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.”
Prospects for Growth
There are other causes for optimism, too, such as the oft-cited impending retirement of 78 million baby boomers.
“You have a much more mobile population that's not going to want to give that up,” Sullivan says. “I'm one of the baby boomers, and certainly I'm going to do everything in my power to stay active. It won't bother me if I have to go to a power chair; I'll still do something. Just the sheer number still is probably the most positive aspect for the marketplace.”
Adds Jacono, “Consumers are not declining. People need these devices, and those that find a way to produce and provide them will sustain a good and worthy business.” She notes companies are finding ways to improve profitability to survive in the world of declining reimbursements.
Growth in the market is still good, says Leisure-Lift's Kramer, but by segment. “The overall rapid growth of consumer power has certainly slowed, but niche markets, like in bariatrics, will continue to remain strong, with a variety of funding sources available.”
Kramer also has an optimistic view of the future: “No matter what happens with Medicare, two things are certain — the segment of the U.S. population that is obese continues to grow, and the baby boomer generation is entering the age group where these products will be required, especially when you consider how that group will insist on staying mobile into their later years.”
Kramer says he sees a lot of growth in bariatrics still to come. “Weight-appropriate units to span the complex Medicare coding systems and meet the needs of those patients” are innovations he identifies.
Roberta Jacobs, national sales manager for Gendron, which offers only bariatric chairs, also sees growth in that segment. “Obesity is considered an epidemic, and as this disease state continues to grow, there will be a need for power bariatric wheelchairs,” she says.
Adds Brandeis, “The market's not going to die, let's put it that way. With 70 million baby boomers on the horizon, they're going to need product. It's just going to be the way they're able to get it.” He also notes that he retail side of the business has really begun to grow.
Says Serhan, "I think the future is bright — it's just understanding which market to be in to go after. Is it going to be Medicare, retail, or a combination of the two? I think if you choose to be just specific towards Medicare K0823, it's going to be a difficult road."
Watching the TrendsPortability is one area of development in which manufacturers are striving for innovation.
“We're trying to put a kind of pull-apart power chair into a retail-type box, similar to what's been done with the scooter market for a long time,” Brandeis says. “The problem for years was that a power chair was more for a patient who really was totally incapacitated, and today that's not exactly true. There was a stigma to power chairs. Now that stigma's slowly going away, and power chairs are becoming more portable.
“We're going to see a lot more of that in coming years in the retail market for power chairs,” Brandeis continues. “More companies are going to start to make smaller-scaled chairs because that's going to help increase their sales.”
Yolanda Contreras, sales and marketing coordinator for IMC-Heartway, says her company is looking toward making chairs that consumers can use both for medical and recreational purposes.
“I think that's the trend now; people are just trying to get something out there that can be used both ways,” she says.
PWC pricing in some segments is also getting an overhaul.
After the K0823 code came along, according to Drive's Serhan, manufacturers had to “build the best product we could but priced efficiently. The good thing is that, based on the reimbursements, manufacturers had to go back to the drawing board to figure out a chair that really would work for this market.”
K0823, Serhan continues, suddenly encompasses a very dynamic range of chairs, and it appears both manufacturers and suppliers are gravitating toward the most competitively priced product in that code. “If you have a higher-end product in that code, you do have providers that are only looking for that higher-end item … but more and more are going toward the lower-priced side of things.”
For that reason, he says, “products that give the most value right now are selling very well, and products that bring value and options are probably a little softer in sales — the ones that would basically cost a little more but are in the same code, same reimbursement.”
Sullivan of Invacare points out that complex rehab is still a growing market segment “because those are the people in the most critical need and there really haven't been any cures out there for anything yet.”
Overall, he says, technologies for longer battery life or lighter batteries “are still very expensive,” so manufacturers are trying to focus on keeping those costs down. Invacare is “still continuing to innovate a lot, especially on the electronics side,” Sullivan says.
“We've even introduced some new power chair bases that are better than their predecessors but a little bit lighter, a little bit more responsive, less costly to manufacture. We [have] just had to be smarter in our designs, which is always good.”
Jacono notes that “the considerations for rehab seating and tilt for Group 2 and the possibility of cash options through the ABN are interesting aspects of the market to watch.”
Being the Best You Can Be
According to Sullivan, the best providers of power wheelchairs are those that are “investing in their processes and their systems” and that “understand their costs from the moment the phone rings to the moment they get paid.” These companies have invested in infrastructure as far as computer systems and programs to help them do business more efficiently.
“These are people that are starting to run their businesses very professionally,” Sullivan says. “They make sure they know where the waste is — they're not focused just on acquisition cost. They're finding better ways to communicate with their customers, better ways to order with their manufacturers. Those are the ones I see starting to do a really nice job and winning. They've mapped it. They know it each step of the way.”
They also do a good job of educating their referral sources, he adds.
