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.
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.
Leila Meyer is a freelance writer covering a variety of industries. She can be reached via email at firstname.lastname@example.org or on the web at leilameyer.com.