More than 82 percent of home medical equipment providers are predicting revenue increases for 2002, while at the same time providers are projecting fewer purchases in almost every home medical equipment category. This begs the question, from where will these increases come?

To find the answer, HomeCare asked providers which products would generate the largest revenue increase this year, and learned that providers are relying on the old standbys — respiratory and mobility products — to boost their bottom line.

Of the 361 providers who responded to the survey, 47.4 percent listed respiratory products as the top revenue generators for 2002. Mobility products followed at a distant second, topping the revenue list for 28.3 percent of providers.

Only 8.3 percent of providers chose sleep disorder products to generate the most revenue in 2002, followed by 5.3 percent of providers who chose beds and mattresses, 3.3 percent who chose bath safety, 2.5 percent who chose seating and positioning, 1.4 percent who chose pediatrics and 1.4 percent who chose women's health.

“These numbers are consistent with what my clients tell me — specifically concerning the bread-and-butter respiratory equipment,” says Neil Caesar, an attorney with the Greenville, S.C.-based Health Law Center and principal of the Woodbine, N.J.-based consulting firm Caesar Cohen Limited.

However, the fact that providers expect revenue growth in these areas does not make sense in light of providers' decreased spending predictions, Caesar says.

Todd Christopher, president and chief executive officer of Beaumont, Texas-based Home Care Supply, agrees with Caesar. “If you don't have product, then you can't sell it,” he says. “These numbers are incongruent.”

Perhaps, Christopher suggests, the respondents have too much inventory in stock. “If you're going to grow sales by 10 percent and you're over-inventoried by 10 percent, then, yes, you can grow sales without buying more products,” he says.

But Caesar proposes a different explanation. “My guess is that people who do not have a decrease in spending were the ones who were expanding their revenue,” he surmises. Positive responses from the providers who are not planning to cut product spending must have bolstered these revenue predictions, he concludes.

Respiratory products' position at the top of the list is no surprise, according to Christopher. “This is the most profitable area of the [HME] business for everybody,” he says. “Certainly [Clearwater, Fla.-based] Lincare's 2001 financial report — in which the company announced an operating profit of about 40 percent — bears that fact. They are a well-run business, but they also are primarily oxygen.”

One can attribute mobility products' second-place position to “a general tightening of the belt coming from the crackdown of the new entitlement rules for Medicare and Medicaid,” Caesar explains.

And, while some providers are optimistic about sleep-disorder products, Caesar doubts that these products will penetrate the home care market substantially until federal reimbursement for sleep therapy becomes more lucrative.

Breaking down the top two revenue generators-respiratory and mobility products-HomeCare again found few surprises.

Thirty-one percent of survey respondents said that oxygen concentrators will generate more revenue than any other respiratory product this year, while 28 percent said that CPAP/Bi-Level devices will top the list of revenue generators.

Following at a distant third, other sleep-therapy devices top the list of revenue generators for only 5.5 percent of respondents, while 5.3 percent of respondents chose portable oxygen systems, 4.2 percent chose liquid oxygen systems, 3.9 percent chose conserving devices and 1.1 percent chose in-home fill systems.

Unlike his peers who responded to the survey, Christopher says that demand for his CPAP/Bi-Level products is growing faster than demand for oxygen concentrators. He attributes this growth to increased awareness of the prevalence and seriousness of obstructive sleep apnea.

“The sleep market has exploded in the past year or two,” he says. “I think you're going to see more growth in the CPAP/BiPAP market in the future, but O₂ concentrators still are the larger market.”

On the mobility side, survey respondents' predictions have raised a few eyebrows.

Nearly 35 percent of the providers HomeCare polled said that manual wheelchairs will generate more revenue than any other mobility product this year, while only 29.4 percent chose power wheelchairs, 10.8 percent chose scooters, 6.9 percent chose wheelchair seating products and 3.9 percent chose sport or lightweight wheelchairs.

To explain why manual wheelchairs might top these providers' list of revenue generators, Caesar looks to the Medicare's recent upgrade provision, which allows beneficiaries to pay the difference between standard wheelchairs and customized wheelchairs. “In light of the cash-flow issues associated with Medicare reimbursement for power mobility products,” he surmises, “perhaps giving people the option to upgrade to a customized manual wheelchair is more lucrative and nearly as satisfying.”

WHICH ONE OF THE FOLLOWING 10 MARKETS WILL BRING YOU THE BIGGEST REVENUE INCREASES IN 2002?

Rank	Market	% of Providers
1	Respiratory	47.4%
2	Mobility Products	28.3%
3	Sleep Disorders	8.3%
4	Beds/Mattresses/Pads	5.3%
5	Bath Safety	3.3%
6	Seating/Positioning	2.5%
7	Pediatrics	1.4%
8	Women's Health	1.4%

WHICH MOBILITY PRODUCTS DO YOU EXPECT TO BE THE FASTEST-GROWING PRODUCT FOR YOUR COMPANY IN 2002?

Rank	Product	% of Providers
1	Manual Wheelchairs	34.9%
2	Power Wheelchairs	29.4%
3	Scooters	10.8%
4	Seating Products for Wheelchairs/Scooters	6.9%
5	Sport/Lightweight Wheelchairs	3.9%

WHICH RESPIRATORY PRODUCTS DO YOU EXPECT TO BE THE FASTEST-GROWING PRODUCT FOR YOUR COMPANY IN 2002?

Rank	Product	% of Providers
1	Oxygen Concentrators	31.0%
2	CPAP/Bi-Level Devices	29.1%
3	Sleep Therapy Devices	5.5%
4	Portable Oxygen Systems	5.3%
5	Liquid Oxygen Systems	4.2%
6	Oxygen Conserving Devices	3.9%
7	In-Home Fill Systems	1.1%
8	Sleep Diagnostic Equipment	0.8%