In the face of the looming specters of rate freezes and competitive bidding, finding cost-effective solutions for oxygen delivery becomes more important than ever in maintaining viable margins.

“Basically, Medicare pays a flat rate for delivering oxygen and they expect everything to be included in that rate, all the necessary items,” says Jim Reeves, purchasing manager at Roberts Home Medical in Germantown, Md. “The only variable is the liter flow of the patient.”

However, while Medicare may view most oxygen patients as the same, providers must consider multiple factors in determining the most appropriate solution for each patient, Reeves says.

“The variables include the patient’s condition, the liter flow, how close they are to your company, and the number of patients you have in the area,” he says.

Travel Time
One of the biggest expenses involved in providing oxygen service is, of course, delivery costs. “I’ve seen a range of numbers related to the costs of delivery, ranging from $55 to $85 per oxygen bottle,” says Richard Westlake, CEO of Independence/ HomeHealthWares in Providence, RI. “It depends on how efficiently a delivery is routed, how well it’s coordinated, and whether it’s rural or urban. There are a lot of variables.”

Although different dealers have different delivery costs, likely all would agree that keeping those costs under control is of prime importance. But how to best do that is often up for debate.

“If a patient is within 15 or 20 miles of my location here, I’ll use a regulator concentrator and we’ll just deliver cylinders,” says Robert Litsey, owner of Sunshine Medical in Palatka, Fla. “Once patients get outside of a 20-mile radius, we’ll use an oxygen concentrator that allows them to fill their own tanks. Economically, it just doesn’t pay to make a 50-mile round trip for a small cylinder once a week.”

A delivery schedule also may depend on how active a patient is, Reeves says. “For a patient who’s basically bed-bound and needs constant oxygen, the ideal would be a concentrator in the house and visits maybe once every 3 months,” he says. “As the patient becomes more ambulatory, you factor in portability. If they’re ambulatory for just a few hours a week, a small portable cylinder or a couple of cylinders would be most cost-effective. You’d drop off more cylinders maybe once every couple of weeks. As patients get more ambulatory, you drop off more cylinders, and delivery costs rise. In recent years, we’ve tried a conserving device on their portable cylinders to deliver oxygen only when needed.”

According to Reeves, one of the most economical solutions for those who are ambulatory from 20 to 40 hours a week is a concentrator with a conserving liquid system. Liquid oxygen can offer near unlimited mobility, but its use has declined since Medicare stopped reimbursing, he says, because delivery can be very costly in comparison to a concentrator.

Individual Needs
While not everyone may agree with Reeves, the availability of different types of oxygen delivery systems lets companies make up their own minds about what will work best for them.

Take Anita Watts, owner of Pack Medical in Catlettsburg, Ky, for example. Having multiple oxygen delivery system choices allows her to limit expenses while providing appropriate technology to her customers. In many cases, she favors a concentrator system that also fills portable cylinders.

“Enabling patients to do their own refills at home cuts out a lot of our costs,” Watts says. “Our drivers don’t have to run back and forth to our patients’ homes, so we really like that. I’m looking for cost-effectiveness, but also patient need. An older patient who goes back and forth to the doctor a lot has to have the portable tanks; the tanks we’re able to utilize with these units are so lightweight and portable that they’re much easier for a patient to maneuver. A lot of patients like that.”

Patient preference may not always match your expectations, though. When Joseph Kennedy, owner of Passport Homecare Equipment in Sylvan Lake, Mich, goes to patients’ homes, he offers them the choice of a conventional concentrator with six cylinders and a self-filled concentrator. He demonstrates how the self-filling concentrator offers mobility and the opportunity to use all the oxygen they want.

“It’s a wonderful system, but it has a few drawbacks. It’s too heavy just to throw in the car if you go away for weekends a lot, so they may prefer a concentrator they can put in the car and have us deliver cylinders. If they go away only once or twice a year, we’ll loan them a travel concentrator. About half of them will take the home-filling concentrator and half will take whatever other concentrator you have.”

In addition, Kennedy finds that some of his patients do not want a home-filling concentrator because they fear they would miss the social aspect of having a delivery person come by frequently. “Some patients like people coming in once a week, because they’re glad to have the delivery man to talk to for a couple of minutes,” he says.

Occasionally this causes problems with patients using too many portable cylinders, but in these instances Kennedy and his staff simply explain to the patient or the caregiver that it is too expensive to keep filling and delivering cylinders and they must change to the home-filling system.

Reliability, Cost, and Convenience
Another important consideration, when selecting which oxygen concentrator systems to supply, is equipment reliability, Reeves says.

“Any time the concentrator breaks down, that is a costly trip you have to take,” he says.

But while reliability may be one of the main considerations for Reeves, it is less important for Litsey, who finds that durability does not vary significantly among manufacturers.

“It really comes down to price,” he says.

For Westlake, price is also a consideration, but it is not as important as having the correct features on the product. He finds that spending more initially to get oxygen concentrators with added sensors saves him money in the long run.

“If there’s an oxygen purity sensor, you can service [the concentrator] more efficiently than by routinely going out and checking its purity,” he says. “You spend a little more up front, but you save some operating costs relative to trips out. One is a capital expenditure; another is an operating expense. I favor the capital expenditure, because you know how much it’s going to be. When you talk about ongoing operating expenses, you don’t have the certainty of costs anymore because labor changes, insurance changes, gas changes, and they typically go up.”

On the other hand, Litsey prefers regular service calls. “All these patients are on 3-month rotation,” he says. “We analyze the system and make sure they are getting 90% or higher production. All these bells and whistles and you get calls at 1 or 2 o’clock in the morning that turn out to be nothing....Just make sure they have an alarm so if they lose electricity they can go on their portable tanks.”

Finally, the vendor’s ability to supply units on demand may also factor into your decision.

“[An oxygen concentrator] has to be available right away or on an as-needed basis, so the vendor has to have adequate stock and close enough distribution to get the product to us quickly,” Reeves says.

More Patients Per Mile
Another way to keep down delivery costs is to add new patients to your existing delivery routes.

“Getting more business is a matter of treating your referral sources right,” Reeves says. “In other words, make their jobs as easy as possible.”

Watts says she has a hard time getting referrals from the local hospital, which gives the majority of them to its affiliated DME company, but she has had success marketing home-filling concentrators directly to physicians.

“When physicians find out we have these units and they see on the training tapes how nice they are, we receive a lot of referrals,” Watts says. “We market our company, our business, and our products, and it’s paid off.”

Kennedy sells his local physicians on his ability to address the lifestyle needs of a particular set of patients.

“We go into doctors’ offices and say, ‘Instead of you going down your rotation list and giving us every third or fourth patient, we want to have your ambulatory patients, because we have something new for them: They can use all the oxygen they want and they can self-fill their cylinders,’” Kennedy says. “It makes sense to doctors to give us the ambulatory patients and to give the other companies patients who mostly are staying home.”

Although the future of Medicare reimbursement looks uncertain, concentrator suppliers who make the effort to keep costs down and find the most appropriate solution for each patient will have the best prospects for continuing profitability.

“I’ve been in and out of this business for 30 years, and they’re always messing with us,” Litsey says. “You just have to be flexible and go with the flow.”

Keith Bush is a contributing writer for Dealer/Provider.