The initial blast of competitive bidding does not affect the manual wheelchair market, but unwanted shrapnel will likely do damage in the form of reduced overall profits. As a result, home medical equipment providers looking to make up shortfalls in other categories may ask manufacturers to lower manual wheelchair prices. The problem is that in many cases, manufacturers have already done that.
Factor in a sputtering economy, and 2010 added up to what Tim Lis, global product development manager for wheelchairs, Invacare, characterized as a "difficult" year for providers.
"It's almost like the perfect storm has hit the industry because everybody was hit by the recession, so cash is an issue for providers," says Lis. "Then you have the cutback in Medicare reimbursement in other categories, so providers are looking to make up their lost margin in still other categories. All of this is hitting at once, and it has made it difficult for everybody."
Markets historically dislike uncertainty, but those in the HME industry may be more used to it than most.
While manual wheelchairs weren't included in Round 1 of the bidding program, the Centers for Medicare and Medicaid Services has the authority to designate whatever products it wishes (with the exception of Group 3 complex rehab power chairs, which have been excluded). Predictions are that manual wheelchairs will be included at some point.
Then there's the coding situation.
After several years of work on a badly needed revision of the manual wheelchair code set, CMS' SADMERC (Statistical Analysis DME Regional Carrier) transitioned to the PDAC (Pricing, Data Analysis and Coding Contractor) in 2008, and so did the coding revamp. Since then, the major coding project seems to be on hold, and no one is sure when it will be completed.
One bright spot for the manual wheelchair sector is the 5 percent reimbursement bump that took effect in 2009 when so many other products were facing a 9.5 percent cut.
Sidebar: Building Manual Wheelchair Sales
Another is the aging population, which remains a prime driver. As in other sectors of the HME market overall, baby boomers who are taking care of their parents — and who themselves may need such products — mean a strong demand for mobility aids will continue.
According to a recent research report, the increasingly active lifestyles of wheelchair users and wheelchairs' use in athletic events are pronounced trends in the market. Ultra-light and lightweight manual chairs are also likely to drive growth.
All things considered, Lis believes 2011 may look a lot like 2010, primarily because cash is still an issue for so many providers and, of course, the prospect of competitive bidding. With this in mind, Invacare plans to add to its Veranda product line, which features a less expensive chair.
"We are expanding our product offerings due to market pressures, reduced capital of providers and pricing pressures [on other product categories] due to competitive bidding," says Lis. "Providers are asking for a quality chair with a lower price point."
The overall market is undeniably competitive, and Lis notes that smaller competitors are facing the same issues as giant Invacare. Funding is a key challenge, he re-emphasizes.
"If customers can't get a loan from the bank to buy equipment, they can't buy it from us or our competitors," he says.
"Our competitor manufacturers are facing the same pricing pressures from providers."
Even with such conditions affecting manual wheelchairs and other product categories, Mike Serhan, executive vice president of Drive Medical, remains optimistic. Calling manual wheelchairs a "growing market," he says profits can be helped by focusing on occasionally overlooked efficiencies.
"Efficiency is not just the cost of the product, it is the cost of an invoice," explains Serhan. "We have a large breadth of product, and the typical provider can put an invoice together that would include wheelchairs, hospital beds and patient aids instead of having to cut five different invoices."
He also thinks providers are not capitalizing on the options, such as cushions, that can be put on a chair once patients have it.
"Make sure it is the right cushion, the right size, and that it fits properly with the correct accessories," he says. "There are billable accessories, and along with the cushion, the patient will be much better off for comfort and skin breakdown. We try to put out educational pieces, and some providers really understand it and do a great job."
However, Serhan says, others do not fit patients correctly, and he believes the reason comes down to the inherent difficulty of properly customizing a chair. In what he predicts will be a "game changer" for the industry, Drive hopes to ease the problem with a new option designed to maximize adjustability.
"Many times, patients really need a longer seat," Serhan explains. "Their legs are a bit longer, or they could use a back cushion, and they are pushed forward in the seat. The seat really fits them poorly, which can cause circulation issues and other problems. We are creating an 'in-the-box' option of a seat that has telescoping depth adjustment. It is coming out in our K3 series, our Cruiser, and our K4 series under the Viper line."
"Everyone that is eligible for a wheelchair is eligible for a seat cushion and a back, and that is additional money that a provider can make by billing for those items," adds Lis. "Every person that receives a wheelchair is also eligible to receive a new chair every five years. If I were a provider, I would be keeping track of those years and go back to those patients at the appropriate time."
