Reporter's notebook: Who will feel the most pain?

Monday, April 26, 2010

YARMOUTH, Maine – In March, when I was calling providers to ask them about the elimination of the first-month purchase option for standard power wheelchairs, one provider’s comments caught me off guard.

The provider wishes to remain anonymous and you’ll see why.

“Technically, I’m not going to make a lot of noise about this,” he said. “We’re finding that the companies doing TV ads are really starting to grow and do more products in our area, and if this provision puts a monkey wrench in their business, I’ll stand up and applaud it.”

Applaud the elimination of the purchase option? “We don’t like it, but we’ll deal with it,” he said.

That got me to thinking: Who will feel the most pain from this provision—smaller providers, like this anonymous provider, or larger providers, like the ones who are more likely to advertise on TV?

It turns out it’s not an easy question to answer. Some say smaller providers will feel the most pain. To stay afloat between the time they purchase wheelchairs to the time they get fully reimbursed for them, providers will need financing. Without strong profit margins and a lot of equity—two categories where smaller providers often fall short—that’s hard to get.

Consider this scenario: “Let’s say a company does only 10 wheelchairs a month and let’s say the price on those chairs is $3,500,” a provider told me. “As a purchase, you’re going to collect $35,000. As a rental, in your first month, you’re going to collect something like $350 times 10 chairs or $3,500. That’s a gaping hole of $31,500.”

“Can smaller providers lay their hands on that kind of money?” the provider asked. “Even if manufacturers help out with terms, I don’t think some will be able to.”

However, some say larger providers will feel just as much pain.

“It’s going to create cash-flow issues, regardless of the size of the company,” a large provider told me. “We’ve talked to people who have said, ‘You’re going to benefit from this.’ We tell them, ‘Look, we’re no different than the company with five employees. We’re big, but our cash flow isn’t necessarily guaranteed.’”