By now, CPAP providers are chomping at the bit for a chance to embrace the full potential of the resupply business. Many know there is money to be made, but an equal number soon find out it is not easy money.
Most insurances reimburse two to four masks per year, and copayments are relatively minor — so how tough can it be? Sporadic phone calls, disorganized databases and inefficient shipping are just three elements that can complicate what seems like a straightforward mission to replace aging equipment such as CPAP masks.
Officials from major manufacturers such as San Diego-based ResMed have taken notice of the growing resupply phenomenon, but they, too, recognize the limitations. "Clearly there are some players that see resupply as an opportunity to backfill the loss in revenues they have seen at the DME level," says Donald Darkin, ResMed senior vice president. "It's not that some of them don't want to do it, it's that they are not prepared to do it yet."
At Somerset, Pa.-based DeVilbiss Healthcare, Mike Marcinek, vice president of sales and marketing, sleep solutions, agrees that while many providers understand the importance of resupply, they soon realize it takes considerable resources to provide the desired level of service. "The best advice to our partners is to start exploring the options that are available in the marketplace," Marcinek says, noting DeVilbiss' new keystone services such as Adhere and Replenish protocols. "We were listening to our provider partners and developed these unique services to match the customer's needs," he says.
Almost 90 percent of all CPAP patients at Progressive Medical, a thriving home care business in Carlsbad, Calif., become part of the provider's resupply program. Helen Kent, RRT, CEO of Progressive Medical, uses Brightree software to track when supplies are due. "All we have to do is populate it when the patient is initially set up," says Kent, who has been called the "grandmother" of sleep.
Sounds easy, but Kent's success is hard won through trial and error. Other providers are increasingly relying on outside help, and companies such as Atlanta-based PAP Supply are springing up to fill the need. Started in 2009 by home care provider Andy Simmons Sr., the relatively new venture relies on a database management system to help with follow-up, order processing, shipping and additional compliance calls.
As founder of Cornerstone Medical with eight locations throughout the Southeast, Simmons honed the system on the 3,000 patients served by his HME company. "PAP Supply takes the burden off the home care company," says Simmons. "They don't have to have the staff for this process, which can be cumbersome and require a lot of people. We enable companies to keep patients in compliance and create a revenue source that they might not have had due to insufficient time to manage the process."
Calling after hours and on weekends is a critical aspect of Simmons' offerings because a lot of patients are working 8 to 5, and daytime calls can be fruitless. "All of our calls are live operators, because that is the most effective way to ensure that patients get the service they need," adds Simmons. "People don't want to talk to a machine. If you want to inform someone you can do that by voice recorder or in writing, but if you want to influence someone you must have a conversation."
Jeremy Stolz, program director for VGM Fulfillment, recognized the need to help member companies back in April 2009. About 75 companies now take advantage of the resupply help, and many of these VGM members particularly rely on the Waterloo, Iowa-based organization for aid with shipping. Within the resupply program, shipping labels reflect the provider's return address, and provider logos can be added to the packing slips. Patients are notified via email when items are shipped so they can track the package. "The goal is to make it appear as though the package is coming from the provider," Stolz notes. "It's really expensive for people to try to do this on their own," says Stolz. "They don't take all the pieces into consideration — such as warehouse space, freight, employee costs, insurance, utilities, packaging and equipment. Based on volume, we can do this cheaper than almost anybody."
Market Fundamentals Are There
Assessing other aspects of the sleep market, for those unfortunate enough to be ensnared in the tentacles of Round 1.2 of competitive bidding, bid prices went into effect just this month. Few believe these prices will be sustainable. Time will tell, and the final chapter may ultimately be written by the so-called losers.
"There are plenty of theories saying that winners of the bid are in bigger trouble than losers of the bid," says Darkin. "We are in a watch-and-wait mode, and I can easily see this lasting for at least another 12 months. The fundamentals of the market, however, are still there."
Several locations within Simmons' Cornerstone Medical are involved in Round 2 of the controversial federal program, and he is grudgingly preparing for the bid. Despite the uncertainty, the veteran of more than 20 years in the home care business is confident that creative ways can be found to keep participating in the sleep market.
"We haven't given up hope on getting competitive bidding changed between now and then," says Simmons. "There is still an opportunity in the sleep business, and a lot of companies are putting together subcontracting arrangements. It still provides an opportunity for companies to have a replenishment program. If they don't get a bid, then they are going to move toward non-Medicare business. More and more patients have insurance instead of Medicare because it's a younger population base."
Taking care of non-Medicare patients is nothing new for Progressive Medical's Kent, who always aims for compliance rates that please both private and public funding sources. Just as the manufacturers are educating PCPs, Kent educates patients with zeal and know-how.
"We all talk about compliance, but you cannot have compliance if patients are not on effective therapy," says Kent. "You cannot have compliance without the right mask. How do you know if it is the right mask? You must download patient results from their machine and look for leaks."
Not everyone continues on CPAP, but those that do represent the long-term future of the market. For Kent, no analysis of the market can be complete without a realization that the sleep industry's overall health depends on an unwavering commitment to each patient. "That patient you are putting on therapy is a lifelong patient," she says. "That is money coming down the road. It is not instant gratification, but it is bound to keep coming. From a business perspective, if you think of patients as $1,000 a year in supplies — before competitive bidding — you would be crazy not to follow them."
Manufacturers Still Smiling
Darkin characterizes 2010 as an "up" year that continued ResMed's streak of 63 consecutive quarters of growth. The company released its new Quattro FX full-face mask in the United States early this month, so patients will soon have the opportunity to experience what company officials characterize as a less obtrusive and more acceptable mask. Offering a clear field of vision with no forehead support, the design brings together new frame and cushion technologies to create an alternative support system. "It is almost identical in size to a large nasal mask," says Darkin.
"Overall," he continues, "we consider ourselves a lot more nimble and maneuverable in today's changing market. Everyone else is doing well, and that is healthy … clearly the organic growth is still there."
At DeVilbiss, 2010 ended with "strong and growing" PAP and mask sales, says Marcinek, who attributes the positive results to market acceptance of the company's IntelliPAP line. "We are seeing increased pull through of our mask and interface line," he says, "specifically the EasyFit nasal and full face masks."
Sales figures and demographic projections continue to give manufacturers reasons to smile. Maura Weis, director of sleep marketing North America for Philips Respironics, is optimistic that better business practices — partially fueled by technology — can preserve the viability of the sleep market.
"Enhancements to our System One sleep therapy platform, coupled with our Internet-based patient management system, EncoreAnywhere, and our wireless modems for monitoring, have been well received," says Weis. "In the last decade, we've gone from looking at data on the machine to a Web-based system where the device stays in the patient's home, and information is bidirectionally transferred daily for easy access and intervention anytime and anywhere by the entire care team.
"We are entering a new era in sleep therapy," adds Weis. "Technology is enabling a high level of care, while also helping to streamline business operations that benefit the clinician/patient relationship and contribute to long-term compliance."
Earlier this month, Philips announced its acquisition of Pittsburgh-based MedSage Technologies, which offers a voice and email application that providers can use to interact with patients. As part of the Sleep business within Philips Home Healthccare Solutions, the addition gives the company a web-based program that HME companies can use to manage ongoing compliance and supply replenishment for OSA patients, as well as those with diabetes, respiratory and other conditions.
Says Philips Healthcare CEO Steve Rusckowski, "We believe the need to manage chronic diseases by an aging population, coupled with health economics, will continue to drive a greater need for health care delivery at home."