“That's probably the other key item. They work with their referral sources to help them understand what the reimbursement challenges are so together they can solve them … They're very involved in making sure the clinicians understand what's needed to get their clients in the proper equipment.”
Such efforts go a long way toward making sure a claim doesn't ultimately get rejected.
“Nothing will irritate your referral source more than if the claim gets rejected and your client can't get the chair for four months,” Sullivan notes.
Committed providers “are just very connected with the end-users, the physical trainers, the doctors, and they are very, very detailed in what they do and obviously very driven,” agrees Contreras. “They have just followed the changes since the beginning, and they haven't fallen back.”
Jacono of Sunrise says PWC provivder standouts “have bersified in their product segments and consumer types, as well as understood the value of total cost to their business.”
According to Leisure-Lift's Kramer, the best providers not only do “an especially excellent and detailed job of fitting the customer, they have taken considerable time and effort to master the art of coding the product properly to see that they (and therefore the patient) get properly reimbursed.”
Merits' Brandeis says some providers are increasing their PWC business with advertising. Moreover, “the Internet accounts are really blossoming,” he says, although he adds “it's not to everybody's liking because in many cases they give the store away and then there's no service.”
Drive's Serhan says the best power wheelchair providers “are out there, whether it's through liaisons, advertising or whatever it is. They're getting the word out that they carry these products, whether it's direct to the patient, or to the OTs/Pts. They're marketing themselves.”
In the Medicare market, there has been a void in suppliers that are willing to provide those products, says Serhan. “There are facilities throughout the U.S. that see spinal cord injuries or hip replacements or geriatrics who may have mobility issues, and providers that have chosen to stick with power have done well going after those referral sources where there's a vacuum that's been created with people pulling out of the market.”
On the other end of the spectrum, he says, “the amount of power that we can sell for a Web supplier is really increasing.”
Advises Jacono, “Dealer salespeople will need to add to their list of clinical skills the ability to sell. Consumers are struggling with the limitations of the new funding, but they have to be made aware of what their funding provides. If this does not suit all of their needs, then they should be given the option of paying for those options that they desire.
“We forget that there are many aspects of products and service that consumers may perceive to be real value, and they need to be given the choice.”
According to Kramer, providers must “know their customer and the sources that their customers use to locate the things they need. There are doctors who deal specifically with bariatric patients. Dealers should let them know the products they have and the services they offer their customers as well as offer in-services to show how the products they distribute will help the clinician's customers.”
Brandeis also believes providers need to become better educated about power itself, in terms of what it can do and who it can help. He says more training is a necessity, as well as a better understanding of product features and benefits and the patient's requirements for power.
“It doesn't necessarily mean it's a chair,” he says. A scooter or a folding power chair “might be more conducive to that patient's needs. It just seems that because of code changes and the amount of money that they're getting back, they're looking to get the biggest bang for their buck as opposed to helping the patient out, so they need a lot more education in that area.”
“Anybody can sell a product, but you have to be able to stay profitable doing it,” notes Invacare's Sullivan. “I think those providers that better understand their entire chain costs and really know their businesses from A-to-Z are going to sell more products. First of all, they're going to be around longer, and secondly, their service is going to be better.”
Bumps in the RoadOverall, says Sullivan, the market may go through a couple more rough years, but then things should start to stabilize. Strong survivors will likely emerge that can maintain a good business without having to give up service. Once that happens, “I think you will really start to see that market grow again,” he says.
Coupled with strong demographics, that could mean providers of power wheelchairs have some sun in their forecast.
Meanwhile, the battles will continue in 2008. Though the rehab carve-out didn't happen last year, it does seem progress was made.
“The industry educated many members [of Congress] and their staff regarding complex rehab and, in most instances, members agreed that complex rehab should be carved out of competitive bidding,” says Rita Hostak, president of the National Coalition for Assistive and Rehab Technology and vice president of government relations, Sunrise Medical. At this point, she says, “it is unclear whether there will be Medicare legislation [in 2008] that would serve as a potential vehicle to attach the rehab carve-out provision.”
But the industry must continue to fight to get those products excluded from the program, Hostak notes, as “the impact on consumers is potentially too damaging.”
Experts Interviewed:Les Brandeis, director of sales, Merits Health Products, Cape Coral, Fla.; Yolanda Contreras, sales and marketing coordinator, IMC-Heartway, Fort Meyers, Fla.; Rita Hostak, president of the National Coalition for Assistive and Rehab Technology and vice president of government relations, Sunrise Medical, Longmont, Colo.; Roberta Jacobs, national sales manager, Gendron, Bryan, Ohio; Julie Jacono, vice president, global power products, Sunrise Medical, Longmont, Colo.; DuWayne Kramer, president, Leisure-Lift, Kansas City, Kan.; Mike Serhan, executive vice president, Drive Medical, Port Washington, N.Y.; and Mark Sullivan, vice president of rehab, Invacare, Elyria, Ohio.
