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On the Editor's Desk

by: Liz Beaulieu - Tuesday, September 1, 2015

Each year, we file a Freedom of Information Act request with CMS for the number of providers who provide each of six product categories: oxygen concentrators, CPAPs, hospital beds, blood glucose strips, power wheelchairs and standard wheelchairs.

This data, and much more, appears in the State of the Industry Report that we publish each December. (Look for them under the resources tab of our website.)

We’ve been collecting this data for years—well, 10 years to be exact. I just rifled through my stack of State of the Industry Reports from years past, and there it is in the inaugural version in 2005, when Jim Sullivan was editor.

While the recent year-to-year decrease in the number of providers for oxygen concentrators doesn’t look so bad—6,862 in 2014 vs. 7,491 in 2013 vs. 7,942 in 2012—the decrease over 10 years is another matter.

As I said, there were 6,862 providers in 2014. Compare that to 10,839 in 2004. That’s about a 37% decrease.



It’s much the same story for the other product categories that we have tracked over this 10-year span.

Hospital beds: 7,444 in 2014 vs. 12,484 in 2004

Power wheelchairs: 2,075 in 2014 vs. 6,716 in 2004

CPAPs: 6,628 in 2014 vs. 8,243 in 2004

Standard wheelchairs: 7,665 in 2014 vs. 13,722 in 2004

This decrease in the number of providers may be by design (driven by CMS through programs like competitive bidding), but don’t let that make you think you can’t control whether or not you’ll be one of the X number of providers that supply oxygen concentrators in 2015.

I’m reminded of a Health Affairs blog that our publisher Rick Rector forwarded to me about the future of the home health industry under value-based reimbursement (vs. fee-for-service reimbursement). This transition in reimbursement is resulting in a tremendous consolidation in the number of home health agencies. The author of the blog, John Marchica, argues that there are 12,000 HHAs today and less than half will probably be around by 2018.

Marchica doesn’t mince words in describing the role of HHAs in their own demise.

“Beyond dabbling in a handful of bundled payment experiments, few home health care companies have made an effort to be part of the discussion about value-based care,” he writes. “Not a single one has taken the lead.”

So what does it take to be one of the HHAs, and I argue HME providers, left standing?

“What the VBR initiative means for home health agencies is clear and is part of CMS’s stated objectives: weaker providers without the technology and other means to keep costs in line and quality under control will go out of business,” he writes.

Marchica issues this challenge to HHAs: “I believe CMS is telling the industry: innovate or die. Figure out a way to change how you do business that fulfills the Triple Aim.”

Do you accept the challenge?

by: Liz Beaulieu - Tuesday, August 25, 2015

I was reading a study titled “Retrospective Assessment of Home Ventilation to Reduce Rehospitalization in Chronic Obstructive Pulmonary Disease” in the Journal of Clinical Sleep Medicine when I got an email from a PhD student in accounting at the University of Central Florida.

Jared Koreff is working on a research study related to ZPIC auditors, and he’s interviewing HME providers about their experiences dealing with them.

He writes: “I am looking to hear about their experiences dealing with the ZPICs, the tactics they use and the resulting implications, challenges dealing with them, and what information they collect. I am also looking to understand successful tactics to respond to the ZPICs and come up with a list of best practices.”

Koreff plans to present his findings at the AICPA Health Care Industry Conference in November. (Don’t worry, I had to look it up, too: AICPA stands for American Institute of CPAs.)

It’s not every day that I read about a study in a journal and hear from a researcher at a university on such HME-specific topics.

It’s a good thing. Though HME is a small piece of the healthcare pie, this means it’s increasingly becoming part of the big-picture conversation.

Think about it…

An HME provider that implemented a multi-faceted intervention program for COPD patients that led to significant reductions in rehospitalization (we’re talking 100% readmissions one year down to 2.2% readmissions the next year)?

A researcher studying the minefield of audits affecting the HME industry?

It’s practically manna from heaven.

Jared emailed me to see if I would spread the word about his research and to put him in contact with providers that may want to tell their stories, anonymously or otherwise. If you fit the bill, drop him a line at

by: Liz Beaulieu - Friday, August 21, 2015

We’re getting our ducks in a row for two big data reveals:

·      the annual update of the HME Databank on Oct. 1; and

·      the annual update to our State of the Industry Report in December.

For the State of the Industry Report, we always look at the growth in Medicare expenditures for DME. We do this by looking at products grouped into six “buckets”:

·      med/surg supplies

·      hospital beds

·      oxygen and supplies

·      wheelchairs

·      other DME

·      respiratory meds

We run Medicare expenditures for these products in a seven-year loop for comparison purposes.

