Will PMD cuts crimp TV advertising?

Wednesday, February 28, 2007

With Medicare slashing reimbursement for power wheelchairs significantly, some industry watchers expect to see a corresponding drop in consumer advertising, especially on TV.
It's easy to see why. In general, it costs about $1,000 of TV advertising to generate one power wheelchair sale, and for providers less skilled at target marketing, it can cost upward of $2,000, they say.
With Medicare reducing reimbursement for K0011-style chairs (Group 2) by about 27%, forking out that kind of dough will present a challenge for a lot of providers.
"They can run a profitable consumer business, but the marketing that was done for these products will not be as extensive," said Lou Slangen, Invacare's vice president of worldwide market development. "Awareness will not be great, so utilization should go down."
If reduced reimbursement for power wheelchairs does dampen advertising, don't expect CMS to shed a tear. For years, agency big-wigs have voiced disdain for TV advertising and its role in boosting utilization.
"CMS doesn't like advertising, but there is nothing wrong with telling people what you do," said one provider. "They spend millions of dollars on advertising telling people to go to Part D. There is so much hypocrisy out there."
At Hoveround, which does a lot of national advertising to promote its power wheelchairs, Vice President Calvin Cole called the Medicare cut "a big one--no doubt about that." Nevertheless, the company has no immediate plans to reduce its marketing, he said.
That doesn't surprise Jerry Keiderling, vice president of The VGM Group's U.S. Rehab. For big advertisers of consumer mobility like Hoveround and The Scooter Store, which didn't return calls for this story, to reduce their advertising would require a major overhaul of how they generate business, he said. Smaller providers can't afford to reduce their advertising, either.
"Even though their revenues were cut, they have to make up for it, and marketing their services and quality is the only way they can do it," Keiderling said.
Rick Perrotta certainly has no plans to reduce his advertising budget, but he's not going to increase it, either.
"I think it is important that we have a presence out there," said the president of Network Medical Supply in Charlotte, N.C. "We changed our advertising to include repairs. We're doing everything we can to boost our repair business to offset the loss in revenue, which will be about $200,000 (annually) for us."