It has been five years since the Balanced Budget Act of 1997 made its dramatic impact on the reimbursement structure for home oxygen delivery. The smoke has cleared, and a strong trend has emerged from the ashes: Manufacturers are developing products that enhance consumers' quality of life while increasing providers' revenues.

“The really good home care companies that have a keen business sense are starting to feel fairly comfortable in understanding the market's reimbursement issues,” says Jeri Eiserman, director of marketing for Hudson RCI.

“With every passing year, things stabilize, and some of the fears about what was going to happen to oxygen reimbursement are getting quelled a bit.”

Maybe this is why the respiratory market is experiencing increased product innovation. For manufacturers of oxygen delivery products, the impetus for research and development is two-fold, according to Roger Briese, biomedical engineering manager for Caire. “One focus is reducing the number of deliveries for the home care provider [by designing] products that make the operation more efficient, and the other focus is on lighter, more patient-focused ambulatory products, such as smaller, longer-lasting units,” he says.

An Active Market

Today's oxygen users are more active and less likely to stay at home for extended lengths of time, compared to the oxygen patients of the past, experts say. Patients' interest in traveling and participation in local recreational events has created the need for oxygen delivery devices that are portable, long-lasting and easy-to-operate. “The key for manufacturers is to design units that are user-friendly and [universally] compatible,” says Tom Bannon, vice president of sales and marketing for Victor Medical.

Weight, duration and ease-of-use are the features that will revolutionize the portable oxygen market, industry representatives say. Manufacturers are seeking to meet consumers' needs while positively affecting HME providers' bottom lines.

Softening the Blow

During the past few years, HME providers have learned to survive under Medicare's reimbursement structure for oxygen, but the effect of reimbursement cuts on this service-oriented segment of the industry — and on manufacturers' motivation to develop technology-based solutions — still is a primary concern. “Because of the reimbursement issues, we have seen a lot of attention [focused on] finding ways to deliver oxygen in the most cost-effective manner,” Eiserman says. “I think we are going to continue to see that.”

This prediction is common among manufacturers of oxygen-related products. “The main challenge is providing products that give better patient outcomes at continually lower costs,” says Thomas Jones, president and chief executive officer of Chad Therapeutics. “Medicare reimbursement cuts and competitive bidding proposals make offering high-quality products that will still favorably affect the bottom line even more crucial.”

Mitch Barton, director of respiratory marketing for Invacare, says products that enable providers to offer the “same or better” level of service while decreasing delivery costs are the answer to the industry's reimbursement woes. “The companies that have survived in respiratory have had to become smarter and improve their own business models,” he says. “They have recognized that the service component is a very large part of their expenses.”

Tim Clark, executive director of global sales and marketing for Precision Medical, says that is why conservers are an important product for oxygen providers to consider. “Conservers actually reduce the number of deliveries — the most expensive issue for providers — which will actually reduce the cost in the long run and make the oxygen business more profitable.”

Another crucial detail, Bannon says, is ensuring that the products providers rent and sell are reliable. “Providing products that enhance customer satisfaction yet lower the service level is the overall goal for providers,” he says. “They have to deliver a product that they know is going to work.”

Reimbursement for stationary oxygen is barely adequate, and many see reimbursement for portable units as truly inadequate. “The biggest problem in oxygen reimbursement today is the [lack of] recognition of the cost of ambulation,” says Joseph Priest, president and chief operating officer of AirSep.

“Reimbursement sources are missing the fact that there is a huge cost associated with the more-ambulatory patients and [these patients'] demands on the system.”

The $35 to $40 monthly reimbursable amount is insufficient to cover the cost of active patients who use portable systems, Priest continues.

Will the respiratory industry see continued reductions in oxygen reimbursement? Most likely, it will, Jones says. “While we would like to think otherwise, continued reimbursement reductions seem likely, which will put an even greater squeeze on home care providers,” he explains.

The good news, however, is that manufacturers are continuing to introduce new technologies. “We expect to see new and innovative technology take on a greater role in the marketplace, especially [products] with potentially great cost savings,” Jones says.

Private Pay … In the Oxygen Market?

Participants in the home medical equipment industry have attended seminars and read numerous articles about the benefits of retail-oriented marketing. Retail makes sense for scooters, sports therapy products and lift chairs, but is the oxygen market ready for cash sales? Yes, says Joseph Priest, president and chief operating officer of AirSep.

For example, AirSep's new portable concentrator fits well into a private-pay market and can be sold or rented by providers who, in turn, can offer customers training and service, according to Priest. “We don't think this is a standard oxygen supply product — we think it can be an extra revenue-generating product for the provider,” he says. “It can be rented or purchased outside of the normal reimbursement scheme.”

So perhaps consumers with disposable incomes will-as they did with ambulatory aids, wheelchairs and beds — desire more than what third-party payers traditionally allow for oxygen sources.

Products on the Go

Freedom-enhancing products are a primary focus for manufacturers of oxygen therapy products, according to Roger Briese, biomedical engineering manager for Caire.

Recent product introductions, including conservers, regulators, portable cylinders, portable concentrators and home transferring devices, promise to provide mobile users with the security and peace of mind they need to enjoy life without being concerned about their oxygen supply.

Some of the latest products to hit the market include:

• AirSep's LifeStyle portable oxygen concentrator, which produces its own supply of therapeutic oxygen continuously and can be powered by AC household electricity, a DC automobile adapter or through a rechargeable battery pack, the company says;
• Invacare's HomeFill II, which now has a coupling device designed to be easier to use, Invacare says;
• Luxfer's new composite cylinder, which is about half the weight of a comparable aluminum product, according to the company;
• Precision Medical's oxygen conserving device, which uses a pneumatic operation and can predict tank duration, Precision explains; and
• Victor Medical's universal regulator, which can become a conserver, the company says, with the flip a switch.

COPD: A Continuing Epidemic

Chronic obstructive pulmonary disease, which includes chronic bronchitis and emphysema associated with airflow obstruction, is the fourth leading cause of death in the United States for people ages 65 to 84, and is the fifth leading cause of death for people ages 45 to 64, and 85 and older, according to the Web site www.ibreathe.com.

Although an estimated 16 million Americans have been diagnosed with COPD, it is likely that an additional 14 million or more COPD cases are undiagnosed, ibreathe explains. Thus, the true prevalence of COPD in the United States may be as high as 30 to 35 million cases.

According to the National Heart, Lung and Blood Institute, other COPD facts include:

• The annual cost to treat Americans with COPD in 2000 was approximately $30.4 billion, including $14.7 billion in direct expenditures for medical services, $6.5 billion in indirect morbidity costs and $9.2 billion in costs related to premature mortality.
• In 1997, COPD accounted for 13.4 million office visits to doctors and 634,000 hospitalizations.
• COPD is expected to be the third leading cause of death by 2020.

Experts Interviewed

Tom Bannon, vice president of sales and marketing, Victor Medical, St. Louis; Mitch Barton, director of respiratory marketing, Invacare, Elyria, Ohio; Roger Briese, biomedical engineering manager, Caire, Burnsville, Minn.; Tim Clark, executive director of global sales and marketing, Precision Medical, Northampton, Pa.; Rob DuPuis, market manager for medical cylinders, Luxfer Medical, Riverside, Calif.; Jeri Eiserman, director of marketing, Hudson RCI, Temecula, Calif.; Thomas Jones, president and chief executive officer, Chad Therapeutics, Chatsworth, Calif.; and Joseph Priest, president and chief operating officer, AirSep, Buffalo, N.Y.