In 2013, expenditures for every single “bucket” nosedived, led by wheelchairs, which saw expenditures of $1.1 billion in 2012 and $622 million in 2015, nearly a 50% reduction. Overall spending for all categories decreased from $8.1 billion in 2012 to $5.3 billion in 2013.

So what happened in 2014?

Well, not much, and in this case, steady as she goes is probably a good thing.

A few “buckets” saw some growth, notably respiratory meds which rebound from $709 million in 2012 to $605 million in 2013 to $836 million in 2014. A few saw declines, but none of them were that significant, at least not compared to the drops from 2012 to 2013.

More to come soon.

by: Liz Beaulieu - Friday, August 14, 2015

Here’s a sneak peak at the The Braff Group M&A Insider in our September issue.

This graph is a 10-year retrospective look at the percent change in deal volume since 2005 for four of the most active sectors in health care.

Here’s The Braff Group’s commentary:

“It’s no surprise that when you examine HME, the sector has spent most of the decade “in the red” at levels 50% below the 2005 base year (immediately prior to the Deficit Reduction Act becoming law in 2006). That said, once the downward pressure was fully absorbed between 2007 and 2008, it has not given up any further ground (and even enjoyed a nice bump between 2011 and 2013). Similarly, after the Medicare home health sector realized substantial gains between 2005 and 2007, there has been virtually no change in deal volume for eight consecutive years, which isn’t too bad given sector volatility in reimbursement and more). So which sectors have enjoyed the longest runs of deal growth since 2005? Well, hospice has had a nice run, but has recently flattened. The big winner?  The once largely ignored behavioral health sector, which has enjoyed near uninterrupted growth in deal flow over the past decade.”

by: Liz Beaulieu - Friday, August 7, 2015

I had a great call this week with the panelists for our “Rise of the Disrupters” panel at the upcoming HME News Business Summit in Nashville. I think this session, alone, will be worth the price of admission.

When I asked panelist Dan Afrasiabi whether being a disrupter was something that came naturally to him or something he had to work hard at, he said it was the latter.

“To borrow from Andy Grove from Intel, ‘Only the paranoid survive,’” he said. “That’s how I do business. I’m always paranoid that I’m missing something. I try to detach myself from my assumptions and ask, ‘What am I missing?’ I liken it to being a rabbit in a field with a bunch of coyotes. I have to be looking around all the time.”

Both Afrasiabi and panelist Dan DeSimone said one of the biggest challenges of being a disrupter is getting buy-in from staff.

“Constantly putting our people through changes kills us,” Afrasiabi said.

DeSimone agreed.

“The trait I look for in employees is flexibility,” he said. “Years ago, I wouldn’t have looked for that necessarily, but it takes a flexible person to go through so many changes. You’re taking something they loved to do and asking them to do something else.”

Both Afrasiabi and DeSimone acknowledge that not every idea they have is a home run.

“Sometimes you expect a certain shock factor and it doesn’t reach that level,” DeSimone said.

Hear from these disrupters and dozens of others at this year’s HME News Business Summit, Sept. 13-15 at the Nashville Marriott.

by: Liz Beaulieu - Tuesday, July 28, 2015

Last week, I shared the first installment of words of wisdom from this year’s speakers at the HME News Business Summit. (Refresher: I asked them that they think HME providers should be exploring, and what risks they should be taking.) Here’s the second.

Help physicians help patients

“It really is all about outcomes and patient-centered care at this point. Hospitals and payers want to know that you can make a difference in their patient/member’s experience and well-being, which ultimately should help to reduce costs. Providing physicians with their patient’s report helps to identify potential risks for readmissions, and builds creditability and trust within the healthcare team.”

Tammy Zelenko, AdvaCare Home Services

Lead above the death line

More from Zelenko: “You know how the saying goes: The greater the risk, the greater the return. The industry is facing the perfect storm with the extension of competitive bidding into rural areas, the creation of ACOs and the expansion of hospital-owned networks, the reductions in reimbursement hitting us from all the payers, and more. We are facing a great deal of uncertainty. I think we need to stay the course and manage our finances extremely well. I am reading a book by Jim Collins, “Great by Choice,” and one of the chapters is called “Leading Above the Death Line.” He describes three primary categories of risk: (1) death line risk, (2) asymmetric risk, and (3) uncontrollable risk. Death line risks are those that could kill or severely damage your organization. Asymmetric risks are those for which the potential downside is much bigger than the potential upside. Uncontrollable risks are those that expose the organization to forces and events that it has little ability to manage or control. So, if you are considering a new business line, product line or opportunity, take the time to determine if the decision that you make will lead you above the death line.”

