2018 HME Business Handbook: Oxygen

How To Optimize Portable Oxygen Business Efficiency

How respiratory providers offering portable oxygen services can maximize their efficiency gains.

Both in terms of business and care, portable oxygen solutions, such as portable oxygen concentrators (POCs) offer considerable advantages over tank delivery.

From a clinical perspective, POCs give patients far more mobility and independence, allowing them to get out and live their lives. That increase ambulation results in improved long-term oxygen therapy and better outcomes.

From a business operations perspective, portable oxygen’s value proposition has been that, while the devices might cost more up front, they will save providers far more money on the back end, by helping them transition to a low- or no-delivery model. Moreover, from a sales and marketing perspective, that improved clinical care will resonate with referring physicians and other key healthcare partners, which should drive more business for providers.

As providers that offer tank delivery calculate a true cost analysis of what a delivery-oriented business costs them over the long-haul versus a POC-based business, the need to take the portable oxygen plunge becomes obvious. In a declining reimbursement environment, those ongoing costs are starting to create an unsustainable business model. Moreover, providers have to “bake in” the lost opportunity costs because the business is focused on tanks as opposed to getting new referrals and retail customers.

Once providers commit to portable oxygen, how can those providers ensure that they are making the most of the opportunity?

TAP INTO THE RETAIL MARKET

Providers of portable oxygen systems must look beyond the funded market. Medicare and some private payer are clearly important, but the retail market for portable oxygen cannot be ignored — particularly the online market. Type “portable oxygen concentrator” into Google. The results will show a thriving marketplace — a marketplace that most providers currently do not serve.

Retail is a massive lost opportunity to providers, and more important, it is where customers go when providers don’t give them what they want. This is particularly true of the Baby Boom.

The massive demand for POCs and similar devices should clearly demonstrate that there is a huge population of underserved patients looking for — and buying — those types of systems. Moreover, even if some of those online buyers are already receiving tanks, that should make providers wonder two things: how much wasted cost is built into the business, and on how much retail or funded revenue did they fail to capitalize?

Obviously, selling on a retail basis can be difficult for Medicare providers. They need to have new business infrastructure, they must adhere to a number of legal requirements under Medicare, and the guidelines can sometimes be confusing. Moreover, many providers interested in retail will set up entirely separate businesses in order to serve a retail customer base (and even then there are specific Medicare guidelines regarding referrals between the two businesses, and similar issues) that providers must contend with.

However, between the 36-month rental cap, competitive bidding, and audits, it’s clear providers are no stranger to complication. They can work with the right legal experts to outline a retail portable oxygen business with workflows that conform to regulation.

OFFER 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. Factoring in driver’s time, the cost of leasing and operating the vehicle, and the cost of repairing the equipment that prompted the service call, sending a truck to fix a POC can get expensive.

Also, when patients visit the store, 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.

FINANCE THE EQUIPMENT

The best way to get past the up-front costs of portable oxygen is to negate them entirely. Unless the provider has a lot of money, financing equipment helps prevent them from becoming cash-strapped. If a POC costs, say, $1,000 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, it can avoid that large initial expenditure and amortize the cost of the unit over time.

So, financing is an option, and the financing companies serving providers 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 might object to financing because they feel like they’re going to be deeper in debt, but they need to consider that through financing they are freeing up cash flow that can address other aspects of the business. And then if a provider were to get audited, it would have no money coming in and would have to pay bills out of pocket.

FOSTER FIELD SERVICE

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.

POINTS TO REMEMBER:

  • Portable oxygen offers a number of benefits, both in terms of care and operational costs.
  • Providers that are reticent to pursue portable oxygen need to do a comprehensive cost analysis of their tank-delivery business.
  • The retail market for portable oxygen is huge and providers should pursue it, but must comply with Medicare’s regulations.
  • Offer in-store service and offer field-serviceable units to help cut down on costly technician visits.
  • Financing the purchase of portable devices will help free up cash flow.

LEARN MORE:

To learn more about how to take advantage of portable oxygen solutions and improve your business effectiveness, visit our Oxygen Solutions Center at hme-business.com/microsites/oxygen.

This article originally appeared in the June 2018 issue of HME Business.

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