The story and the argument is not particularly new. What is somewhat new is the direct and stern criticism leveled directly at certain companies that the New York Times allege directly benefit from this delay. They name Invacare, Pride, Praxair and the Scooter Store and criticize Invacare’s Cara Bachenheimer who they allege does not want to see any substantive changes to the current system.

At the hub of the issue is the fact that consumers can purchase (according to the Times) – for example – a walker on the internet for about half the price of what national insurer Medicare (and therefore (directly / indirectly) the tax payer) pays.

It is true that in several cases the internet price of products is less expensive than the Medicare price. It is also true that the internet does not particularly serve well 90 year olds with Alzheimer’s or other incapacitating conditions who have no idea how to use the internet.

Unfortunately there have been documented cases of Medicare issues which have not helped the industry. Although it has changed somewhat, the industry has also not been able to get its act together in terms of a plan that makes sense to all. This continues today in some cases for example with the Scooter Store recommending that even higher specified products should be part of the competitive bidding process. Much to the chagrin of several industry stalwarts.

Adversity has made for strange bed fellows and time will tell if the new industry initiative will prove effective.

(In an unrelated event, Dan Meuser, President of Pride and former Republican candidate, will be hosting a Sen. John McCain lunch on July 23).

Update:

New York Times Opinion piece continues the onslaught “Medicare Savings vs The Lobbyists” - perhaps in part referring to the disclosure of a major homecare company spending $230,000 on lobbying in Q1.

If you would like to see our related post referring to the Office of the Inspector General and their report it is here - Pricing vs Reimbursement In The Homecare Industry - And The Competitive Bidding Solution

And a quick rebuttal from AAHomecare which actually is a little challenged in terms of winning this fight. You decide.

Robert K. Gudbranson has been appointed to the position of senior vice president and chief financial officer. He rejoins Invacare after a stint at Lincoln Electric. He formally held the positions of Investor relations, business development director as well as being based in Europe where he was CFO.

Press Release

It’s also about Asian sourcing, low barriers to product development and market entry - and who takes what and how much in the value chain.

Invacare has just announced (HME News) that they will no longer sell powerchairs to the Scooter Store. This follows last weeks announcement from the Scooterstore recommending that higher end rehab power chairs be included in the the (divisive - according to the majority of the industry) - national competitive bidding process (pdf download).

While the reason for the split from the Invacare perspective is related to their commitment to individual independent homecare dealers this is symptomatic of a much bigger issue.

What are the key factors…

The power wheelchair manufacturers (and others) have seen dramatic cuts in Medicare reimbursement in this category. Furthermore the new competitive bidding process is also sure to have a negative impact on margins. It also pits traditional manufacturers against the dealer distribution channel as to who and how will both parties participate in this new (coming -already here) environment.

In fact, everything that the major payers (reimbursement agencies, governments and de facto “consumers”) desire.

In order to deal with prices that continue to fall, the major manufacturers, started a few years ago, outsourcing heavily to Asia - as other industries have done when confronted with cost issues (or to increase their margins).

The issue for the manufacturers however is that they outsourced products with little or no intellectual property attached to them - only manufacturing know how. As one would expect, now that Asia has learned (with the help of the manufacturing industry) how to make rehab products - these same Asian companies are doing two things:

• Firstly they are establishing their own operations in the US and other markets. Some examples being Shoprider and Merits. Of course what these Asian companies have is products largely developed with the help of the US domestic manufacturers over the years - but what they still don’t have a great deal of is dealer and direct consumer customers.
• Still no big surprise - except that these (and several others) not only supply the traditional manufacturers with power chairs and other products, now have their own US direct operations, but they also supply national and / or large distributors with product, competing with the self same traditional manufacturers that essentially put them in business.

What’s next.

The competitive bidding process and the lines between manufacturer, importer, distributor and dealer are going to become increasingly blurred.

Companies like The Scooter Store, essentially breaking conventional ranks is a sign of things to came, not only in the US but also in other big rehab markets, like Germany - in fact its already started.

So, unless rehab “manufacturing” companies have IPOD (r) type patents and distributors of enhanced OEM rehab products have lifetime guaranteed customers - be ready for rapid change.

Or better yet be the change maker - and prosper.

Update January 28, 2007: Doug Harrison from the Scooter Store getting more isolated - maybe not. Lou Slangen from Invacare notes

“This is the most defining moment we’ve had in our industry on rehab products”.

Invacare and Scooter Store Heat Up Rhetoric - hmetoday

As a brief follow - up to the post on this subject this week, we can now confirm that Invacare, Meyra and Handicare will not be attending this years Rehacare.

This is the first time in the history of this show that Invacare and Meyra have not attended.

No doubt the empty space will be used by others - most notably Asia manufacturers.

The reshaping of the industry continues…

Invacare, struggling, like several of its competitors with reimbursement, Asian sourcing pressure and cost issues has just announced that it has appointed General James L. Jones, United States Marine Corps (ret.) to its board. General Jones has recently retired as Supreme Allied Commander of NATO (North Atlantic Treaty Organization) and Commander of the United States European Command.

This should raise the profile of the company and perhaps the industry as it goes about restructuring and aligning with the new order healthcare environment.

Mal Mixon, CEO at Invacare, also served as an officer in the US Marines.

Press Release

Invacare announced today that they were consolidating their sales organizations in the second largest homecare market in the world - Germany.

The new organization will be known as Invacare Aquatec.

Following the acquisition 2 years ago of Domus, the Aquatec and Invacare organizations in Germany had remained in separate locations (one in the north and one in the south). Standard Invacare homecare products moved to Aquatec shortly after the acquisition - but now the original Invacare Company (save for some power wheelchair manufacturing and a few functions) is being moved to the Aquatec headquarters in Isny (near Munich). Isny of course is home to the worlds leading bathlift companies.

There will no doubt be savings including a headcount reduction.

To readers of this blog this will be no surprise as the German market continues like most of the world to cut deeply into reimbursement benefits.

By the way it seems to me that centralizing the sales and marketing activities could also bring some customer benefits…

You may want to read the recent related posts:

German Homecare Market - An Insiders Perspective - Adrian Thyssen

Who Is My Customer? - a Story of Achievement in Germany - Adrian Thyssen

Invacare is adding to its sleep line to better compete with market leaders Resmed and Respironics.

Invacare Corporation Expands Its Sleep Division Through Distribution Agreement With AEIOMed, Inc.
“Invacare is rapidly adding to its sleep product line and is on its way to becoming the third major player in the sleep industry,” said Ann MacGregor, vice president and category manager, Invacare Sleep Division…. Combining our current sleep lineup with AEIOMed’s experienced sleep team…”

Despite the tough homecare and respiratory environment sleep product companies like Resmed and Respironics both had credible Q2 results.

Umm - IVC is normally 1 or 2 in its product lines - is this a sign of things to come?