With all of its difficulties, oxygen is still the core of most home care businesses. Increasing profitability requires two basic business principles—smart growth strategies and cost reduction. In spite of the day-to-day challenges of running a home care business, it is important to periodically step away and look at business fundamentals to see where you can realize greater efficiencies. That means looking at ways to reduce costs and finding where you can grow to increase revenues.

While reimbursement uncertainty is nothing new, the oxygen patient base is changing. The change presents an opportunity for providers who understand the best way to manage their business in the face of change. You are servicing younger, more ambulatory patients who are more educated. Baby Boomer-aged children are more involved in their parents' care. Patients search for solutions and information via the Internet, and a growing number have the means and are willing to purchase technologies that are not reimbursable.

Beyond being a changing patient base, it is also a growing one. According to multiple sources, the home oxygen population is expected to almost double from the more than 1 million today to well over 2 million by 2012. And, while there is a growing awareness of COPD, US government statistics cite approximately 15 million undiagnosed patients.

Before looking at ways to more profitably service your home oxygen patients, explore ways to grow your business in general. First, look beyond your existing home oxygen business to additional areas of opportunity. For example, if you are not in the sleep therapy market, it is one you should consider due to its fast growth and the rising awareness of obstructive sleep apnea (OSA). As with oxygen, there is a large segment of undiagnosed patients. However, unlike oxygen users, OSA patients tend to be younger, so they can be introduced to your business and become customers before they need other services as they age.

Another area that many smaller, independent providers do not offer is home NIV (noninvasive ventilation). For those that do, there is opportunity to become a local resource for this service. Items to consider include proper respiratory staff training and stringent documentation to receive proper reimbursement.

You can also grow by looking beyond Medicare to managed care providers. This strategy has worked well for some providers, depending on the managed care group policies in their area. In addition to service reimbursement levels, look to factors such as payment turnaround times, which may sway you to or from pursuing managed care contracts.

Hospices, skilled nursing facilities, and VA contracts are other potential sources for new business. Some providers who have been successful in the hospice area have turned to formularies to specify services and equipment, and have used a central point of contact to adhere to agreed-upon services. Skilled nursing facilities are a growing area requiring respiratory services. VA contracts may also be an attractive opportunity. Check your local situation to assess whether this fits in with your business goals.

RETAIL/CASH

While most home care providers offer a retail location, not everyone makes that operation as profitable as possible. Employ best practices such as displaying items out of the box and offering choice—but not so much choice that it overwhelms the customer. Have adequately trained staff and educational material available and create a warm, welcoming environment.

There are several additional strategies for growing the home oxygen portion of your business. With up to 50% of home oxygen patients traveling out of their home area at least one time per year, the portable oxygen concentrator (POC) rental and cash sale business is growing. Since many airlines now permit POCs on planes, many providers offer these units as a service to patients who are traveling. It benefits providers since a POC can quickly pay for itself through rental revenue.

For patients, POCs provide freedom, while eliminating the fear of running out of oxygen. POCs have also become a strong cash sale opportunity as a growing number of patients or their caregivers are willing to purchase them out-of-pocket since their small size, light weight, suitability for air travel, and ability to generate oxygen as long as there is power are attractive.

INTERNAL RESOURCES

Another strategy is to maximize existing internal resources to achieve growth. A number of providers are using online oximetry services to track efficiency. For example, track prescriptions versus tests. One online oximetry provider estimated that up to 25% of prescriptions for tests are not performed. It is important to find out why unfulfilled testing is occurring in your business. Other uses of online oximetry include tracking items such as borderline patients and turnaround time. By understanding what's happening in all of these areas, you can make sure you are not missing revenue opportunities.

Patients and physicians are other ways to grow your home oxygen business. If you offer attractive patient technology such as portable concentrators, no-delivery solutions, or quiet concentrators, advertise this to home oxygen patients in your area. Make sure your physicians are aware of this as well as any other best patient care practices you offer.

Use the latest advances in home oxygen equipment to your advantage. For example, you may want to expand into an outlying geographic area. Using no-delivery technology, you can test a new area without the expense of a new building lease. You can also expand your business by renting or selling POCs.

Increase profitability by understanding costs and controlling them through processes and technology. According to a study for AAHomecare, 72% of the cost of home oxygen therapy is non-equipment-related. Many of these costs are often related to recurrent oxygen delivery. One way to reduce these costs is to match oxygen equipment to each patient's needs.

NO-DELIVERY SOLUTIONS

Your home oxygen patient breakdown may be similar to the following—50% ambulatory, 25% highly ambulatory, 25% nocturnal only. Develop a process to match oxygen equipment to the varying needs of your patients by looking at a mix of items such as hours of ambulation, geographic location, liter flow, stage of the disease, and travel frequency.

With each visit to drop off oxygen cylinders costing around $50, it makes sense to turn to technology that can limit recurrent oxygen deliveries for those patients who require frequent oxygen deliveries. No-delivery solutions that enable the patient to generate portable oxygen in the home are likely to be more profitable in the long term for active patients. No-delivery solutions eliminate recurrent oxygen delivery cost, even though they have a higher initial equipment purchase price.

Similarly, a nocturnal patient or one who rarely leaves the home is not likely to be a good candidate for no-delivery technology, since few deliveries are required and travel is not likely to be a key requirement. Therefore, the delivery cost savings may not offset initial purchase price. Look to your oxygen manufacturer for tools to calculate cost per patient using different types of equipment.

Many providers are also turning to technology to reduce expenses in all areas of their business. The implementation of any new technology comes with the initial expense of purchasing the solution, along with staff training costs. Therefore, it is best to focus on one or a small number of initiatives at a single time—and to start with those that are likely to have the greatest impact.

Technologies to consider might include:

• GPS (global positioning systems) that are placed in vehicles to increase routing and delivery efficiency;
• Voice over Internet Protocol (VoIP), which uses the Web to support phone calls and reduce phone expenses over traditional systems;
• claim denial tracking software; and
• bar coding systems that can reduce equipment loss.

Kimberly Snyder is US marketing manager, home respiratory care, for Respironics Inc, Murrysville, Pa.