Decreasing reimbursement rates have forced healthcare providers and manufacturers to cut costs and increase the lifetime of oxygen therapy devices. These market changes have slowed demand for several devices, thereby lowering unit shipments for manufacturers. To offset the dull unit sales, some manufacturers are slashing prices up to 50 percent. Manufacturers' profit margins are declining as they struggle to comply with the revised reimbursement payments and proposed oxygen cap on rentals. Reimbursement cuts initially reduced the demand for oxygen devices; however, more efficient systems are revitalizing segments of the U.S. oxygen therapy devices market.
Frost & Sullivan finds that U.S. Oxygen Therapy Devices Markets earned revenues of $528.2 million in 2005 and estimates this market to reach $ 885.9 million in 2012.
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"Increase in Chronic Obstructive Pulmonary Disease (COPD) patients boosts interest in oxygen therapy," explains Frost & Sullivan Industry Analyst, Sheila Ewing. "Thus, earlier placement of patients on oxygen intensifies demand for oxygen therapy devices."
The aging population and the increased incidence of Chronic Obstructive Pulmonary Disease (COPD) are the main factors influencing the increase in COPD patients requiring oxygen. For the aging population, COPD is a disease that strikes later in life with 60 as an average age of onset.
There has been a medical movement in the last two years to push for physician awareness of COPD and earlier diagnosis. Currently, approximately only 50 percent of the cases are diagnosed, often at later stages of the disease. Oxygen therapy is also known to delay the onset of more severe symptoms and is being encouraged for earlier use in stage two of COPD.
As awareness of this disease increases, funding and diagnosis expect to follow. Earlier diagnosis and awareness of COPD also expect to increase the number of patients on oxygen therapy and; hence, the demand for the devices.
In 2005, Medicare reduced reimbursement payments forcing manufacturers to drop prices of the oxygen therapy devices and leaving them searching for initiatives to counter the impact. Due to Medicare cuts, patient’s out-of-pocket expenses expect rise up to 30 percent. In some cases, the aging population may be able to supplement their Medicare reimbursement to obtain the devices. However, many patients do not have supplemental income.
Providers anticipate up to a 20 percent decrease in their revenues as a result of reductions in Medicare reimbursement. Providers are restricted by severe reductions in Medicare reimbursement, but may purchase new devices if the device provides a significant improvement either for patients or in terms of maintenance cost reduction.
“The reduction in Medicare reimbursement will not only affect the DME providers, but significantly impact manufacturers. Providers are requesting manufacturers to share the burden of the Medicare cuts," notes Ewing. "Thus, these cuts will further delay the introduction of innovative products in the market as manufacturers are forced to reduce expenses.”
Manufacturers can recover from the downfall by taking steps to increase the number of oxygen therapy patients through education programs for early detection of COPD in stages 1 and 2 . . .
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