A Look at the Medical Cylinder Business

Similar to other industries, the medical device and equipment business is transforming. Factors pushing for change include everything from evolving customer demographics to healthcare reform.

The home oxygen market is a perfect example of this transformation. Dusty McClintock, vice president of sales and marketing for Worthington Cylinders, gives his take on the medical cylinder industry.

What is the current market and where are the demands for alternatives occuring?
The home oxygen market – including therapy and related treatment products – is a major sector of the medical device and equipment business. Approximately 1.5 million Medicare beneficiaries received some type of home oxygen therapy in 2009. This represents a significant business opportunity for oxygen product manufacturers.

The number of consumers requiring home oxygen products is expected to continue to rise as the Baby Boomer population ages. Two of the most common conditions requiring oxygen therapy and/or home products are chronic obstructive pulmonary disease (COPD) and heart failure, affecting a combined 18 million Americans. The medical cylinder industry, specifically, is expected to see increases of 2% to 4% annually.

While the market’s consumer population is slowly increasing, so is the demand for varied product offerings and price points. Consumers are interested both in products that fit their medical needs and lifestyle (such as lightweight, portable options), and align with what they can afford – particularly based on insurance reimbursement. The increase in consumer demand is also forcing medical equipment manufacturers to diversify their offerings and continually create innovative, cost-effective products.

Customers are demanding more variety in product offerings, and the industry is responding. In addition to aluminum cylinders, alternatives like portable concentrators and portable liquid storage devices have emerged. Although both of these options have benefits, they also come with significantly higher initial investment and maintenance costs for the consumer, compared to portable cylinders.

The primary advantages that cylinders will maintain are a lower initial investment and increased patient mobility. Because these features focus on cost and convenience, two key concerns of consumers, the demand for cylinders will not disappear. Lightweight and cost-effective products will continue to be high priorities for consumers. To ensure that cylinders remain an economical solution for consumers, manufacturers can focus on establishing an extensive distribution system so product is available and easily shipped when it is ordered. These types of efforts will further differentiate cylinders from both portable concentrators and liquid storage devices.


Thoughts on the healthcare reform and reimbursement?
Federal legislation and changes to Medicare are definitely impacting – and will continue to impact – the medical cylinder business. One major change is the updated law regarding how Medicare pays suppliers for oxygen equipment. In the past, after a rental period lasting 36 months, consumers would own oxygen equipment. The new law still calls for a 36-month rental period, but leaves ownership with the supplier at the end of that period, and requires two years of additional service as long as the equipment is medically necessary – adding up to a five-year commitment on the supplier end. This means that the supplier is responsible for maintaining and servicing equipment beyond the previous 36-month agreement, but without additional compensation.

This extension of service will continue to force suppliers to focus on the price of delivering home oxygen. Because suppliers can only bill consumers for 36 months, factors like manufacturing turnaround time will be vital. In the supplier’s eyes, the sooner they can have the product in hand and shipped to recipients, the sooner they can start billing the consumer. Every day they have to wait on the manufacturer to deliver product translates into lost revenue.

Obviously, the emphasis on delivery turnaround time impacts the manufacturers as well. Although they may not be able to promise drastic changes to the speed of delivery, manufacturers should take into consideration the issues suppliers are facing and work toward viable solutions.

What about response to the changing medical market?
There is no doubt about it: the medical equipment industry will continue to transform. Between the changing demographics of consumers to alternative product offerings and healthcare reform, providers also must be aware of the ever-changing market and be willing to adjust their business plans accordingly. One way to keep up with customer demands and cut costs is to consider cylinder exchange over refurbishment. Not only does this process revitalize aging inventory by providing brand new cylinders, it is less expensive than refurbishment because it reduces, by up to 50%, mandatory Department of Transportation costs associated with requalification.

An emphasis on relationships and top-notch customer service, both between manufacturers and suppliers, and suppliers and consumers, will continue to be a top priority. As all of the parties navigate the changes to Medicare coverage, the one constant will be the one-on-one interaction each can offer the other. When it comes down to the point of sale, customers (whether it is a supplier or an actual consumer) are much more willing to deal with companies that are committed to their needs than those simply focused on the bottom line.

Worthington Cylinders
Columbus, OH
worthingtoncylinders.com