Taking Portable Oxygen To the Next Level
Portable oxygen can revolutionize respiratory providers' businesses, but there's no room for half measures. We talk to experts to see how HMEs can hit new heights.
- By Joseph Duffy
- Mar 01, 2018
THREE KEY PORTABLE OXYGEN OUTCOMES ARE READILY ACCEPTED BY THE HME INDUSTRY: Portable oxygen drastically cuts overhead costs for providers, delivers increased ambulation and independence for users, but it requires a full effort to succeed.
Portable oxygen offers many benefits to providers and patients, but do providers need to stop all oxygen deliveries tomorrow? Nick Jacobs, senior director of respiratory for Invacare Corp. said he doesn’t think so. That said, should they start the transition right away? Absolutely.
“One of my favorite quotes is from retired U.S. Army General Erik Shinseki, who said, ‘If you don’t like change, you’re going to like irrelevance even less.’ That describes where we’re at today with delivery models,” Jacobs says.
There are two reasons why providers generally fail when transitioning to a non-delivery model, he said. The first reason is a lack of enforcement from senior leadership. There are people who will resist change, especially when jobs are potentially at risk. Jacobs says delivery drivers are a good example of this.
“Senior leadership must set the tone that the change is non-negotiable, and everyone needs to be on board,” he explains. “The second reason stems from inadequate patient education. Without proper training, providers will get calls from frustrated and upset patients who cannot get their equipment to work the way they need it to. The providers that have failed to make the transition have said enough is enough, I’m going back to what I’m comfortable with.”
Portable oxygen in the U.S. market has undergone some significant changes over the last decade. With the seemingly unending reimbursement cuts, caps and competitive bidding, providers and manufacturers have sought out new ways to reduce the cost of the equipment and service.
Picking the Right Approach
“Implementing a non-delivery model can cut monthly service costs by 40 percent to 60 percent, depending on how many deliveries are made,” says Jim Clement, North American general manager for GCE Healthcare. “Transfill systems provided a very good option to reduce delivery cost in the drive to non-delivery business models; however, the more recent trend is to use POCs. POCs provide the patient with essentially constant supply without the need to refill the cylinders, so long as they have battery or external power. Patients prefer the flexibility and freedom offered by POCs.”
Ambulatory patients have better outcomes because “objects in motion stay in motion,” says Victoria Marquard-Schultz, Esq., managing director of OxyGo, so the key is to find a portable oxygen modality that fits the patient’s needs and can also be cost effective.
“Portable tanks used to be the main event — but with reimbursement cuts, the delivery associated with those is too high to be sustainable for most providers who take Medicare patients,” she adds.
“The popularity of the POC market has certainly increased over the last five years, and probably more over the last two,” says provider Anthony LaCute, president of Seeley Medical. “In my view, the popularity has been driven by the manufacturers, patients, dealers and referral sources. We think of POCs purely as an opportunity to reduce overhead costs, but it has nothing to do with the marginal monthly increase in revenue. It also has allowed us to significantly grow all major lines of our business without hiring new service technicians. This is a result of far fewer stops for tank deliveries.”
POCs do cost more up front, but providers must have an understanding of their operational costs over time to evaluate the overall expense when comparing a POC model to that of stationary and tanks, according to David Lyman, RRT, vice president of respiratory for VGM & Associates. Providers should consider that the model of stationary and tanks encompasses more than the expense of delivering tanks to patients’ homes. The tanks need to be filled and require hydrostatic testing and cleaning — these all add costs to delivery of the product.
“Over time, POCs do cut cost,” he emphasizes. “For example, say it cost $50 per tank to deliver oxygen. You deliver 24 times to a patient in one year, resulting in overhead costs of $1,200 per year. When comparing that scenario to the cost of an average POC model, you would have a return on investment after about 12 months on a POC model. Years two and three, based on Medicare’s 36-month cap, are profit. That’s not the case if you are delivering tanks. Yes, you have some cost if the batteries need to be replaced in the POC or it needs repairs, but you also have repair costs in a stationary and tank model.”
Having an understanding of your current patient base and the true overhead cost to deliver services will help determine if a POC model is right for your business, Lyman says. Cash flow is very tight for many companies; however, if you choose to enter the POC market, there are options to finance, which helps to offset the initial cost of the POC.
“Portable oxygen has definitely increased in popularity and more and more patients seem to be willing to pay out of pocket for their devices,” says George Coppola, director of marketing of CAIRE Inc. “For homecare providers, we have seen a shift with where they have turned their attention to address their fleet inventory and its much-needed conversion to a non-delivery model.
