Category Development

Thursday, October 22, 2009

Despite a significant drop in reimbursement for Medicare and subsequent lower revenues, mobility manufacturers continue to wax optimistic about the future of the power wheelchair market. Demand for the product, they say, will ensure the category’s vitality now and well into the future.

“Obviously there are challenges with reimbursement right now and there has been a significant dip in profits,” said Nicole Muehlenhaus, market manager for Otto Bock in Minneapolis. “That said, people still need this product and the category isn’t going away. It is continuing to grow.”

Besides lower reimbursement, the industry has had to deal with prepayment audits, surety bonds and mandatory accreditation, which has caused “many providers to be just plain fed up,” said John Wright, consultant with Carson, Calif.-based Shoprider. “But while some providers are complaining, others are being proactive and rising to meet these challenges through preparation and making changes so that their businesses will prosper.”

Wright concurs that demand for power chairs will continue to rise due to the demographics, advertising campaigns by both manufacturers and providers, and the increased awareness of these products by the public.

“The providers that can make the critical adjustments to their business that are necessary to exist in this space will enjoy the benefits of that growth,” he said.

Ted Raquet, vice president of domestic sales for Exeter, Pa.-based Pride Mobility Products, adds that the proposed elimination of the first-month purchase option is also a big challenge for the industry. Pride’s government affairs team is working to preserve the purchase option, he said, pursuing alternatives to the proposal.

“The power wheelchair market still possesses tremendous rewards for both providers and their clients, which is why it’s more important than ever to align with a manufacturer that can help providers create an economically sound, patient-first business model,” Raquet said. “By focusing on cost-effective, high-quality products, providers remain economically viable while meeting clients’ needs. When providers focus on this sound business model, which prioritizes clients’ needs, it’s a very rewarding market segment.”

Elyria, Ohio-based Invacare is a little more muted about market growth, however, as John Koster, product manager for scooters and consumer power, explains: “Due to continuously decreasing reimbursement, more and more providers are exiting the industry because it is very difficult to operate profitably. There is less marketing and lead generation going on and the market is becoming more referral based. The end result is that the total market is decreasing slightly, despite the slightly growing need.”

Retail potential

Whether power chairs can be sold for cash in the same way as scooters is subject to debate. In Wright’s view, flagging reimbursement is a definite motivator for moving power chairs into the retail arena.

“If you are disappointed in the continued decreases in reimbursement, remember this: It won’t be getting any better,” he said. “Retail sales have many benefits for the provider, such as cash flow, profit potential and cross-selling opportunities.”

Sensing potential retail growth for the power segment, Shoprider recently launched a consumer financing program that assists the providers by offering affordable payment options for their customers, Wright said.

“We are hopeful that the providers will take a serious look at expanding their retail focus,” he said. “Many providers are content to refer their customers down the street for these companion products and they are leaving money on the table. Many are reluctant because they are fearful of the installation and service requirements, are unsure of the licensing necessary or don’t have the time to investigate all of this. On the other hand, I have seen many of the vehicle lift, van conversion and home modification businesses getting into the power wheelchair business.”

Conversely, Otto Bock’s Muehlenhaus says the mobility industry needs to take extra measures in tailoring a retail message for the public on power chairs, spelling out the differences between standard power chairs and custom seating.

“Logically there is a retail angle, but it’s a dangerous slope if the different features are not distinguished,” she said.