The Outlook for HME: 2004-2008

Based on a report presented at Medtrade 2003 by Wallace Weeks of The Weeks Group, the following summary looks ahead to market growth, competition and other factors that will affect the HME industry from 2004 to 2008. While the report was prepared before Congress' passage of a Medicare reform bill that includes competitive bidding and reimbursement cuts within this period, the good news, according to Weeks, is that the industry has plenty to be optimistic about. To put the long-range preview in perspective, Weeks first highlights the “wide-angle” view, which is an overview of what the industry may go through in the next five years. The “telephoto” view zooms in on specific segments of the industry to examine the results we could see by 2008. Once settled on what the future of the industry and markets will be like, “we are compelled to answer the question ‘What do we do about it?’” says Weeks, who also offers some specific business strategies for providers to focus on when adjusting to meet market changes during the five-year timeframe.

Note: Spending projections in the report are based on a CPI freeze for Medicare reimbursement, but do not reflect the effect of reimbursement adjustments to FEHBP as included in the Medicare reform bill.

The Wide-Angle View

Our company research and industry forecasts indicate that the home medical equipment business will be characterized by three conditions over the next five years: growing demand, channel diversification and continued consolidation.

Growing Demand

More demand is exciting news for the industry, and a good place to start a look at what's ahead. Sales to consumers will grow from approximately $18 billion currently to $21 billion in 2008. And that's a conservative estimate because it assumes no increase in Medicare spending.

The overall average annual rate of growth will be 3 percent, but some product lines may grow as fast as 19 percent. Sales of diabetes products, for instance, are expected to increase at approximately this rate, as is the smaller category of walkers.

The following forces will drive the growth in demand:

• People are living longer. That is no surprise, but the numbers behind this factor might be. In 1980, life expectancy was 73.7; now it is 77.2 and climbing. By 2008, it will be 78.