Whether due to age, neuromuscular disorders, obesity or spinal cord injuries, there's no question that a growing number of consumers will continue to need power wheelchairs. The question that remains on the table, however, is how legislative and other factors might impact the market.
A difficult economy, health care reform, competitive bidding and elimination of the first-month purchase option are all ingredients in a mystery stew that providers and equipment-makers find hard to swallow. The bidding program is moving forward at a fast clip (although complex rehab has been excluded). In the contentious world of health care reform, a nix of the purchase option was included in both House and Senate proposals at press time. Any mention of funding cuts is enough to set the sector's teeth on edge.
According to Seth Johnson, vice president of government affairs for Pride Mobility Products Corp., Exeter, Pa., the Senate proposal preserves the purchase option for Group 3 and higher chairs but eliminates it for standard PWCs. The provision would front load rental payments so that 45 percent of the total would be received in the first 90 days.
But, says Johnson, “even with the front-loading of payments that still falls well short of the amount necessary to cover all the costs of providing a physician-prescribed power wheelchair.”
Based on the proposed legislation, elimination of the option would take effect in 2011, according to Johnson, and that gives the industry another year to advance an alternative.
The American Association for Homecare's Complex Rehab and Mobility Council (formerly RATC) has developed such a plan. Under the proposal, providers would have to refund Medicare the difference between the purchase amount and what would have been paid under a 13-month rental for beneficiaries whose medical need ends prior to the 13-month rental cap.
“While this alternative is not perfect, it does preserve the purchase option and provide an opportunity to manage through the change,” adds Johnson. “A straight elimination of the purchase option provides no such opportunity.”
Rapid City, S.D.-based provider Tim Pederson views elimination of the purchase option as a fundamental market changer for his business.
“One thing that is coming through crystal clear is that both houses of Congress seem very intent on removing the purchase option for Group 2,” says Pederson, CEO of WestMed Rehab and president of the Midwest Association for Medical Equipment Services. “This is a huge hurdle, and if this happens, we will be out of the Group 2 power wheelchair Medicare business.”
For one thing, the equipment is expensive, and waiting on reimbursement could severely crimp cash flow. For another, Pederson contends that power wheelchair users often put their chairs through heavy use.
“It would not take many of those individuals to either go into long-term care or die before the wheelchair is paid for, and if we even get it back it will be a pile of rubble,” says Pederson, who also serves as chairman of AAHomecare's CRMC.
“We are not in the ATV rental business. It might work for other peoples' business models, but not ours. If somebody did not qualify for a complex power wheelchair under Medicare, they would have to go somewhere else.”
In the Group 3 complex rehab sector, sales are up at WestMed. Pederson attributes the boost to greater emphasis on the category, partly spurred by faltering respiratory reimbursement. With additional budget dollars devoted to high-end power chairs, Pederson and his three ATPs can now focus more time on tough cases, whereas before they had to put them off until later.
Two Steps Back
If the option elimination ultimately becomes law, it will represent yet another setback on top of the 9.5 percent competitive bidding “compromise” cut from last year's delay of Round 1 — and on top of rebids that must be below the current allowable.
Ted Raquet, who presents educational seminars around the country, routinely gets a close-up look at the power chair market, and he concedes that elimination of the option would be damaging. However, he believes concerns about over-used chairs may not apply to many providers.
“I think initially that is a fear of many providers, but the statistical data shows a majority of consumers and beneficiaries who currently get Group 1 and Group 2 power wheelchairs — primarily Group 2 — use that power wheelchair longer than 13 months,” says Raquet, vice president of domestic sales for Pride Mobility.
“It will be interesting to see what the parameters and standards will be for reusing a power wheelchair, if it does come back after six months or 10 months. Of course, rental is capped at 13 months, and then the beneficiary owns the chair.”
Despite the familiar threat of legislative change, manufacturers characterize the current market as strong, at least when viewed in the proper context.
“Power mobility sales have been strong in light of what has occurred in our industry with the 9.5 percent reimbursement cut,” says Julie Jackson, director of Power Mobility and Seating Products for Elyria, Ohio-based Invacare Corp. “The power chair market continues to grow each year, and although the reimbursement cuts have affected this segment, there is still a growing number of consumers who need these products.”
Through it all, the overall market for power chairs is not going away, and those much-hyped baby boomers all but assure it. According to those oft-repeated census figures, the first boomers will turn 65 in 2011. Within that category lurks the bariatric sector, a demographic both Jackson and Raquet agree should not be ignored.
“We definitely anticipate that the bariatric category of power chairs will grow,” says Raquet. “One-third of U.S. adults are considered clinically obese, which adds up to more than 72 million people. Based on the overall statistics, we see a bright and growing future for the overall power chair market, both bariatric and standard.”
