(A 20 Minute Update)(A 20 Minute Update)

The State of HME:The State of HME:Demographics, Figures & Demographics, Figures & Projections Affecting the Projections Affecting the

HME IndustryHME Industry

Presented by John E. Gallagher Vice President - Government RelationsThe VGM Group

Age – Facts & FiguresAge – Facts & Figures 36 million people aged 65 or older -

almost 13 percent of the total population. Older Americans have increased more than ten-fold since 1900.

In 2011, the “baby boom” generation will begin to turn 65, and by 2030, it is projected that one in five people will be age 65 or older. The size of the older population is projected to double over the next 30 years, growing to 70 million by 2030.

The population age 85 and older is currently the fastest growing segment of the older population. An estimated 2 percent of the population is now age 85 and older. By 2050 the percentage in this age group is projected to increase to almost 5 percent of the U.S. population, or about 19 million.

Some researchers predict that death rates at older ages will decline more rapidly than reflected in the Census Bureau’s projections, which could result in faster growth of this population. The size of this age group is especially important for the future of the homecare industry, because these individuals tend to be in poorer health and require more services than the younger old.

Most States 65+ > 10%!Most States 65+ > 10%!

65 and older65 and older

100+100+

There were about 65,000 people age 100 or older in 2000, and the number of centenarians is projected to grow quickly so that there may be as many as 381,000 by 2030!

Life ExpectancyLife Expectancy Today Americans enjoyed the longest life

expectancy in U.S. history – almost 77 years. The life expectancy of men is 74 years and for women almost 80 years. A century earlier, life expectancy was 48 years for men and 51 years for women.

  Men and women who reach age 65 now

live, on average, to ages 81 and 84, respectively. For older Americans, the increase in life expectancy is largely due to the sharp drop in deaths from heart disease and stroke.

HME Expenditures – Small % of Total, BUT…HME Expenditures – Small % of Total, BUT…(all figures in $000’s)(all figures in $000’s)

$0

$100,000,000

$200,000,000

$300,000,000

$400,000,000

$500,000,000

$600,000,000

$700,000,000

$800,000,000

NHE: Total Expenditure, By Provider, 1970 - 2010

Hospital

Physician

Home Health Care

Pharmacy

Nursing Home

HME

……Large % and $ Increase!Large % and $ Increase!(all figures in $000’s – 2010 @ $32 Billion!)(all figures in $000’s – 2010 @ $32 Billion!)

NHE: Total HME Expenditures, 1970 - 2010

$0

$5,000,000

$10,000,000

$15,000,000

$20,000,000

$25,000,000

$30,000,000

$35,000,000

1970 1980 1990 2000 2010

DME

Approximate national health Approximate national health expenditures are as follows:expenditures are as follows:

1/3 of every health care dollar is spent on hospital care, 1/5 on physicians, 1/10 on prescription drugs, and about 1.5% on home medical equipment and supplies.

Most certainly, the aging of the population has important consequences for our homecare industry.

As the elderly fraction of the population increases, more homecare equipment and services will be required for the treatment and management of chronic and acute health conditions.

Growth – By Provider….Growth – By Provider….

19801990

20002010

All Providers

Hospital

Physician

Home Health Care

PharmacyNursing Home

HME

0%

100%

200%

300%

400%

500%

600%

Note: Home Health 1980 Actual Value

980%

NHE: Percentage Growth, By Provider, 1980 - 2010

All Providers

Hospital

Physician

Home Health Care

Pharmacy

Nursing Home

HME

Growth – By Provider….Growth – By Provider…. While a little difficult to see on the

previous PowerPoint slide, note that estimated HME expenditure increases, by percentage, for 2010 remain relatively constant with hospital and nursing home projections, or about an increase of 70 – 80%. This is equal to an estimated a $32 billion projection!

2010 NHE Growth Detail:2010 NHE Growth Detail:

NHE - PROJECTED INCREASE 2010

Total NHE 103.10%

Hospital 78.91%

Physician 95.31%

Home Health Care 104.71%

Rx Prescription Drugs 208.69%

Nursing Home 70.63%

HME 73.22%

Miscellaneous U.S. Health Miscellaneous U.S. Health “Quick Facts”“Quick Facts”

Three in five adults ages 20-74 are overweight.

One in four Americans is considered obese. Almost 40 percent engaged in no physical

activity during leisure time, and women were more sedentary than men.

One in 10 Americans age 45-54, 1 in 5 of those 55-64 years, 1 in 4 of those 65-74 years, and 1 in 3 of those 75 years and over reported being in fair or poor health.

 

Hospital….Hospital…. Hospital stays keep getting shorter: just 4.9

days on average in 2000. Twenty years ago patients spent more than 7

days in the hospital. Sixty-three percent of all surgeries now are

performed as outpatient procedures, with patients being sent home after a short stay in a recovery room.

A decade earlier, one-half of all surgeries were on outpatients. In 1980 only 16 percent were done on outpatients

Payers…Payers…

Federal and State government programs – principally Medicare and Medicaid – paid 43 percent of all medical bills.

  Private insurance covered 35 percent, and

other private sources paid 5 percent.   Consumers paid 17 percent out of their own

pockets.   

Projections: Major HME Markets.

The Respiratory Market The Respiratory Market Between now and when the first baby

boomer turns 65, Americans will report more than 170 million new cases of asthma and as many as 150 million cases of bronchitis, according to the National Center for Health Statistics in Hyattsville, Md. More than 2 million Americans currently receive some type of oxygen therapy at home.

And, do you know…And, do you know… According to a new report from the

market research firm Kalorama Information, the current $464.5 million industry should grow at an annual rate of 7.8 percent during the next four years, and will reach an annual revenue of $677.4 million by 2006!

