There's no way, right? Or is there?

Tuesday, November 23, 2010

There's no way HME providers will be cut out of the distribution model, right? I mean, who's going to deliver the product to the patient? Manufacturers aren't set up to do that, right?

That's been the conventional wisdom for years, but now I'm not so sure. I say that because over the past month, a few stories surfaced that got me thinking that some changes may be afoot.

The story that really grabbed me was about Inogen winning six competitive bid contracts for oxygen. Inogen, as you probably know, makes a portable oxygen concentrator, the Inogen One. Back in 2008, when sales of the Inogen One didn't meet expectations, the company began selling direct to consumers for cash. Since then, Inogen has become accredited and received a Medicare supplier number. If providers don't want to distribute its product, fine. Inogen will do that itself, CEO Ray Huggenberger told me.

In addition to selling direct, Inogen has a network of preferred providers. Inogen advertises its product on TV and drives business to its HME partners. In markets where it doesn't have a provider partner, Inogen goes direct to the end-user, either as a cash or insurance transaction.

Inova Labs, which went national with its POC, LifeChoice, last summer, has no intention of getting a Medicare supplier number, but it does have a network of preferred providers. If you only want to sell a LifeChoice here and a LifeChoice there, don't bother calling, said President David Shockley.

Finally, there's been a recent rash of M&A activity, with private equity groups snapping up HME manufacturers and distributors. When I saw this, I called industry consultant Wallace Weeks. "What do you make of this, Wallace?" I asked.

Whenever a market, like HME, is in turmoil, investors frequently swoop in, unleash new business practices that drive superior revenue and then sell  at a nice profit, Wallace told me.

Makes sense. These investors aren't married to old ideas.

So, do I think we're going to see a rush of HME manufacturers going direct to the end-user any time soon? No. But do I think it's likely we'll see alternative distribution models emerge that minimize and/or redefine the role of HME providers? Wouldn't surprise me. Would it you?