Page 22 - HME Business, August/September 2018

THE TWO SIDES OF RENTAL
THE TWO SIDES OF RENTAL
By Holly J. Wagner
While respiratory providers typically focus on Medicare’s 36-month rental, there is also a short-term rental market for oxygen equipment. Entering either business requires solid planning.
a facilitator cultivating the broader customer relationship.
“When we get a call directly from a patient, we refer them to a DME. We rent [equipment] to the DME and they rent it to the patient. Trace does not deal with patient billing,” Campbell says. Trace has a rela- tionship with an authorized service center that does all of the maintenance, repair and service on equipment the company rents. True rental is also largely a cash business with few, if any, reimbursement options.
Either way, oxygen is a drug, so providers need the correct licensing to provide it. That means providers need to have the right resources and knowledge.
“To sell POCs retail, there are several basic infrastructure requirements including state licenses and the ability to retrieve and store
a prescription in a compliant manner,” says Nick Jacobs, senior director of respiratory at Invacare Corp. “I would not say that certain DME retailers have inherent capabilities that make them better suited to provide oxygen services; however, some are better at it than others. This ultimately comes down to whether the retailer views the sale as a transaction or something more than that. And it’s about busi- ness model and choice more than anything.“
Once the legal hurdles are cleared, finan- cial and operational considerations kick in. “There are some decisions that need to be made about the business model,” Jacobs says
WHEN IS A RENTAL NOT A RENTAL?
As respiratory providers know, the oxygen business splits into two main categories: One is called rental, but that really describes the payment arrangement in which Medicare pays a provider a monthly fee for three years to provide equipment for long-term oxygen therapy (LTOT) patients. After the 36 months, the patient owns the device, but the provider must continue to provide warranty protec- tions and service for another two years. The other model is true rental, in which compa- nies – usually specialized providers – offer true equipment rental and support for patients with short-term needs.
The first group is long-term oxygen therapy patients, primarily chronic pulmonary (COPD) patients. They are likely to use oxygen supplements an average of 15 hours a day. Much of that is at home, where they may
use a tank system as a primary source but portable oxygen concentrators (POCs) are expanding patient horizons with devices that are compact, lightweight and less intrusive.
The second group overlaps the first: it might be a home oxygen patient who just needs a POC or other arrangement for an event or trip, or as support for another treatment.
Who are the Short-Term Renters?
“Short-term POC patients are hospice patients who want to go to a wedding or graduation, someone who is traveling across the country,” says Elliott Campbell, senior vice president of Trace Medical. The company’s main business is ventilators, but, “We were getting people who say, ‘I need a POC, but I don’t need it for long.’” Campbell says. That launched Trace’s POC rental business, “for people where it does not make sense to buy.”
For those patients, companies such as Trace and VGM Freedom Link work with DMEs to give patients the service they need, without encumbering the DME
with long-term oxygen support obliga- tions. In this scenario, the DME is mainly a middleman providing a referral as a service,
22 HMEBusiness | August/September 2018 | hme-business.com
Management Solutions | Technology | Products
Special FocuS on portable oxygen: pg. 24 The Two Sides of Rental • pg. 26 Seeing the Bigger Picture • pg. 28 O2 on the Go
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