Non-Delivery Home Oxygen
A change in perspective.
Kodak’s history is important…
because they failed to recognize trends
Medicare Oxygen Payments ‘97 to ‘09
• 1998, sold my business in Georgia
• Regional Manger with Air Liquide Healthcare,
a global medical gas manufacturer
• 2004, implemented non-delivery home
oxygen model at O2Neal Medical
– 17 patients in 2004
– over 1800 patients served from ’04 to ‘14
Medicare defines
Non-Delivery Equipment as “OGPE”
Oxygen Generating Portable Equipment
• Portable concentrators
• Self-filling compressed oxygen systems
• Liquid oxygen generating systems
Model comparison
Delivery Model
Non-Delivery Model
Op EX, lower initial cost
Cap EX, higher initial cost
Forecasting cash flow has many variables:
• Patient utilization of tanks MATTERS IN
BID CALCULATION
• Energy costs
• Fuel costs
• Lost productivity
Forecasting cash flow is straightforward
• Patient utilization of tanks DOES NOT
MATTER IN BID CALCULATION
Delivery will always be a ball & chain for
staffing, resources
Non-delivery is patient centric, they are in
control
Promotes rationing of oxygen
• May inadvertently promote noncompliance
• Source of anxiety & customer/referral
source complaints
No rationing:
• Encourages compliance
• Has virtually eliminated
customer/referral source complaints
High in NVA
Low in NVA
Morrison Study: Cost of NVA
ACTIVITY
COST
Intake & Customer Service
$12.66
Preparation, return, PM,
disposables
Delivery
$25.24
Total
$80.16
1Morrison
$42.26
Informatics. A Comprehensive Cost Study of Medicare Home Oxygen. June 2006
Strategies to implement non-delivery
1. Standard of Care – Every ambulatory patient is
provided a non-delivery device
+ fast organizational change, quick buy in from patients
and staff and referrals
- maximum capital requirement
2. New patients ONLY
+ minimizes capital need,
- but prolongs positive effects
3. Episodic, based on patient need
+ minimizes capital need
- but does not maximize effectiveness across the
organization
Why it worked…
• During our bid preparation, we knew that, even
as a small provider, we could bid aggressively, and
smartly because:
– We had a history (since 2004) of eliminating NVA costs
via non-delivery
– Properly capitalized with enough non-delivery
equipment to sustain the bid
– Based on capital equipment costs, and our own
internal costs, we could genuinely forecast cash flow
on a per patient / per month basis – Bona Fide bid
Bid calculation, it was this easy
Cost of equipment per patient = X
X / 36 = per patient per month base cost
base cost
+ disposables ?
+ 1 delivery fee ?
+ annual PM cost ?
+ agreeable margin ?
= bid price
Ambulatory Breakdown
Combo
1%
High Flow
5%
Legacy
10%
POC only
1%
Self Fill
Tanks 83%
Technician to
Ambulatory Patient Ratio:
the ultimate expression of the
elimination of NVA
Delivery
Non-delivery
1 to 150
1 to 275
Resources
• Morrison
– http://www.bipac.net/cqrc_test/MorrisonResearc
h.pdf
• GAO Study
– http://www.gao.gov/assets/320/315094.pdf