Advances in medicine and technology, and the demographics of an aging population provide unprecedented opportunities for growth in the rehab industry. But rather than enjoying the ride, there is dissent in the air.
Over the years, the word rehab has been used to describe the mobility products and assistive technology market of the home medical equipment services industry as if it were one product segment. It is not. In fact, three distinct market segments that fall under the rehab label. And, not only do these segments not look like each other, they don't much like each other.
Standard Products
The standard rehab products market segment includes walkers, canes, crutches, standard wheelchairs and other items that are used to rehabilitate individuals who are recovering from strokes, fractured hips, knee replacement surgery or other maladies from which the individual is likely to recover — or to be rehabilitated.
From a marketing standpoint, the situation is similar to what goes on in the pharmacy business: You can treat a cold with over-the-counter remedies or antibiotics prescribed by a physician. You can buy many standard items of DME at many retailers without a doctor's prescription. Are these rehab products or durable medical equipment?
Consumer Power Products
In recent years, a new product segment has exploded in the rehab market and it is growing like wildfire. Manufacturers and a new group of “providers,” known as mass marketers, have discovered that there are people out there who can benefit from basic power wheelchairs and scooters (Medicare calls them power-operated vehicles or POVs).
The majority of the consumers in this market segment are older Americans who have some health condition that limits their ability to walk and who use the products to improve the quality of their lives. From a medical perspective, these people probably won't get any better as they age.
While improving anyone's quality of life is a laudable objective, it is not, in and of itself, rehab. The businesses that serve this market segment use phrases like consumer power or senior mobility products to differentiate themselves and serve a clientele that benefits from their presence.
Rehab Technology Products
The third market segment is served by businesses that call themselves rehab technology companies, or RTCs. They serve patients who require wheelchairs that are custom fitted, have specialized seating and, if motorized, can be made usable with a variety of alternative driver controls (chin controllers, sip-and-puff systems, etc.).
Many RTCs also provide complex technologies such as portable ventilators, environmental controls and augmentative communications devices that can be incorporated into the mobility device and make it possible for the end user to enjoy increased independence. But most of these patients have conditions that are never going to be restored and, often, will only get worse. In short, they cannot be rehabilitated.
What label do you put on the equipment that is provided to these patients, as well as the potpourri of services that are necessary to keep these products in good working order?
War of Words
There are many providers who participate in all three market segments, but, in general, those who see themselves as serving the consumer mobility market don't get along very well with the other two. The same can be said for each of the distinct segments.
Why do market segments that seem so similar to the outside world appear to be at war with each other within the industry? Understanding this phenomenon is based, in part, upon understanding the different business approaches of each market segment.
Let's start with the standard DME products group to see the differences between the three market segments. Three forces define the difference between standard rehab products and the other segments of the rehab market. First, this segment is beginning to be heavily influenced by offshore knock-offs of domestic designs that compete not on quality but on price.
Next, the entrance of big-box retailers like Wal-Mart into this market has further diminished its image as part of the medical continuum of care. Because the big-box retailers can buy in quantity, they are able to undercut the prices of traditional providers and still realize acceptable margins because their overhead is very low.
Finally, with increasing frequency, the product is secured without any involvement on the part of a traditional HME supplier (e.g.: it is bought, from a wholesale distributor, fitted and adjusted by clinic or hospital staff and sent home with the patient upon discharge). In short, standard rehab products are fast becoming a commodity that lends itself to conventional retail sales and marketing techniques.
Senior/consumer mobility products are sold and distributed by well-financed mass marketers who don't wait for the doctor to tell their patients that they need a scooter or power wheelchair — they create the demand. Slick ads in magazines, TV commercials and direct mailings tell potential consumers not only that the products will make their lives better but also that they can be obtained for little or no cost under Medicare.
Moreover, all the potential customer has to do is call a toll-free number and the operators will take it from there. If they qualify for payment, the dealer goes into the warehouse, puts a shipping label on a box and two weeks later a shiny new scooter or power wheelchair arrives at their home.
Finally, there is the “traditional re-hab provider,” whose customers come almost exclusively through referrals from physicians and therapists. A lengthy evaluation is done, which is followed by a written set of detailed specifications for a product or combination of products that will meet the patient's clinical needs.
Depending on the payer, the rehab technology company may have to prepare a bid to see if it will be awarded the sale or if the sale goes to a nearby competitor. Once the company gets the sale, it has to order the product, assemble the various parts and components, adjust it to properly fit the patient and then spend time training the patient in the unit's proper and safe use. Then the process of getting paid begins.
There are so many pitfalls along the way that the average length of time between the first visit with the patient and receiving payment is about one year. That means the provider has paid for the cost of dozens of hours put in by trained professionals, as well as thousands of dollars for the merchandise before knowing if, when, and how much it will be paid for the goods and services provided. Further, keep in mind that 60 percent of the revenue of the average RTC comes from Medicaid — arguably, the most precarious and unpredictable of payers.
Face the Music
Do you see the pattern? Traditional rehab providers are losing their low-cost, high-margin (and often cash) business such as walkers, canes and crutches to new players — the big-box retailers and facility-based providers. At the same time mass marketers are siphoning off another largely cash business — the sales of scooters and senior mobility products. That leaves the traditional RTC with the high-risk, high-cost, low-margin business of providing complex, labor-intensive products and services.
Perhaps the most significant difference between the three product segments is that the average RTC sees itself as an individualized clinical service. RTCs invest heavily in quality improvement programs such as accreditation, employee training and certification, as well as ongoing continuing education for the entire staff. They are understandably frustrated when they see standard rehab product and senior mobility segments grow and post record profits while they have to fight for every sale and wait inordinate lengths of time to be paid.
Nonetheless, let's be clear, a well-run RTC can be very successful and, over time, there is a significant return on the investment it makes in its employees. But, as one well known re-hab provider puts it; “…it ain't easy, it ain't cheap and it ain't quick, brothers and sisters!”
It is time for everyone to face the music and accept that there are three distinct rehab market segments and each of them is a legitimate business that addresses real human needs. No matter which rehab market segment or segments a company is involved in, every participant has a right to grow and prosper in a free-market society. Too much time is wasted finding fault with “those other businesses” and not enough time is spent finding ways to differentiate one's particular business from competing forces.
As in many aspects of life and business, the best way to stand out in a crowd is found in a constant search for excellence. An RTC will get its fair share of the other market segments if it has a good reputation for quality goods, professional staff and great customer service.
One of my favorite lines is, “Words drive thoughts and thoughts drive actions.” Perhaps the first step toward building peace among the three rehab market segments would be for traditional rehab technology companies to come up with a name that more accurately describes the products and services they provide because, according to Webster's, it is not rehab!
Dave Williams is the director of government relations for Invacare in Elyria, Ohio.
