Last fall, as the San Antonio-based market research firm Frost & Sullivan collected data on the mobility market, the U.S. economy was spiraling downward quickly. In the wake of Sept. 11, even economic analysts were hesitant to predict the future.

Nonetheless, most in the mobility industry remained optimistic, according to Collin Tam, the consulting analyst who wrote Frost's report. Based on existing research and interviews with representatives from more than 95 percent of the nation's mobility manufacturers, Frost has predicted that the U.S. mobility market will generate more than $1 billion in annual revenue by 2008, an increase of 23.4 percent from $766 million in 2001.

Growth Hindrances in the U.S. Market for Mobility Products

Rank	Restraint	1-2 Years	3-4 Years	5-7 Years
1	Reimbursement Cuts Limit Revenue Growth	high	medium	medium
2	Funding Agencies' Efforts to Curb Manufacturers' Prices	high	medium	medium
3	Repair/Replacement Parts Market's Infringement on Wheelchair Sales	low	low	low
4	Refurbishment Market's Potential to Infringe on Wheelchair Purchases	low	low	low

Growth Drivers in the U.S. Market for Mobility Products

Rank	Driver	1-2 Years	3-4 Years	5-7 Years
1	Advance Beneficiary Notice Upgrade Provision	medium	medium	high
2	Aging Baby Boomer Population	low	medium	high
3	Concern for Caregiver Safety's Impact on Patient Lift Market	medium	medium	medium
4	Product Marketing and Customer Awareness of Products	medium	low	low
5	Increased Risk of Automobile Accidents and Related Injuries	low	low	low
6	Increased Occurrence of Sports-Related Injuries Contributes to Wheelchair Usage	low	low	low
• Source: Frost & Sullivan

That means the industry will grow steadily, at an annual rate of approximately 3.3 percent, if Frost's predictions are correct. And, hot products such as patient lifts and bariatric wheelchairs will drive that growth, the report says.

While Tam allows that “the recession probably prevented mobility companies from reaching their full growth potential in recent months,” he notes that health care industries often are immune to drastic economic shifts.

Now, two months after the report's publication, mobility market experts are more optimistic than ever.

“I think [Frost's] numbers are right on, and if anything, may be a bit low,” says Mike Serhan, vice president of Dr. K Health Care in Monrovia, Calif. Serhan noticed a brief lull in business after Sept. 11, but he attributes the lull to a general feeling of shock. “It was not because people didn't need mobility products,” he explains, “but because people who influenced purchasing decisions were in a haze.”

The MED Group's director of the national rehab network, W.B. Mick, agrees that Frost may have underestimated the mobility market's potential. “Both of my parents will be hitting Medicare age within the next six years,” he says, noting that millions of baby boomers will do the same this decade.

“I think there's potential that [Frost's estimate] might be a little bit low. Revenue growth probably will be more like 5 or 5.5 percent [per year],” he adds.

WHAT'S DRIVING GROWTH?

While Frost ranks the aging baby boomer population among the top factors driving revenue growth in the mobility market, some in the industry are surprised to discover that the report lists Medicare's Advance Beneficiary Notice upgrade provision as the No. 1 market driver, followed by:

• The aging baby-boomer population;
• Increasing concern for caregivers' safety;
• Successful product marketing and customers' consequent awareness of available products;
• Increasing number of automobile accident-related injuries; and
• Increasing number of sports-related injuries.

A long-awaited amendment to Medicare's reimbursement policy for durable medical equipment, the ABN upgrade provision allows beneficiaries to choose an item that is more expensive than what Medicare will reimburse, and pay the difference out-of-pocket.

Despite this provision's potential, “I don't know if I would put it at No. 1 on the list [of revenue drivers],” Mick says. “I would say the baby boomers are No. 1.”

For the short term, however, Frost's list of revenue drivers makes sense, according to Mick and Serhan.

However, looking further ahead, these industry experts predict that fundamental changes in the ways we look at the mobility industry will drive growth most significantly.

Mick says lobbying efforts to clarify Medicare's definition of “in home” — as the term applies to beneficiaries receiving Part B equipment — could change the face of reimbursement dramatically. Currently, Medicare interprets “in home” as meaning “[beneficiaries] confined to the home,” but the term should mean only that these beneficiaries reside in the home, Mick explains.

“I would assume that during the next few years, funding and approvals will start to be based on lifestyle and not on confining somebody to the home,” he says. “There are a lot of folks who don't have access to power equipment today because they don't need it in the home. But they do need it to go to church, to go to the doctor and to go grocery shopping.”

On the marketing side of the mobility business, retail sales are the wave of the future, Serhan says.