Oxygen concentrators…Oxygen concentrators…

Generally, industry predictions for oxygen concentrators are positive. Recovering from the 1997 reimbursement cuts that drove down prices, the oxygen concentrator market may see a 7.3 percent annual growth between now and 2006.

Sleep Disorder Devices…Sleep Disorder Devices…

While as many as 12 million Americans suffer from sleep apnea, 80 percent to 90 percent of these people have not yet been clinically diagnosed. Awareness about the far-reaching implications of sleep apnea is increasing, and government research findings recently prompted Medicare to extend the coverage of CPAP devices to include mild and moderate sleep apnea.

And Ventilators…And Ventilators… Driving the ventilator market is the trend

toward sending hospital ventilator patients home sooner. Some managed care organizations are setting a limit of five weeks of hospitalization for a ventilated patient. For the ventilator market, these developments mean rapid growth, to 10.2 percent annually during the next four years. In 2002, the market approximated $116.8 million; by 2006, $189.8 million, according to Kalorama.

$0

$200,000,000

$400,000,000

$600,000,000

$800,000,000

2002

2003

2004

2005

2006

U.S. Home Respiratory Projections

KaloramaInformationProjected Sales

The Mobility MarketThe Mobility Market The mobility market is one of the largest in our industry. Market

research firm Frost & Sullivan is predicting that, by 2008, the mobility

market will generate more than $1 billion in annual revenue, an increase of $244 million, or 23.4 percent, from the $766 million in revenue generated

in 2001.

In addition, the mobility market is one of the most expansive as well — from manual and power wheelchairs, to walkers and rollators, to scooters and ramps, not to mention the companion product category of seating and positioning, which is large in its own right.

$0

$200,000,000

$400,000,000

$600,000,000

$800,000,000

$1,000,000,000

$1,200,000,000

2001 2002 2003 2004 2005 2006 2007 2008

U.S. Mobility Projections

InfusionInfusion

Growing at an annual rate of 10.3 percent, the U.S. infusion products market should, between now and 2006, outpace all other home care segments, also according to a recent report from Kalorama Information.

 

The report, entitled "The U.S. Market for Home Care Products," defined infusion products as ambulatory infusion pumps, nutritional supplements and pharmaceuticals, and said that, in 2001, these products generated a revenue of $815 million. Consequently, if Kalorama's growth predictions are correct, infusion products will generate a revenue of $1.33 billion in 2006, more than the respiratory and mobility markets combined.

$0

$200,000,000

$400,000,000

$600,000,000

$800,000,000

$1,000,000,000

$1,200,000,000

$1,400,000,000

2001 2002 2003 2004 2005 2006

U.S. Infusion Projections

Disabilities

Disability Facts & FiguresDisability Facts & Figures

Disability Facts & FiguresDisability Facts & Figures The percentages of people with disabilities

increase sharply with age (Figure 8). Disability takes a much heavier toll on the

very old. Almost three-fourths (73.6%) of those aged 80+ report at least one disability.

Over half (57.6%) of those aged 80+ had one or more severe disabilities and 34.9% of the 80+ population reported needing assistance as a result of disability.

And…And… There is a strong relationship between

disability status and reported health status. Among those 65+ with a severe disability, 68.0% reported their health as fair or poor.

Among the 65+ persons who reported no disability, only 10.5% reported their health as fair or poor.

Presence of a severe disability is also associated with lower income levels and educational attainment.

OutlookOutlook

At VGM, we believes that sales of HME products will continue to grow during the next decade as a result of several factors, including:

Favorable Business Conditions.Favorable Business Conditions.

Interest rates are the lowest in years. Capital intensive HME businesses require credit. In 2001, a full Cost of Living Allowance was implemented. And, the recent approval of the ABN process allows new choices for consumers and additional opportunities for providers.

Growth in population over age 65Growth in population over age 65.. The nation's overall life expectancy

continues to increase, and the current life expectancy based on 2001 data is now an all-time high of approximately 76.7 years. More than 13% of the U.S. population is 65 or older, and this percentage is expected to increase to 20% by 2030. The over-65 age group represents the vast majority of home health care patients and continues to grow. A significant percentage of people using home and community-based health care services are also 65 years of age and older.

Treatment trendsTreatment trends We believe that many medical

professionals and patients will continue to prefer home health care over institutional care. Homecare results in greater patient independence, increased patient responsibility and improved responsiveness to treatment because familiar surroundings are conducive to improved patient outcomes.

Health care professionals, public payers and private payers agree that home care is a cost effective, clinically appropriate alternative to facility-based care. Recent surveys show that approximately 70% of adults would rather recover from accident or illness in their home, while approximately 90% of the older population showed preference for home-based long-term care.

Technological trendsTechnological trends. . Technological advances have made

HME increasingly adaptable for use in the home. Current hospital procedures often allow for earlier patient discharge, thereby lengthening recuperation periods outside of the traditional institutional setting. In addition, continuing medical advances prolong the lives of adults and children, thus increasing the demand for home medical care equipment.

Healthcare cost containment trendsHealthcare cost containment trends The rising cost of health care has caused many

payers of health care expenses to look for ways to contain costs. Home health care has gained wide-spread acceptance among health care providers and public policy makers as a cost effective, clinically appropriate and patient preferred alternative to facility-based care for a variety of acute and long-term illnesses and disabilities. Home health care and home medical equipment will play a significant role in reducing health care costs.

Society's mainstreaming of people Society's mainstreaming of people

with disabilitieswith disabilities.. People with disabilities are part of the fabric of

society, and this has increased, in large part, due to the Americans with Disabilities Act, which became law in 1991. This legislation provides mainstream opportunities to people with disabilities. The Americans with Disabilities Act imposes requirements on certain components of society to make reasonable accommodations to integrate people with disabilities into the community and to the workplace.