“With the recent cuts in reimbursement, homecare providers are looking to get every penny out of every transaction,” he continues. “An oxygen non-delivery model eliminates service costs for homecare providers and puts them in position to thrive in the low reimbursement era. Manufacturers, including CAIRE, all have designed products and crafted programs designed to make this possible for homecare providers. A good option is bundling a portable and stationary oxygen concentrator and it is often more affordable than many realize. Providers are encouraged to talk to their manufacturers sales representatives about these bundling options, and have a discussion to establish the cost of ownership. There are also plenty of leasing programs available through manufacturers that let homecare providers get the monthly payment they need to maximize their cash flow.”
“Successful providers keep the patient at the forefront and provide them with equipment that meets their lifestyle,” Jacobs adds. “POCs are complex medical devices and some patients may just feel more comfortable with a simpler solution. Successful providers balance clinical considerations and patient preference with the economic realities of the business.”
Portable Oxygen Pro-Tips
There is much to consider when growing a probable oxygen business. As mentioned earlier, experts agree that a well thought out strategy is necessary to navigate its many moving parts. Lyman offered these key tips to help in formulating a blueprint to success:
- Know your true overhead costs.
- Create a profitability calculator so you know your exact ROI.
- Take advantage of manufacturers’ willingness to offer finance options.
- Make sure you have respiratory therapists on staff so they can appropriately titrate the patients to make sure the POC will saturate the patient to what the physician ordered.
- Explore multiple POCs. Not all POCs will work on all patients. It is good to have a few different POCs to accommodate your patient population.
- You must make sure that you cut your overhead expense.
- Do not be afraid to sell extra batteries for cash. An AOB will be needed if you bill the POC.
- Let referral sources know that you have a POC program.
For Marquad-Schultz, it’s all about keeping it easy for the patient.
“Patients benefit via improvements in quality of life and lower morbidity from mobility from a POC the most when they use it the most,” she says. “That means you need capacity in terms of milliliters per minute (mls) coupled with compact size and weight so they wear or carry the POC. Basically, two categories are available to patients today: less than 3 pounds in a 1 to 3 lpm equivalent pulse dose and less than 5 pounds in a 1 to 5 lpm equivalent pulse dose POC and with at least 600 mls in 3 pounds or less and 1,000 mls or more in 5 pounds are the most popular. Patients should be able to use up a 25 foot or 7.62 meter supply tubing and cannula, which is a common length for a stationary concentrator giving the patient plenty of room to move around.”
Marquad-Schultz adds that patient-removable batteries make it easy to swap out batteries while traveling and replaceable sieve beds make it easier to service units right in the store.
“No removable batteries or sieve beds require the unit to be returned to the factory for service and the patient having to use a loaner POC,” she explains. “This is problematic when the patient is traveling, which is a key benefit of using a POC.”
Finally, patients and caregivers need a POC that has straightforward easy-to-understand controls, indicators, and alerts.
Clement agrees with the earlier suggestion to always evaluate the patient’s clinical and lifestyle need when selecting a portable system.
“Each patient is unique,” he says. “So consider potential changes in patients’ disease state. The device meets their needs today may not meet their needs in the near future.”
He adds that providers should opt for a device that can be serviced locally. POCs are mechanical devices and all POCs will require service at some point. If the service can be carried out on-site, you can provide better patient service and keep service costs down.
Finally, consider the added value of remote device management and connected technology to help lower costs while maintaining patient contact and potential proactive care.
Coppola suggests partnering with a manufacturer that will ensure the following:
• Compatibility — Working together effectively as a team will help identify any problems and will lead to a better outcome for all. It is important for both the homecare company and manufacturer to recognize the unique individual needs of each partner up front. If the partners are not familiar with each other and do not fully understand each other’s goals then neither party will get what they want out of the partnership. Take the time to sit with your manufacturer’s representative and have these discussions before you jump into a partnership.
• Communication — Establishing and maintaining effective communication is imperative. This will not only foster the relationship, but it also will lead to better outcomes. Do not just create a program with a manufacturer, and ‘set it and forget it.’ This almost never works. Be sure to establish a regular meeting cadence and use this formula to share ideas of what is working and what is not for continuous improvements. An effective partnership is impossible without effective communication.
• Commitment — In the book, “Marketing Services: Competing Through Quality,” authors Leonard L. Berry and A. Parasuraman state that ‘relationships are built on the foundation of mutual commitment.’ They are right! Ensure that your manufacturer partner is committed to your success and return the favor.
From here, Coppola says that providers review their current and future marketing plans and look to improve the following:
• Print advertisements — Co-branding print ads have proven to be a successful way for the manufacturer to help the provider promote their products. Today’s print opportunities are endless: direct mail, brochures, newspaper and magazine ads, flyers and more. Many manufacturers have print ads ready to go or can be resized quickly for when that local advertising representative calls you.
