You need a cost-effective home oxygen system that is profitable for you and clinically effective for patients.

With revenue for home oxygen capped and competitive bidding right around the corner, finding cost-effective methods of home oxygen delivery has never been more important for HME providers. The challenge is to balance and satisfy equally all of the various market forces (Figure 1, page 18) that affect oxygen delivery.

Physicians write prescriptions for home oxygen. They want their patients to be ambulatory and increase their quality and length of life. Active patients desire freedom to perform activities of daily living without having to wait for an oxygen delivery. They want the freedom to take their oxygen and leave on a moment’s notice to see a neighbor, visit a local shopping mall, go out to eat, or enjoy a movie at a local theater.

Of equal importance is the peace of mind of knowing they will not run out of oxygen while enjoying these activities. They depend on the skills and expertise of the HME provider to give them the proper equipment to meet their lifestyle requirements. Payor sources, however, have demonstrated that they are not as concerned with the beneficiary’s quality of life as they are with reducing their monthly expenditures. Often, the cost efficiencies of new technology are unused and misunderstood while short-term cost reductions remain in place.

Medicare pays for home oxygen under a modality neutral payment system. They require HME providers to provide home oxygen while continually reducing the payment for stationary and portable oxygen through fee reductions and competitive bidding.

Manufacturers are responding to the challenges that HME providers face with a wide array of new technologies that include improved oxygen conserving devices (OCDs), oxygen therapeutic devices, home filling of cylinders from a concentrator, longer lasting and lighter-weight liquid oxygen portable systems, and portable oxygen concentrators. All are designed to decrease the number of oxygen deliveries that HME providers are required to make to patients’ homes.

Technology Choices
Current technology allows three distinct methods of oxygen delivery:
• Two or more deliveries per month usually involves liquid oxygen but could include a concentrator with cylinders in some situations. If cylinders are being delivered twice per month, consider other methods of oxygen administration.

• One or more deliveries per month is typically for users of combination systems (oxygen concentrator and liquid oxygen stationary and portable system) or a concentrator with M6 or M9 cylinders.

• No monthly deliveries point to home-filling cylinder devices from a concentrator. One brand uses pulse technology at all times and can be used as both a stationary and portable device as long as the patient can clinically tolerate an OCD during all activities of daily living, including sleep. Proof of tolerating sleep can be demonstrated through an overnight oximetry study that proves the patient does not desaturate at night.

The number of deliveries per month is important because of the recurring cost over the entire life cycle of the patient. These costs of doing business—trucks, fuel, insurance, oxygen contents, and driver salaries—are real and escalate year after year while reimbursement drops or at best stays neutral.

In the past, many HME providers focused on the purchase price of a new oxygen delivery device. Today, savvy HME providers know that the purchase price of new equipment, while still important, is significantly less important than the monthly operational cost of servicing the patient.

Most manufacturers have reduced their purchase prices to the point where they are making marginal profits. Many have moved all or some of their manufacturing offshore to remain price competitive. More price reductions are not going to markedly help providers who seek further efficiency-based business solutions.

Figure 1. The challenge for providers is to balance and satisy the various market forces that affect oxygen delivery.

Technology Decisions
How can patients receive the “right product” for their needs and a product that is defensible to referral sources? This is important because many manufacturers are using advertising that is directed to the consumer and/or physician. This is a mixed blessing. It increases awareness of the new product by educating everyone quickly. Unfortunately, because oxygen is a prescription therapy, consumer advertising does not increase market size by identifying new users. It merely gets existing oxygen patients who are using one mode of therapy to ask physicians or HME providers about the new device.

Since for most patients a third party pays all or most of the cost for home oxygen, consumers often want the newest technology, regardless of whether it is needed or clinically appropriate. Often, this requires HME providers to purchase new equipment (sometimes after just procuring new alternative equipment for this patient) and spend time educating patients (and often physicians and/or referral sources) about why this new equipment is not right for them—or risk losing patients to competitors. In most situations, all of this occurs without payor support.

