Providers must reduce deliveries, vendors say

Wednesday, May 31, 2006

YARMOUTH, Maine - While nearly two-thirds (66%) of HME suppliers say they don't plan to invest in high-acquisition cost oxygen technology, especially now that reimbursement is headed toward the basement, manufacturers believe a sea-change has already occurred: In other words, the old oxygen technology--concentrator, backup cylinder and portable tanks--is destined for a mothball bed in the attic.
"Eventually, I think 90% of the market will follow this (high-tech oxygen equipment) model," said Lou Slangen, senior vice president of worldwide market development at Invacare.
Following our April News Poll on the subject, HME News queried a number of manufacturers for their response to the provider response. Here's what they had to say about the fate of high-tech oxygen:
Does the 66% surprise you?
Slangen: "The 66% does not surprise me. My estimate is that two years ago this percentage would have been closer to 95% and a year ago at 85%.
Ed Radtke, Sequal Technologies, vice president sales & marketing: "Yes. Providers have made it very clear to SeQual that a non-delivery oxygen syste loses much of its appeal if the cost is more than double that of conventional equipment."
Bob Fary, Inogen, vice president of sales: No. This industry has responded this way for many years. Every change is a crisis, and results in overreaction and re-trenching. Remember re-testing? The 40% cut in oxygen? Respiratory meds cuts? I don't see any difference between any of those and this situation."
If providers are put off by the upfront costs, how do you plan to confront that?
Radtke: "We offer leasing programs to make the upfront cost a non-issue for most providers.
Slangen: "There are no up front costs. Providers can roll costs into a monthly payment plan of as low as $100/month."
Fary: "By encouraging them to realize that the largest threat to anyone's business is short-term thinking and overreaction."
Raj Roychoudhury, Marketing Director, Puritan Bennett Homecare : "It is more critical than ever that manufacturers develop evidence to support their clinical and economic claims, and make sure customers are provided with the right information to know the true total operating cost for different oxygen systems."
Will the acquisition-cost of the technology drop in time to combat some of their reservations?
Fary: "It will never drop enough. If the cost was $1800, the reaction of the providers would be exactly the same."
Mark Ludwig, Sunrise Medical, Senior VP, Standard Homecare Products: "Today, portables are at prices higher than $3000, filling solutions are in the $2,500 range, but many are still waiting for technology to become available at about $1800. Another group of providers are waiting for technology to reach about $1400. It is at that price point ($1,400) that I think high-technology products will become pervasive."What else will you have to do to combat the notion that cheap technology is the best way to handle the cap?
Radtke: "Providers are telling us that only 12% of patients use the technology beyond the 36 month cap, so investing in quality long-life equipment that supports lower provider service costs is much more important than finding cheap equipment."
Fary: "We have the data and economic modeling already. It has not been accepted as widely as we had hoped. It is amazing to show someone inefficiencies in their business with good, hard data and not be able to effect any change in their behavior due to the up front cost resistance."
What do you say to the guy who's got a bunch of trucks running the same routes, who says, "No costs would go away by adding this product in these circumstances."
Roychoudhury: "I would agree with this statement."
Slangen: In the current prevalent delivery model, the cost is not in the acquisition of the hardware. This is only a small part of it. By far the largest cost is in the delivery, trucks/people/compliance regulations. The smart providers are focused on that part of the equation, their operating costs.
What percentage of the market do you think high-tech oxygen will eventually own?
Fary: 80%
Radtke: "We fully expect the percentage of high-tech oxygen to closely parallel the percentage of oxygen patients qualifying for the portable oxygen."