Be OK with uncomfortable

“I believe that providers should do something out of their comfort zone at least once a quarter. Maybe it’s bringing in a new product line along with a plan to promote it and find that new niche that will set you apart from your competition. How about calling on a referral that is completely unrelated to your core business to maybe find a need that nobody is providing adequately in your market? In today’s HME arena the companies that are willing to put themselves in new uncomfortable positions are the ones who are ahead of the pack.”

Jim Greatorex, The VGM Group

Which path are you on?

“As an HME provider, when your products become more of a commodity item than the provision of comprehensive clinical outcomes, it is important to decide what growth pathway you wish to pursue. If you choose to pursue growth of commodity items, the large retailers, including Internet fulfillment houses ie: Amazon, will always have the upper hand on delivery to the masses. Their incredible volume demands focus on mass delivery, which puts less focus on traditional margins HME providers historically enjoyed. So, if you want to be primarily in the delivery business and if you run an efficient operation, the demand will certainly feed scaling your operations. On the other hand, if you have traditionally been inspired, motivated and expert at the clinical aspects of HME, you have other options to consider. As you have seen big retailers avoid too much clinical exposure, this is your opportunity to develop your clinical business model (which can include HME commodity items in a larger bundle of services) to blaze the trail of increased sales and profitability.”

Jonathan Sadock, Paragon Ventures

Know your pain threshold

Retail locations need to maximize cash sales. Looking for non-coded items and providing personal service/up-selling/up-caring—you want to provide a one-on-one exceptional experience that customers cannot get anywhere else. In addition, up-selling and/or up-caring should be part of every customer interaction. Finally, pain management is something we would like to get into more. Did you know that 28% of adults 40 years and older take cholesterol fighting medication and 1 million people are on cholesterol medication and suffer debilitating muscle pain. Expanding our pain management line is something we would like to expand into.

Coleen Zinda, Home Care Medical

by: Liz Beaulieu - Wednesday, July 15, 2015

I asked this year’s slate of speakers for the HME News Business Summit what different avenues they think HME providers should be exploring, and what risks they should be taking.

Here’s how you can hit the sweet spot and other words of wisdom.

Young boomers provide customer base with longer life cycle

“HME providers should be thinking and executing ‘differently.’ In a time where technology and the power of choice, search, and selection are moving faster than the speed of light, providers should be exploring their differentiations, both online and traditional, as well as generationally. How do I mean generationally? Well, baby boomers are in the sights of all, but are they really the users of these products and services? Some yes, but remember, baby boomers are defined by being born between 1946 and 1964, which gives us a rough gap of 50 to 70 years old. Most 50 year olds do not need these products or services—yet; however, they are much more tech savvy than the older generation in this group. Because of this, my suggestion is that providers should target these young boomers now, but target them for their parents, aunts, uncles, and relatives because more than likely, they need these items now. By creating and fostering a relationship with younger boomers now, an HME provider will have already created a solid brand image and commitment to care, which will prove beneficial down the road when this ‘tech savvy’ younger boomer needs products for themselves, thus giving the provider a customer base with a longer lifecycle.”

Justin Racine, Geriatric Medical

Technology is your friend

“Our industry, partly because of the extreme cutbacks, is lagging significantly in its use of technology. The two spots I’d invest in right now would be security around my data, as well as mobile solutions for equipment delivery and inventory management.”

Ryan McDevitt, Laboratory Tactical Consulting

Don’t figure it out as you go

“They should look at merging and consolidating their businesses with other DMEs whose businesses complement theirs but provide services and products they aren't involved in and are outside Medicare competitive bidding. That makes more sense than trying to diversify into new areas and figure them out as they go.”

Mike Kuller, Allstar Medical Supply

Hit the sweet spot

More from Kuller: “Companies need to build their size to create economies of scale to survive in the post-competitive bidding era, particularly when the pricing goes beyond the 101 MSAs in 2016. The sweet spot seems to be about $10 million or greater in annual revenue with diversified services.”

by: Liz Beaulieu - Thursday, July 9, 2015

If it’s summer in Maine, it means I’m in the throes of requesting, collecting and analyzing Medicare data sets for two upcoming projects: the annual update of our HME Databank (it happens Oct. 1!) and the publication of the State of the Industry Report (it will be an insert in the December issue).

