Not long ago, oxygen providers could rent out equipment for as long as patients needed it. But since the Deficit Reduction Act of 2005 placed a 36-month cap on rentals, oxygen providers have been forced to take a harder look at the bottom line. Portable oxygen concentrators (POCs) may give providers the means to reduce expenses while giving patients better quality of life.

POCs offer active patients several advantages. When attached to a cart, the system resembles a small piece of roll-on luggage, and batteries give patients between 3 and 4.4 hours of use away from a wall outlet. The units have been approved for use on airplanes, and patients can even plug them into a car's accessory outlet when driving. For many oxygen patients, the appeal of the portable concentrator is not having to worry about running out of oxygen while they are away from home.

"People love that part about it," says Kurt Filiault, president and CEO of Keene Medical Products, Lebanon, NH, an HME provider with 10 locations in New Hampshire and Vermont. "They're no longer living under constraints, worrying, 'I have so much time left before I have to get back or go home.' "

ELIMINATING STOPS

Early models of POCs had higher failure rates, which understandably scared providers away. But improvements in reliability make these systems worth a second look.

While patients enjoy being able to travel longer distances than with traditional models, these tankless units also reduce the need for deliveries and repair stops for providers.

For Randy Freeman, president of Mediwell Inc, Fort Worth, Tex, these savings more than make up for the cost of the unit. "Now we're being forced to look at our costs, and we're being forced to look at them very hard," he says. "The thing that most dealers are not realizing is the cheapest-priced modality is not necessarily the cheapest to service."

Since incorporating POCs, Freeman has decreased the number of service calls for replacing tanks and trouble-shooting conservers. His oxygen refill costs have fallen significantly. "The savings are quite substantial," he says. "Now we can focus on some of the finer points of our business because we saved a lot of money every month."

Reducing deliveries also works out well for patients who have portable units. "The people who get them are so busy, you can barely catch them at home," Freeman says.

Filiault, who says that it costs his company $55 to pull into a driveway, agrees that cutting stops is key to higher profit margins. In his newest location in St Johnsbury, Vt, Filiault plans to set up a routeless model for the 53 oxygen patients the branch serves. "Instead of putting a guy on the road and [his] making 15 or 20 stops a day delivering portables, now he'll be doing only five or six stops a day—doing new setups or terminating the equipment from existing setups," he says.

Both Keene Medical Products and Mediwell also offer transfilling systems, which have contributed to better efficiency as well. However, these systems incorporate several parts—concentrators, transfilling units, and extra tanks—while a POC is just one unit. "The reason that I prefer a POC over a transfilling-type system is because fewer things can go wrong with it," Freeman says. "When you're dealing with those three pieces of equipment, you have a greater percentage of error. Somehow the patient might drop the tank and break the conserver."

Kurt Filiault

For POC users, Freeman provides a backup tank just in case something goes wrong. "We've found that most of the patients aren't really using those backup tanks unless there's an electricity problem," he says. He also finds that most issues that arise are minor and usually can be addressed over the phone. "It simplifies your diagnosing process when patients are having a problem with their equipment," he says. This translates to tangible savings for providers. "This modality actually allows you to recoup your initial investment within a year, and that's my objective," Freeman says.

SPREADING THE WORD

While both Freeman and Filiault have tested different brands of POCs, they predominantly use the Eclipse unit from San Diego-based SeQual Technologies because it does not rely on pulse technology. "The coolest thing about it is you're not asking the patient to tolerate a conserving device," Filiault says. "They can have a continuous flow on a portable or a stationary, so it's almost a seamless transition from a traditional portable to a portable concentrator."

To get the word out to consumers, Filiault advertises on TV and in print, and he has been happy with the results. "We've done extremely well with obtaining new clients who were formerly being serviced by competitors," he says. "This year alone, we've taken 70 clients from competitors by using this technology."

Filiault also holds in-services at physician's offices and has been particularly successful presenting the unit to 10 to 25 patients at a time at pulmonary rehab clinics. "They all want it the second they see it," he says. "At the same time that I'm showing it to patients, I'm showing it to referrals in this environment, and that's helped very much."

Although Freeman extensively advertised when he first incorporated transfilling systems, he has not advertised the POCs at all. "The machine has sold itself," he says. "Referral sources understand it will make their patients' lives easier."

This year alone, Freeman has seen a 25% increase in his oxygen business, which can be partially attributed to his early adoption of POCs before the national competitors do. "Usually, national companies are very bureaucratic," he says. "Small dealers can react faster to the market, and that is why small HME dealers have been so successful."

ACQUIRING UNITS TAKES TIME

When it comes to cutting costs, offering POCs to customers is only the first step—the real savings depend on how you redirect your resources into the rest of your business. "In order to save that $55 per stop, you have to make some changes," Filiault says. "You have to be able to reduce your labor or apply your labor to other places [where] you're looking to grow your business."

This also means keeping pace with the growth patterns of your company. For example, if your patient base is growing, you may still need to hire staff, even if you have reduced the number of deliveries needed. "We are on over a 20% growth rate," Filiault says. "The thought process [with POC] is that I'm not adding techs at the rate I would be in order to keep my growth pattern."

Keene Medical Products serves approximately 2,600 oxygen patients, so buying enough units at once to cover this volume would be impossible. Instead, Filiault gradually has been acquiring transfilling systems and POCs. He currently owns 250 Eclipse units and close to 400 transfilling systems. "We've tried to buy them within our own cash flow," he says. "The only kind of leases that we've entertained to get us into this technology are the 0% leases some of the manufacturers offer."

To maintain the desired profit margins, Filiault bought the units in small batches and offered them to clients based on their portability needs, starting with those who used more than 12 tanks per week. Gradually, he offered them to patients who used more than six per week, then to those who used four. This allowed the company to reduce its most frequent delivery stops first.

While this is a gradual process, it means that the company is able to maintain its desired profit margins. "It's going to take us a little longer to get where we want to go, but we will be able to afford to get it to where we want to go, too," Filiault says. "You certainly can't go out and buy or lease 2,000 of these and still expect the same return-on-investment scenario."

As providers introduce POCs into their businesses, they should certainly not discount the usefulness of more traditional systems. "There are clients for any modality out there, including the standard stationary oxygen with portables, for people who just don't use that much portability," Filiault says.

Still, Filiault believes that POCs offer his company the best return on investment. "I've talked to a variety of people who probably won't agree, but for us, we've said that it had the best return-on-investment scenario out of all the different modalities," says Filiault, citing the unit's user-friendliness, reliability, and price as contributing factors.

As with any new modality, incorporating POCs requires providers to be savvy about the market and the ever-changing HME climate. "You have to be willing to manipulate your operations, which we all do almost every day now anyway just to keep up with the changes—or better yet, stay ahead of the changes," Filiault says. "The independents who are left are the people who have been quite good at that."

Ann H. Carlson is a contributing writer for HME Today.