Hospitals buying more portable ventilators

Health Industry Today, Feb, 1992 by Greg Borzo

The portable ventilator segment is the fastest growing segment of the $110 million to $120 million ventilator market. Demand for all types of ventilators is increasing 6% to 8% per year and leading the growth of the respiratory therapy equipment market.

An increase in the number of chronic care patients in hospitals has stimulated demand for ventilators there. Meanwhile, hospital cost-containment efforts have shifted their purchasing habits to less expensive, portable ventilators in favor of the more expensive critical care equipment.

"Eighty percent of patients on ventilators in hospitals don't need to be on critical care ventilators," according to Bob McCoy, ventilator product manager at Aequitron Medical Inc., Minneapolis.

"The trend in hospitals is towards less sophisticated equipment, so manufacturers are coming out with simpler, portable equipment."

The prospective payment system led hospitals to develop many extended-care facilities and step-down units for respiratory patients, which created new markets for ventilators, especially portable ones. Studies show that caring for chronic ventilator-dependent patients in the acute-care hospital is a money-losing proposition. Therefore, they are increasingly being discharged to extended-care facilities, stepdown units or their homes with portable ventilators.

Besides growing demand for portable ventilators from the alternate site market, hospitals have been purchasing significant quantities of portable ventilators, manufacturers say.

In the past, most portable ventilators were purchased for use in the home-care setting. But hospitals, forced to cut their costs under DRG reimbursements, have realized that a large percentage of their patients on critical care ventilators can be treated just as well with portable ventilators.

"Some hospitals have opted for a few space-age critical are ventilators for difficult cases and rely on simpler machines to meet the rest of their needs," McCoy said.

In addition, portable ventilators have become more sophisticated, versatile and powerful, making them more appropriate for some acute-and subacute-care patients.

[TABULAR DATA OMITTED]

Given these changing technologies and the fact that add-ons and accessories can make some portable ventilators more powerful and expensive than a critical care ventilator, it's sometimes hard to pin down which is which.

For the purposes of this story, a portable ventilator is one that can be carried and can be battery-operated. They cost an average of $8,000 vs. an average of $17,500 for adult hospital ventilators in 1989, according to "The U.S. Market for Respiratory Therapy Products and Services," published in 1990 by Frost & Sullivan Inc., New York.

In 1989, 3,312 portable ventilators were sold for $26.5 million, the report said. Sales will increase to 5,835 units in 1994, when the market size will have reached $46.7 million.

An increase in the incidence of and the number of deaths from respiratory diseases underlies the market growth. Worsening pollution and the aging of the U.S. population have contributed greatly to respiratory problems, experts say.

The ventilator market has been hurt by unfavorable Medicare reimbursement rates, according to manufacturers. The reimbursement problem has added a tremendous barrier to entry for new companies interested in selling equipment to respiratory care providers.

Hospitals have responded to cost pressures by developing wings and new facilities specifically for patients who require extended-care. Medicare patients can then be discharged from the hospital and read-mitted to the extended-care facility. This allows the hospital to collect the DRG payment for the original hospital stay and to receive additional reimbursement for the long-term care.

"More patients will be cared for in this DRG-exempt environment, although nothing prevents Health Care Financing Administration from taking away this opportunity," Preston said.

It is more difficult to make respiratory care profitable in the home care setting, he added. "You've got to be real good to make this profitable in home care, so dealers support this through the sales of other things, like oxygen."

PB leads the market

The portable ventilator market is dominated by three players: Puritan-Bennett Corp., Overland Park, Kan.; Lifecare, Lafayette, Colo; and Aequitron.

PB is the market leader for both critical care and portable ventilators, with 48% of all ventilator sales in 1990, according to a 1991 report by Theta Corp., Middlefield, Conn. Although the company would not reveal its market share for portable ventilators, a competitor said that PB had 36% of that market in 1990.

PB's direct sales force sells both critical care and portable ventilators to hospitals. The company's alternate site and home care sales force sells portable ventilators to the home care market as well as to discharge planners at hospitals.

Since PB has a strong presence in both the critical carr and portable ventilator markets, it has to be careful how it markets ventilators to hospitals, according to the company's competitors. Many manufacturers of portable ventilators generate sales by convincing hospitals to convert some of its patients from critical care ventilators to portable ventilators. But if PB's portable ventilator division followed the same marketing strategy, it would reduce the company's more lucrative sales of critical care ventilators.