Both will feature 2014 data.

To put 2014 in perspective, let’s consider that pricing for the Round 1 re-compete went into effect Jan. 1, 2014, and six months before that, pricing for the Round 2 re-compete went into effect July 1, 2013.

I pulled Medicare’s allowed charges for some of the more popular DMEPOS codes, like:

E1390: $1,186,187,433 (vs. $1,403,398,730 in 2013)

E1392: $30,644,855 (vs. $29,359,144 in 2013)

No drastic changes there. How about:

E0601: $181,689,399 (vs. $228,523,480 in 2013)

That’s a change.

How about:

A4253: $317,741,495 (vs. $753,293,520 in 2013)

Yikes. The Round 2 re-compete that went into effect July 1 included a national mail-order program for diabetes supplies that reduced reimbursement by 72%.

For you mobility folks, how about:

K0823: $55,990,584 (vs. $133,239,857 in 2013).

Yikes again. As you know, in addition to competitive bidding, this product has been subject to prior authorization approval in a number of states.

Well, there’s more where this came from.

Stay tuned.

by: Liz Beaulieu - Monday, June 29, 2015

I’m working on a story about oxygen transfilling technology.

I’m working on a story about oxygen transfilling technology because Invacare has reported, for the past few quarters, the loss of a significant order of HomeFills by a national account.

I thought it was a good time to check in on this technology.

I’m still in the middle of interviewing sources, but in trying to determine whether this was a one-off or a trend, I first looked at some data.

In our HME Databank, we track total Medicare reimbursement by code, including K0738, E1392 and E1390. The most current year for which we have data: 2013. That’s before Invacare’s loss, but there’s no denying in looking at total Medicare reimbursement for these three codes from 2009-2013 that portable oxygen concentrators have been the big gainers.





























We also track the top providers by code, including K0738. It turns out Apria is not only the No. 1 provider of this technology (again, as of 2013, before Invacare’s loss) but also the only national provider until Lincare makes an appearance at No. 36. I suppose this is harder to discern than at first glance, however, because some of the providers listed may be owned by Lincare or another national provider. Still, with Apria by far the leader of this product category it’s likely the national account Invacare speaks of.



Will sources in the field support the data: That POCs are enjoying a greater adoption rate than transfilling devices?

More to come.

by: Liz Beaulieu - Wednesday, June 24, 2015

It’s easy to feel, in this small world that is the HME industry, that you’re the only ones going through so much change.

You might ask yourself, is any other industry part of such a seismic shift in the way goods and services are delivered? Is any other industry, as part of that shift, seeing its revenues cut nearly in half?

Of course, the HME industry is not the only industry going through so much change.

This hit me in the side of the head yesterday on my commute home.

I was listening to a story on NPR about a makeover at food giant General Mills. You probably heard the company’s announcement this week that it is removing artificial colors and flavors from its cereal line. (This is good news for a semi-rehabilitated Lucky Charms fan like myself.)

But there’s more to the story, as NPR found out.

General Mills is in the midst of overhauling a number of its food lines, including the iconic Green Giant, which sells some 140 different kinds of vegetable products.

For some perspective, picture the Green Giant and a Golden Commode. They’re both throwbacks to an era gone by.

You see, canned and frozen vegetables don’t have the same appeal they once had. With farm shares, farm-to-table restaurants and farm stands inside grocery stores, consumers expect, and increasingly get, fresh vegetables.

“I think there’s been a pretty dramatic shift across the grocery aisle in the last five years,” Justin Massa, founder of the research firm Food Genius, told NPR. “There’s kind of very few sacred cows in the grocery store.”

Kind of like there are very few sacred products in the HME industry?

Faced with this shift in consumer tastes and the subsequent slowdown in growth, General Mills has two choices, Massa says: It can cut costs by merging (a la Heinz and Kraft); or it can try to increase revenues with products that are more in line with consumer demands.

So, cut costs and shift product mix. Sound familiar?

General Mills is trying to do both. To make its products more in line with consumer demands, for example, it will launch a new line of frozen vegetables this summer—think Brussells sprouts with lentils—that are meant to be sautéed quickly, rather than microwaved, improving their taste and texture.

HME and food are apples and oranges, so to speak, but the themes here are similar.

Only, where the HME industry is dealing with fickle payers like Medicare, General Mills is dealing with fickle consumers.

I’m not sure which is more of a challenge.