At least for the short term, it appears that HME has escaped additional cuts from Congress.

The good news for manufacturers and providers of power wheelchairs is that they enter 2008 without further reduced reimbursements and with the first-month purchase option intact. The bad news is that industry attempts to get legislation passed that would alleviate the effects of competitive bidding have so far been unsuccessful, including getting complex rehab and assistive technology exempted from the program.

What will this year bring? Certainly a continuation of 2007's battles and challenges. But despite the uncertainty, most manufacturers seem confident that the market will eventually stabilize, and that strong providers will survive its changes.

It's Been a Tough Year

For manufacturers and providers of power wheelchairs, the biggest problem may simply be not knowing what's going to happen.

“It's been a down year in power, and it's all due to everybody being unsure of where the market's going to go because of competitive bidding and all of the changes that they keep putting on us,” sums up Les Brandeis, director of sales for Merits Health Products.

DuWayne Kramer, president of Leisure-Lift, shares that sentiment. The market is “still in kind of a state of uproar,” he says, “with providers not knowing exactly what CMS will do next. They are reviewing their business to see what's most effective and most profitable.”

Another big problem for providers is documentation requirements. In 2006, CMS' issued a new power mobility rule that replaced the power mobility CMN with a face-to-face exam and a doctor's prescription. Under new documentation requirements, providers are responsible for gathering patient records that prove medical necessity for the equipment.

“It's very difficult to get all of the documentation required from the physicians,” says Mark Sullivan, vice president of rehab for Invacare. Physicians are resistant, he says. “They just don't like it. They just want to write a prescription and be done, so a provider has to keep going back to get [what they need], and even if you get as much as you're going to get it doesn't make you feel comfortable in terms of a post-payment audit.”

Meanwhile, the ramifications of other policy changes are becoming evident in individual PWC product categories, notes Julie Jacono, vice-president, global power products for Sunrise Medical. “As I believe CMS intended, Groups 2, 3 and 4 are fast becoming filled with code-specific products,” she says. “The days of having a single chair fit the funding and client needs of a wide range of consumers are over, and the cases that still exist are only creating issues with correctly applying rehab products into the state Medicaids.”

While Group 2 is still dominated by van seat models, she says, the category is opening up to the benefits of performing true seating evaluations for age-related consumers. “This will, in the end, help those consumers that truly could have benefited from a positioning back pressure relieving cushion or power tilt,” she says. In Groups 3 and 4, “products are dividing into mid- and high-end specific products that allow the complexity of the technology to better fit the clinical needs of the consumer.”

Jacono sees problems on the horizon for Group 4 community use technologies. “There are some rehab consumers that, due to their circumstances, need community mobility, whether or not their funding considers it medically appropriate,” she says. “These consumers may end up in bases that fit the Group 3 specifications but will not fit the lifestyle needs of the consumer. This will lead to service issues and repair costs as the entry level Group 3 chair is used in a heavy fashion.”

Stakeholders are concerned that new technology development will decrease for powered mobility, says Jacono. “We may be entering a period in which technology innovation will shift away from product and focus on the rest of the value chain, [such as] ways to cut costs in product and the delivery chain, and a focus on durability to stem the post-purchase costs. While this may be the right action, it will make for many boring Medtrades to come.”

Still a Lot of Speculation

As for the ultimate effects of competitive bidding on the power wheelchair market, manufacturers can only speculate.

“Given the state of competitive bidding at the moment, it is hard to tell,” says Kramer. “Complex rehab and specialty devices like bariatrics will never fit the ‘one-size fits-all’ model.”

Jacono anticipates that if competitive bidding is applied to Group 2 “it will further alter the level of choice and performance of products sold into that category as providers try to cover the documentation, regulatory and geography considerations in an area. These dealers will shift business from generating leads and marketing their products to servicing a captured market.”

She foresees a “much more devastating effect” if the program is applied to Group 3, where today's reimbursement levels already make it difficult to cover costs. “If further cut, the products will have to dramatically change to allow for services to be rendered.”

Invacare's Sullivan notes that lowered Medicare rates impact other payers, like managed care organizations and Medicaid. “We're starting to hear a lot of problems with some of the managed care payers,” he says. “So above and beyond competitive bidding, which is a problem in itself, you wind up with everybody else starting from those lower allowables. I think that will impact market growth.”

However, manufacturers also anticipate some positive results from competitive bidding. Sullivan says it will force the market to become more professional. “That's a real plus for us,” he says. “I think the strong will survive, the people that really have invested in their businesses and invested in their people.”

Merits' Brandeis has a similar view. “The basic advantage to [competitive bidding] will be that we know, once it's finalized, that we will have strong dealers in those areas that will probably stay in business for a long, long time.”

Those providers that are “focused on doing well in that arena will be able to do well,” agrees Mike Serhan, executive vice-president for Drive Medical. “With the lower reimbursements, they're going to have to decide where to bring in the product, where they can service the product, or both, and still make money. In general, efficiency in competitive bidding is going to be key to survival, so the providers that understand that are going to do well.”

The situation can also present unique opportunities, Serhan says. When things are down, it can actually be a good time to grow a business.

“If you find the right niche in a down market, it's usually a pretty strong niche,” he says. “Folks that are going after that and have given themselves the opportunity to understand it better [are] finding there's less in the way of competition than in the past, so those folks are doing OK.”