Mike Serhan, executive vice president of Drive Medical Design and Manufacturing, Port Washington, N.Y., agrees the market potential is there. However, he says, providers who choose passive marketing are asking for trouble.
“If you are a provider who is sitting and waiting for your power chair customer to come in, those days are gone,” says Serhan. “It's harder to get users qualified, more expensive to get users qualified, and you need to aggressively go after referral sources that see patients who are most likely going to be qualified.
“Make sure those referrals know that you exist and that you are offering a quality program that provides good products and services.”
In addition, he cautions, “If you are waiting for Medicare dollars to come in, you need to diversify. With power chairs, you are not going to see a huge growth in retail, but you are definitely going to see it on the scooter side.”
Sales Up, Profit Down?
With the aforementioned reimbursement struggles and little relief in sight, it is entirely possible that greater volume may not add to the bottom line.
“Sales are up, but profitability is a memory,” laments Georgie Blackburn, vice president of government relations for Blackburn's, Tarentum, Pa.
“With power mobility, we have a prime example of diminishing returns. The threat of rent-to-purchase payments in the future for everything except complex will seriously impact providers, driving decisions as to whether to continue to provide this product line.”
In today's power chair market, Blackburn contends that complex rehab is a tougher place than ever in which to mine profits.
“The biggest misconception about power chairs is that there is big money in them,” says Blackburn. “There might be for firms that do not provide complex rehab products, but since complex rehab is a poor sector in our business, I can only comment from our perspective.
“The second biggest misconception is that power wheelchair providers are all crooked scoundrels. And that is so far from the truth.”
In addition to perceptions of providers as “scoundrels,” government officials have inaccurate impressions of what honest providers actually do, industry advocates say. A study released in September from the Health and Human Services Office of Inspector General ignored the substantial costs of services related to providing power wheelchairs, including complex rehab.
Study Perpetuates the Myth
AAHomecare outlined the flaws in the government's “Power Wheelchairs in the Medicare Program: Supplier Acquisition Costs and Services” document dated August 2009. “This study, unfortunately, perpetuates the myth that suggests one could order a power wheelchair and have it dropped at your front door,” said Tyler Wilson, the association's president.
“The study glosses over the level of care, service and professionalism that an accredited home medical provider would furnish directly to a senior or person with a disability.”
The OIG admits as much, acknowledging, “We did not determine the cost of performing these services or other general supplier business expenses, such as billing, accreditation, staff salaries or facility maintenance.”
In a response released by AAHomecare, Pederson pointed out that the data used in the study was from 2007. “The economic reality for a rehab provider in 2009 has changed markedly since 2007,” he commented. “Reimbursement rates have dropped dramatically.
“As a result, it is becoming increasingly difficult for the rehab provider to continue to provide items and services to seniors and people with disabilities,” Pederson said. “It's also worth noting that today there are new medical policies, updated quality standards and surety bond and mandatory accreditation requirements in place that did not exist in 2007.”
Over the past five years, Congress has reduced power wheelchair pricing by a whopping 35 percent.
As documented by AAHomecare, the cuts include: elimination of inflation updates for power wheelchairs from 2004 to 2009; a 9.5 percent cut to reimbursement in the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA), which delayed the DMEPOS bidding program; an average 27 percent reimbursement cut as a result of fee schedule changes in November 2006; and an approximately 3 percent reduction to fee schedule prices in 2005.
Gary Gilberti, CEO of Baltimore-based Chesapeake Rehab Equipment, has weathered these cuts and managed to boost sales in 2009. He attributes the sales jump partially to acquisitions both in and out of his shop's geographical footprint. Still other business has been picked up from competitors getting out of Chesapeake's markets.
“We also have realized some growth from an ability to process more revenue in a shorter time frame through operational efficiency and better use of information technology,” says Gilberti, president of NCART. “We also see challenges as we try and gain back the 9.5 percent cut from last year and establish a new benefit category for complex rehab within Medicare.”
As for the foreseeable future, Gilberti is convinced that industry-wide power chair sales will remain flat, or perhaps fall off a bit.
“Some healthier companies will see increases as their less healthy competitors exit the market,” predicts Gilberti. “Overall, we should see a shift of revenue to those companies more than a loss of revenue.
“Providers who can be the most efficient and can shorten the evaluation-to-delivery time will be able to increase their revenue, or at least make up for the loss of top-line revenue through reimbursement changes. Those who can be more efficient will gain referrals by being better than their competition.”
For a link to the entire OIG study, read OIG Slams PWC Payments, Pushes Competitive Bidding.