My coauthor and I have a strong bias that this product decision should be under the trained guidance of the HME provider’s credentialed respiratory therapist as directed by the physician’s order. It is our belief that the physician should write the prescription for oxygen aimed at ensuring a target clinical goal (Spo2) at rest, during exercise, and during sleep, and defer the process of product selection to the HME provider using a best-practice oxygen process.

The HME provider should select what method of oxygen delivery is appropriate for each patient. The task of matching patients with the best system to meet their needs has always been an art. We believe it can become a science, thus supporting our bias.

We have developed an empirical model that takes into account the clinical, physical, mental, and home environment of the patient along with the operational considerations of the HME provider. Only the skilled HME provider can look at all of these variables and make the appropriate recommendation for the patient. Most physicians lack the time and expertise to get into this level of detail. The model has become a valuable part of our best practices for oxygen delivery.

Within the major sections of the model are lists of “factors” that elicit questions. For example, under the physical section of the model are questions about patients’ activity level, where they go, how often, body weight, ambulation abnormalities, or if they are bed-bound. Responses to these questions, and those in the other sections, allow the respiratory therapist to complete an “objective patient evaluation.” This evaluation provides (at a glance) the potential technology that is appropriate for that patient.

Often, there is more than one method of oxygen delivery that is appropriate for that particular patient. Once this analysis has been completed, the HME provider is then ready to review the economics of one delivery system versus another.

Economic Analysis
If more than one method of oxygen delivery is clinically appropriate and effective for the patient, why would an HME provider not recommend or provide the system that is most profitable? HMEs are in business to provide quality care to patients and must stay in business to provide care for the next patient. There is nothing wrong with being profitable. Your household can not run in the red, your referral sources do not run in the red, and neither can your business.

The economic model we developed in conjunction with HMEs provides an empirical “cash-flow” analysis of each method of oxygen delivery according to your costs. Page one of the model asks you to input the reimbursement you will receive, the patient’s prescription information, and the savings ratio of the OCD that you will use. Page two asks you to provide your cost information and the number of units for all of the oxygen delivery equipment that could be provided to the patient. For convenience, this is broken down into categories: oxygen concen-trator/OCD/cylinders; liquid oxygen; combination system (oxygen concentrator and liquid oxygen stationary and portable); refillable concentrator system and dual purpose concentrator systems. ???

Page three then asks you to enter your operational costs for cylinder refills, liquid oxygen, and deliveries. The model automatically calculates the number of cylinders and deliveries required. Page four then calculates for you and compares all of the methods of oxygen delivery. This is done for the purchase of the equipment and for two types of leases.

Once you have examined the cash flow potential of providing one method of oxygen delivery versus another, then you can make an equipment recommendation for the patient. The device you provide will not always be the one that makes you the most money. Often, the equipment you provide will cost you money. When this occurs, you will have empirical data to share with referral sources or patients and payors.

Outcomes
Health care outcomes encompass three areas: cost, clinical practice, and patient satisfaction. Using our approach, we begin to address the first two areas. Further work is required to demonstrate the essential value of the HME provider. We must define key metrics and measure results.

Outcomes management provides a means for interdisciplinary collaboration between patients, payors, physicians, manufacturers, and HMEs in improving patient care. It also provides financial outcomes that show the value of interventions provided by home care organizations.

All of the methods of oxygen delivery have a place in home respiratory care. Some systems are going to be better for the patient but less profitable than others. Other systems will meet the needs of the patient and be profitable as well.

There are two keys to success. The first is to match the equipment to the clinical requirements and lifestyle of the patient—and the reimbursement climate. The HME provider’s respiratory therapist must be the gatekeeper of this process and the patient must be the centerpiece of the strategy. The second critical component is that manufacturers have to continue to respond with innovative and revolutionary technology that is clinically superior to what exists today.

Thomas J. Williams, MBA, RRT, is managing director of Strategic Dynamics, Riverside, Calif. Williams can be reached through his Web site: www.strategicdynamicsfirm.com. 

Jacquelyn M. McClure, RRT, directs the national respiratory network and orchestrates government relations for The MED Group, Lubbock, Texas.