• Digital — Whether you have hired a digital expert, firm, or are handling it yourself, consider partnering with your manufacturer on exploring digital advertising opportunities that could increase your frequency and reach. Your level of investment could leverage the opportunity to put your messaging in front of visitors on high-traffic sites.
• Social media — According to Pew Research Center, 69 percent of the public uses some type of social media. Active and engaged audiences are not only using the platforms to share news with their friends and family, but they are utilizing these tools to research health information and solutions to their disability or chronic conditions. Making an investment in time in increasing your messaging on social media could prove invaluable in your customers learning about new products available and for the manufacturer the opportunity to put the spotlight on you as being a valued partner.
• Website — Are you keeping visitors on your page and are they acting on your call to actions? The No. 1 thing I see these days is the need to update product photos and metatags, HTML code that can enable your content to pull up in Internet search engines. Reach out to your manufacturer to get the photos and content you need to keep your site updated and relevant. Too many times providers have old products on their websites and in their Facebook ads. Freshening up imagery can create interest and favorably impact visitors to your site. Also, don’t forget to link to product videos or commercials if they are available. Video also plays a vital role in today’s digital marketing; the more education you can provide to your customer base the better engagement you will have.
• Programs — Finally, if you are a distributor selling to providers, reach out to the manufacturer to help you sell to your customers. I want to highlight the recent launch of the CAIRE O2 Discharge Program. This program was created by our team as a comprehensive sales package that seeks to offer our distributors turnkey solutions to selling our Eclipse 5 portable oxygen concentrator as the answer to hospital discharge program. Not only are there patient education materials in this packet, but also important reference sheets for the provider that can be used at the oxygen set-up. In addition, to really quantify the program’s effectiveness and savings we provide surveys for both the provider and patient to track usability and expenses. Over time, taking this important step will help the provider evaluate their current discharge expenses and the value of savings of partnering with a manufacturer with a product that can eliminate after hours calls and additional delivery routes.
Jacobs advises that providers must ask — and answer — many critical questions when converting to a non-delivery model:
• What’s the approach to conversion? Is it only new patients or will existing patients be converted, too? How quickly this can be done will vary by the patient base, how urgent the business need is, and the resources available to convert patients.
• What’s the right ambulatory modality – refilling system or POC? This will largely be dependent on the patient’s prescription and lifestyle.
• How do you finance the equipment needed for non-delivery? Finance programs offered by manufacturers can help facilitate this transition. Payments can often be structured to ensure the provider remains cash flow positive throughout the term of the loan.
“Organizational support from the top down is critical,” he said. “Leadership needs to be clear with everyone about why change is needed, what it’s going to take to get from point A to B, and what the benefits of non-delivery are for the providers and patients. Town hall meetings are a great forum for this. It seems elementary, but it is absolutely critical and not everyone does it well.”
It’s also important to address job security concerns, he adds.
“Delivery drivers, for example, might question the future of their jobs if the company is moving away from the delivery model,” Jacobs says. “This isn’t always the case, as some providers have been able to expand their service area now that their delivery drivers have more time for setups.”
As far as patient education, it is important to first understand the patient’s lifestyle and needs.
“If the patient is highly ambulatory, he or she may need an extra POC battery or larger cylinders if using a refilling system,” Jacobs explains. “Once the necessary equipment is provided, it is important that the delivery drivers demonstrate how to properly use the equipment, and then have the patient demonstrate back to them how to use it. This will help confirm whether or not they truly understand how to use it.
“Equipment manufacturers will often provide quick reference guides that can be left behind with patients for further education, as well,” he ads. “These are helpful tools in the event patients run into problems. Frequent follow up with the patient is necessary to ensure the equipment meets their needs and they’re not having any issues.”
Finally, for LaCute, it is imperative to understand your patient base.
“For anyone considering getting more involved in the POC market, first understand your current portable patient base and work associated with it,” he says. “I would determine the following: What is the average patient tank usage monthly? How many stops per month does the population receive? How many tanks per month do they receive on average? And what percentage of your tech stops are for tank-related actions?
“Once you have this info, evaluate the POC market,” LaCute advises. “There are a variety of options now that fit the need. Cost can vary widely but it is coming down while reliability continues to improve. Lastly, empower your intake staff and service techs to determine which patients get what. We use a series of questions that help guide staff to the right option. Factors include liter flow, patient activity level away from home, home environment and patient hygiene among other things.”
Once implemented, it is very important to monitor results, LaCute emphasizes. If unchecked, a staff will generally go for the POC before using other options.
“Each month we look at the portable oxygen setups and determine what percent received tanks, POCs or a transfill system,” he says. “I am a firm believer that all three options are the way to go. In today’s environment, you must determine who gets what, not your sales reps, not your patients and not your doctors. If you stick to you guns, your ROI will improve in your portable oxygen population.”
This article originally appeared in the March 2018 issue of HME Business.