Problem Solvers

Fine-Tuning Portable Oxygen

Five ways respiratory providers can cut portable O2 costs and boost sales.

• By Leila Meyer
• May 01, 2017

The portable oxygen concentrator has been a boon for long-term oxygen therapy providers and their patients. Providers no longer have the expense of delivering oxygen cylinders, and patients have more physical freedom. However, with limited Medicare reimbursements for oxygen therapy, providers may need to rethink some of their business practices to maximize their bottom line.

Encourage In-store Service

Patients use POCs to stay ambulatory, and because they’re ambulatory many have the option of coming into the store for service rather than scheduling a home visit. In-store service offers advantages for providers and patients.

On the provider’s side of the equation, it saves money when the patient visits the store for service. Jason Flanigan, general manager of OxyGo estimates that “every time you have to send a driver out for a non-revenue-creating delivery or service, it costs an average of $100 at least.” That estimate includes the driver’s time, the cost of leasing and operating the vehicle, and the cost of repairing the equipment that prompted the service call.

When patients visit the store, it saves money for the provider, and it creates an opportunity to generate new revenue through sales. While the patient is in the store, they may decide to buy a cane, a walker or an extra battery.

Coming into the store has advantages for the patient, too, whether it’s for routine maintenance, repairs or training. They can get service right away, while they’re out for a doctor’s visit or on a trip to the grocery store, rather than waiting for an in-home service visit.

Sell Field-serviceable Units

If patients can’t come into the store, a field-serviceable POC can help reduce expenses, according to Flanigan. Field-serviceable means the ability to change the battery and the sieve beds out in the field.

With this type of design, manufacturers can ship the new battery or sieve bed directly to the patient’s home, where users can swap the parts themselves. Or, if the patient brings the unit into the store, the provider can swap the parts on the spot. Either way, it saves the provider the cost of sending out a driver.

Carry Top-quality Brands

Patients may be drawn to POCs that are smaller and lighter. However, Patrick Ferry, national sales manager for Precision Medical, warns that those units may lack in durability and oxygen purity. “They may start off very well, but then after a couple of months, the oxygen purity goes down and then it’s a service call because now you have alarms going off,” he says.

Finding out which POCs are high quality requires some effort on the part of the provider. Ferry suggests finding out how each product differentiates itself in the market and what it can do for the patients themselves, as well as finding out its service and maintenance history. He says one of the best ways to find out how a product works is to try it out.

“When a new product comes out, I walk around all day with a unit on,” he explains. “I want to know how it works. I want to know what are the plusses and the minuses. Does it work for this? Does it work for that? If I increase my breath, what happens? If I slow my breath, what happens? All of these things.” That product knowledge includes understanding what is and is not covered under warranty. Getting that information requires reading the fine print, and can mean calling the manufacturer to find out exactly what is covered.

“When you have a company that will warranty everything from bumper to bumper, that really shows the confidence that that company has in their product so that you don’t have to worry about service calls,” Ferry says. “You can better analyze what your costs are going to be over the time period that you have that patient.”

Cash in on Patient Demands

While providers can reduce costs by carrying high quality POCs, they can also boost sales by carrying the brands that referral sources and patients demand. “Buyer selection is growing,” Flanigan says. “Patients are switching providers based on what equipment is available.”

Patients see TV commercials and they read print materials. They know what features they want, and are more brand aware. And because some patients have the funds to buy a POC via retail, they can buy what they want.

According to Flanigan, when a patient is spending their own money on a POC, they prefer to buy their equipment from the local dealer so they can get the local service and support. “There’s a huge market out there for that,” he notes. “And talk about a great way to supplement cash into the business by selling something they can make great margins on right in the store.”

To support those cash sales, Flanigan suggests asking the manufacturer to provide demonstration shells and signs, as well as trifold brochures for patients to take home when they’re considering a purchase.

Get Financing

Unless the provider has a lot of money, financing equipment helps prevent them from becoming cash-strapped. If a POC costs $1,200 and the provider is getting reimbursed for $35 a month from the government, it takes a long time to recoup the costs of the unit. However, if the provider finances the cost of the POC, they can avoid that large initial expenditure and amortize the cost of the unit over time.

Ferry says the financing companies in the HME market offer similar interest rates and terms. One feature to look for is a three-month skip, which lets the provider start collecting some reimbursements before payments begin.

Some providers may object to financing because they feel like they’re going to be deeper in debt. “But if they don’t do it, they’ll find out that there isn’t enough money coming in to take care of the other aspects of the business,” Ferry says. “So, their credit history starts to suffer.” And then if they get audited, they have no money coming in and they’re paying their bills out of pocket, whereas if they had a loan or a lease, they would only pay a small amount each month.

To maximize their POC business, Flanigan says providers need to have a good business strategy coupled with quality products. “Those two things right there really make up the difference in any pricing differences out in the market,” he says. Providers need to look at the total cost of ownership and they need to make sure their covered in case problems arise.

This article originally appeared in the May 2017 issue of HME Business.