Oxygen 2-U confirmed in June that it signed a deal recently to lease 17,000 square feet of office space in Lawrence, Kan. The location will be staffed with 100 employees and operate as a call center. The company’s strategy combines consumer advertising with oxygen technology designed to reduce deliveries and reduce operational costs.

Home Oxygen 2-U generates calls by running ads on cable TV for Invacare’s Venture HomeFill II transfilling oxygen concentrator. When a potential oxygen patient calls in requesting information on the HomeFill, a call center employee connects the person with the nearest Home Oxygen 2-U location.

Kennedy has been building a network of HMEs around the country since early this year to service patients. In area’s where he doesn’t own a location, Home Oxygen 2-U contracts with other providers, said a Home Oxygen 2-U employee.

“By doing this you don’t have to go to the referral source. All you have to do is go to the end user,” said another Home Oxygen 2-U employee. “The referral source isn’t saying call ABC Medical because he has a relationship with ABC. Instead, you have the patient saying, ‘This is what I want, and I want to call this company.’”

The Venture HomeFill is a key component of Home Oxygen 2-U’s strategy. The transfilling concentrator allows ambulatory patients to fill portable units at home, which means they no longer have to rely on the provider to deliver oxygen cylinders. A HomeFill unit costs about $2,000, a price many providers still find too high when compared to the $700 they pay for a standard concentrator. But those who have embraced the technology say it saves them money by cutting down on deliveries and cylinder purchases.

Cutting down on deliveries removes one of the traditional barriers to building a respiratory business: geography or how far you can drive in a day, how many people you can see and how you handle emergency calls, said Joe Lewarski, homecare section chair of the American Association of Respiratory Care.

“It takes away the necessity to have a branch in every area or changes the size and type of the branches you have to have,” Lewarski said. “Instead of a branch that has five trucks to service X number of oxygen patients in a community, you might have a branch with one truck and two therapists.”

With Medicare reimbursement cuts for oxygen and other HME services and products slated to go into effect next year, providers have begun looking every where to cut their costs, and for ways to do business more cheaply.

“He’s probably got a good idea and is probably going to beat the system,” said Dennis Trach, compliance officer at Associated Healthcare in Amherst, N.Y. “But if one our patients calls and says, ‘I want to switch to these guys because they’ve got this thing,’ guess what we’re going to do? We’re going to match the offer.”