Retail Mobility

Should You Sell Consumer Power?

Funding Cuts, Audits & Competitive Bidding: Is This Still a Profitable Product Segment?

• By Laurie Watanabe
• Oct 01, 2013

To the new or casual student of the industry, perhaps a college senior doing a term paper or a consultant studying up for an investor client, the words “Medicare” and “consumer power mobility devices” are no longer a good mix. Thanks to repeated cuts to allowables, policy changes favoring rentals over outright purchases, competitive bidding and a wide range of pre- and post-payment audits, it’s easy to think that providing consumer power chairs and scooters is a losing battle for today’s DME provider.

But is that the true and entire picture? Look closer, and the view may be different enough to make you rethink your perspective.

Competitive Bidding’s Effect

It’s impossible to talk about consumer power mobility, of course, without bringing up the impact of Medicare’s controversial competitive bidding program. The program sharply reduced the number of providers who can bill Medicare for consumer power mobility devices, and made business challenging indeed even for those who remain.

“If you’re a provider that has not won [a bid for] Group 2 power, obviously it’s not on the table to go aft er that business in a reimbursed format, at least,” says Mike Serhan, executive partner for Drive Medical Design & Manufacturing. “Now there are unique opportunities out there for rental business and non-Medicare business — you can always go down those paths. But there’s not a lot of meat on that bone.”

Cy Corgan, director, Pride Mobility Products’ corporate sales, says, “Certainly if they did not win the bid, it becomes a more challenging category for them.”

Jay Brislin, MSPT, VP of Pride’s Quantum Rehab division, adds, “It is a little bit difficult if you haven’t won a bid. Now maybe on the flip side of all that is many of the providers who have won bids might not necessarily be able to service all the areas appropriately or efficiently the way they may want to. So you do run into some situations where there could be some contracting opportunities for providers that haven’t won bids with providers that have.”

“That’s correct,” Corgan says. “And we do see that happening across the country, with bid winners then sub-contracting in the areas where they won, but did not have a location for their sub-contracting, so the opportunity exists for that provider who did not win to be a sub-contractor, and then they just work out their contract with the bid winner. So it still keeps them at least in the category, it keeps them in front of the referral sources because certainly being the subcontractor, you’re still going out and working the angles as far as contacting all referral sources.”

The Rise of Retail

While it’s possible for some non-bid-winning providers to keep their hands in Medicare’s consumer power mobility pie, the overall potential is definitely limited.

But add the word “retail” to the discussion, and the attitude turns positively bullish.

Serhan says of retail consumer power sales, “That’s the number-one growing segment in power right now. It’s our number-one growing segment in power, and the industry’s number-one growing segment in power is in retail sales.”

And while complex rehab providers usually think “wheelchairs” when they hear the words “power mobility devices,” Serhan points out that the positive outlook includes scooters, as well.

“There are some retail Group 2 power chairs, but very few comparatively to the scooter market,” Serhan says.

The power chair’s generally higher price point and greater tendency to be thought of as “medical equipment” may make it less of an obvious cash-pay item for consumers. Not so with the sportier, generally less expensive scooter — which is also more likely to be compared, appearance wise, to a Vespa than to a wheelchair.

“Even years ago when [payors] started to reduce the allowables on power chairs and scooters, even prior to competitive bidding — we did see scooters moving more toward the cash option for consumers and the providers,” Corgan says. “I think what you’re going to see is more non-coded scooters.”

Such vehicles, Corgan points out, “take it right out of the whole Medicare or competitive bidding equation, or even worrying about [Advance Beneficiary Notice of Noncoverage] and ABNing the special features and options. We as a manufacturer are going to take the approach that we will be launching more non-coded scooters specifically so providers can just sell them for cash.”

The retail option can even work well for complex rehab providers, Serhan notes, or providers who have won a Group 2 power chair bid from Medicare.

“If you’re doing Group 3 and have won Group 2, why not offer the full gamut of product?” he asks. “There’s still money to be made on Group 2. The provider [needs to] wrap their head around the fact that not every customer that they see is going to need a Group 3 power chair. There are many different needs in power, from retail scooters to Group 2 through Group 3. And if the provider understands this and better matches the correct product to the patient, the patient is happier, and [the provider has] expanded their ability to earn profits now in the retail segment and the Group 2 segment.”

Serhan is a big believer in matching products correctly to consumers, and to knowing the details of Medicare’s codes.

“Within the Group 2 segment of power, matching the right product to the patient is extremely important, such as products like travel power chairs,” he says. “The 816 and 821 codes: The providers did not bid that price down as far [as the standard K0823 code].”

He points out, “There can be $400 swings, higher reimbursement in those codes. And a lot of Group 2 users do travel, whether it’s to day care, dialysis centers, shopping, whatever it may be. They really do need a travel scooter, something that can help them complete their MRADLs at home, and their lifestyle needs.”

Doing Your Retail Homework

In the retail business model, Brislin notes that complex rehab providers may have an inside track because they already have “reach, or their ability to be in these rehab facilities and with these therapists and different patients all the time,” he explains. “You go to a seating clinic, and in many cases you might have a few clients that don’t need a Group 3 product. Providers that are doing business with these facilities are mainly Group 3 providers. So the nice thing about that is they’re being exposed a little bit to the different market, and the fact that they can actually do or provide these types of equipment is huge.

“The therapist wants to get their client taken care of and get them in the right mobility product, and in a lot of cases, it might not necessarily be a Group 3. It might just be a scooter, it might just be a standard power chair. So in those cases, the fact that they have access to these clients could benefit them.”

Brislin notes that some complex rehab providers may be able to partner with bid winners to help those winners meet client demand.

On the flip side, a complex rehab specialist may have to tweak his or her perspective to successfully launch a retail sales model.

“Many times,” Serhan says, “they look at a referral, and they’re used to the fact that the referral is going to call them about a patient. The patient needs a certain power chair, they measure it out, and they take care of the chair. This is a little different… They do have to switch gears from the referral sources that are giving them patients, their typical referrals where the patient does feel entitled to Medicare buying them something.”

Any provider wanting to bolster his or her retail revenue needs to instead help potential customers to start thinking of scooters and power chairs as consumer products.

“[Providers] can’t hope to ‘build it and they will come,’” Serhan says. “It’s not going to happen. If they put a couple of scooters on their floor, unless they have some great walk-in business, it’s not going to happen. You have to get out into the community. They’re going to have to build a retail Web site, whatever it may be to bring in more traffic.”

That can include analyzing the neighborhood to look for opportunities to engage with potential customers…as well as reaching further out to the provider’s virtual community.

It also means understanding and connecting with more than one type of potential buyer.

“We’ve always seen the caregiver from a retail standpoint is very much involved in the decision-making process, helping whoever the individual is who needed the product, helping with the selection,” Corgan says. “They’re taking mom or dad down to the provider to sit in all the chairs, to drive the scooters, to drive the power chairs, and a lot of times, if you have a couple of sons or daughters, whatever the caregiver situation might be, they could be the ones from a cash standpoint also paying for the product for the person who’s going to use it. More and more providers are taking that into consideration, that the caregiver is the one they’re actually marketing to.”

This article originally appeared in the October 2013 issue of Mobility Management.