“There are two types of business in this industry: third-party payer business and retail,” he explains. “I think retail is going to be the largest growth market very quickly. What we try to do is create retail [products] with color and pizzazz, so grandma says, ‘I drive a Lexus, and I just had hip replacement surgery, but don't give me the gray ugly thing. Give me something that's pretty.’”

WHAT'S HINDERING GROWTH?

Not surprisingly, reimbursement cuts top Frost's list of mobility market hindrances, followed by:

• Funding agencies' efforts to curb manufacturers' prices;
• Repairs/replacement parts market's potential to infringe on wheelchair sales; and
• Refurbishment market's potential to infringe on wheelchair purchases.

However, blaming reimbursement cuts for many of the market's cash-flow problems oversimplifies the issue, Mick and Serhan say.

The biggest problem is not reimbursement, but the time it takes to be reimbursed, Mick says.

And, it doesn't help that manufacturers have discontinued, or tightened the parameters for, leasing and finance programs, to avoid losing money when providers go bankrupt, he says.

“I don't know of any rehab companies that have gone out of business because of a lack of [demand for their products],” Mick continues. “It's always because there is a cash-flow issue. The problem is that the added burden of paperwork doesn't let you bill for equipment in a timely manner.”

Additionally, while increased reimbursement certainly would help providers, Serhan says, there is no guarantee that more government money would help manufacturers.

“Just because reimbursements are higher doesn't mean the manufacturers are getting more for their products,” he explains.

Some providers are looking only to boost the bottom line, and those providers are likely to buy the cheapest equipment to increase profit margins, no matter what the reimbursement level, Serhan continues. “Hope fully, the better dealers are going to say, ‘Look, I'm getting more money now, let me buy something that's more high-quality.’”

And, while Mick concedes that repair programs usually are not profitable for providers, he does not agree with Frost that the repair and replacement parts industries will hinder the mobility market's growth. “I don't see these markets cutting into new sales,” he says. “But there are some movements afoot to improve reimbursements for repairs — to pay not only for wrench-turning time, but also for the additional burdens of paperwork, setup and drive time.”

With better reimbursement for these services, the repairs and replacement parts industries potentially could help, not hinder, the mobility market, Serhan adds. “If you have the right type of dealer who knows how to take care of a product, it ultimately costs him and third-party payers a lot less to maintain the product.”

IS THE MARKET YOUNG, MIDDLE-AGED OR MATURE?

Before interviewing manufacturers, Frost collects information from many secondary sources, including online databases and previous studies, Tam says. The company then places this data into a spreadsheet and applies a special formula — based on the market's maturity profile — to the data to generate revenue predictions.

For its mobility report, Frost divided the mobility market into four sectors — patient lifts, power wheelchairs, scooters and manual wheelchairs — and assigned each of these sectors a maturity profile. These labels tell Frost whether the sector is approaching the height of, is in the height of or has passed the height of its growth potential.

Frost categorized the patient-lifts sector as being in the “early growth” stage, the power wheelchairs and scooters sectors as being in the “late growth” stage, and the manual wheelchairs sector as being in the “mature” stage. Correspondingly, Frost found that the patient-lifts sector grew the most rapidly in 2001, at a rate of approximately 14 percent. Power wheelchairs grew at a rate of approximately 7 percent, scooters grew at a rate of approximately 2.5 percent and manual wheelchairs grew at a rate of approximately 1 percent, the report says.

“I would agree that patient lifts are in the early growth stage, because of the recent emphasis on caregivers,” Mick says. “And I agree that scooters and power chairs are further along the growth pattern, but I don't think they're at the top of the growth curve yet.”

To support his assertion, Mick points the growing “youth movement” among people with disabilities and the elderly. “When I was a kid, 70 was very old,” he says. “Today, I know a lot of people in their 70s who are still working like crazy.” And, this trend is likely to increase, as Medicare begins to reconsider the definition of ‘in home,’” he adds.

Additionally, while standard manual wheelchairs may have reached maturity, lightweight, maneuverable, durable manual wheelchairs may be only in the early stages of growth, Mick contends.

ARE PROVIDERS ESSENTIAL?

One of Frost's conclusions is that mobility manufacturers need a network of dealers — with specific knowledge of reimbursement issues — dedicated to selling mobility products.

On this point, everyone agrees.

“Any manufacturers [who are selling and handling reimbursement] themselves really are doing themselves a disservice,” Serhan says. “I think that dealers are a must — and they have to be educated.”

Reimbursement simply is too much for a manufacturer to handle, Mick says. “You're dealing with Medicare's four [durable medical equipment regional carriers], 50 Medicaid programs and twice that in private funding sources,” he explains. “I think any profits manufacturers [handling selling and reimbursement] in-house might make would inevitably be spent on educating employees on reimbursement issues.”