It's All Relative
TiLite President Rick Forman says sales were good in 2010 considering the state of the national economy. He believes one of the reasons "is related to the fact that an ever-increasing number of clinicians and consumers recognize that highly-fitted and individually built products like ours have significant long-term mobility and health care benefits — primarily the reduction of upper limb injuries associated with long-term wheelchair use."
Recent results show October 2010 to January 2011 was the company's best four-month period ever, Forman says. With hope for a better economy in 2011, he's cautiously optimistic.
But Forman, too, says the optimism is "cautious" largely due to the still unknown collateral damage that could be wrought by competitive bidding.
"Competitive bidding will absolutely have a negative effect on the market," states Forman. "Initially, this will only indirectly affect TiLite, because our products were not bid in the first round. However, we expect that competitive bidding will tend to cause the supplier network to consolidate, which will threaten the financial stability of some of our customers."
Along with providers, Forman says it is the end users who will suffer.
"Ultimately, it will result in reduced consumer choice, as dealers close or can no longer accept Medicare, or make fewer products available to Medicare beneficiaries. This is a shortsighted approach," he continues, "because as consumers are forced into lower-quality products, their functional outcomes will significantly decrease, which in turn will result in increased medical expenditures for consumers and for Medicare."
Forman also fears that Medicare's "in the home" policy may be extended to Medicaid programs, a move that could lead budget-busted states to reduce costs by cutting services to patients.
"These cuts will have immediate and long-term effects," he explains. "In the short term, wheelchair users' independence is threatened and reduced as they are forced into heavier, lesser-quality products. In the long term, independence may be further impaired as more wheelchair users develop upper limb injuries at younger ages, which will result in increased medical expenses, accelerating the transition to more expensive power wheelchairs."
Michael Schleipfer, ATP, vice president of operations at Alternative Care Providers, North Chelmsford, Mass., sees the consequences of poorly fitted wheelchairs all too often, and he fears it will only get worse as time goes on. Even though complex rehab will not be part of competitive bidding, Schleipfer says a lot of problems can be created by chairs that are not deemed "complex."
"When people spend a lot of time in the K1s and K2s, we still see a lot of problems when someone does not get the right cushion," says Schleipfer. "In the past, we have given people an upgrade in cushion and accepted lower compensation to avoid problems.
"We can't do that anymore because the profit margins that we made in the past — on canes, walkers, commodes, crutches and hospital beds — are not there anymore. As you reduce profit margins across the board, these preventative extras will not be there because of large reimbursement reductions on the DME side."
It's not all doom and gloom, however, with Forman reporting that in recent months he has seen more suppliers recognize the value of convincing Medicare and private insurance customers to upgrade to K0009-coded products.
"This cash component to the sale dramatically impacts the gross margin that suppliers can achieve," says Forman. "And, of course, the customer is provided with a better product, which should make all concerned feel good about this selling approach."
At TiLite, higher demand for rigid chairs continues to outshine the company's folding chairs, he says. Forman sees this as a positive development, since rigid chairs are lighter, easier to push, more maneuverable/responsive and require fewer repairs than folding chairs on average.
Opportunity Is Out There
Despite the challenges, Drive's Serhan puts himself firmly in the optimist's camp, believing that opportunity is out there for those who truly appreciate the manual wheelchair market and its impact.
"Providers don't really understand the true opportunity that being good in wheelchairs can bring to them in the way of patient quality of life, which means more referrals and reimbursement," Serhan says.
"When they get a referral for a wheelchair, it is almost taken for granted. Don't just throw any old K1 out there. Understand the patient's needs, bill for what is allowed, make money and make patients happy. Dig a little deeper and cultivate a program where you have the ability to discuss patient needs with physicians and referral sources."
Experts Interviewed
- Alison Cherney, president, Cherney & Assoc., Brentwood, Tenn.
- Rick Forman, president and chief legal officer, TiLite, Kennewick, Wash.
- Tim Lis, global product development manager, wheelchairs, Invacare Corp., Elyria, Ohio
- Michael Schleipfer, ATP, vice president of operations, Alternative Care Providers, North Chelmsford, Mass.
- Mike Serhan, executive vice president, Drive Medical Design & Manufacturing, Port Washington, N.Y.
