Like much of the rest of the HME market, providers of mail-order
diabetes supplies are playing a waiting game when it comes to rates
and winners in the Round 1 rebid. But even the looming questions
about competitive bidding can't upstage the growing product demand
by a rapidly expanding population of diabetics.
Beyond competitive bidding, there are major concerns about the
big-picture economics of what has been called an epidemic of
diabetes, driven in part by Americans' alarming tendency toward
obesity. According to the CDC, 23.6 million people in the United
States (7.8 percent of the total population) have diabetes. Of
those, 5.7 million are undiagnosed. If current trends continue, one
in three Americans will develop diabetes in their lifetime, and
those with diabetes will lose, on average, 10 to 15 years of
life.
"The economics involved in regulating glucose levels and
diabetes are going to hit everyone, from suppliers to dealers to
patients," says John Walsh, president of Diabetes Mall, an online
source for diabetes information, books and non-insurance-covered
test strips.
The author of Pumping Insulin and several other books,
Walsh has been a physician's assistant for more than 30 years and
founded the Diabetesnet.com Web site in 1994. "If
our health care efforts are focused solely on cost, real health
issues will not be addressed, and neither will health care costs
over the long term," he says.
Product Development
Currently, a steady stream of new products for diabetics
continues, especially new blood glucose meters. Some products
enable the use of smaller blood samples from the palm, forearm or
thigh as well as a fingertip.
"There are a number of new devices coming with improved color
high-contrast screens, and with direct USB or local radio or
Bluetooth connections, along with more helpful online
communications," adds Walsh. "Continuous monitors are being better
integrated into pump devices."
But issues related to bolus recommendations are a problem, he
says, when relying on devices to guide improvements in glucose
levels. "There is a gradual improvement in technology that may
assist in controlling glucose levels over time," Walsh says.
Other examples of new and emerging technologies are continuous
monitors that can shut off insulin pump delivery at night to reduce
hypoglycemia and "talking" pumps and meters. The Prodigy Voice from
Prodigy Diabetes Care and Accu-Chek's Voicemate Plus, which comes
with the Accu-Chek Compact Plus blood glucose monitor, are among
the options offering help for blind and visually impaired people in
managing their disease independently.
"In today's market, the common denominators used to calculate
the hierarchy of diabetes technology are based on blood sample
size, result test time and automatic meter calibration," says Bryan
Sowards, CEO of Infopia USA. "We now feel that those features,
although important, will be viewed merely as qualifiers in order to
compete in the diabetic marketplace." Sowards says moving forward,
manufacturers and providers must partner "to provide a connectivity
bridge between the patient and their health care team."
The company's Eocene Remote Home Patient Monitoring System is a
comprehensive telehealth platform that enables providers to capture
daily diagnostic results for health coaching, trending and
interventions. The system gathers information through glucose
monitors, a blood pressure cuff, thermo weight scale and even an
enabled home care bed.
Adam Clark, national director of sales channels for Medtronic
Diabetes, notes the trend in technology toward the use of mobile
devices is also growing. The manufacturer has connected its
CareLink Therapy Management Software to the Internet and is eying
mobile devices. "These types of technologies have the promise to
notify the caregivers when a patient has abnormal trends in blood
glucose or is in danger of having low or high readings," says
Clark.
While insulin pumps and supplies have historically made up the
majority of the manufacturer's sales to HME providers, sales of its
continuous glucose monitoring line have grown over the past two
years, Clark says. The company's MiniMed Paradigm REAL-Time System
combines insulin pump technology with continuous glucose
monitoring. The system displays updated readings every five minutes
to guide therapy adjustments and identify patterns and problems
that fingerstick and A1C testing, alone, may miss.
Other trends Clark points out: simplifying technology to make
products easier for patients to use, and a focus on aesthetics.
According to Home Diagnostics, meters that can track and analyze
daily changes help patients better understand and control their
blood glucose levels. While some devices with storage capability
allow users to download data onto their computers, soon patients
will be able to transmit data wirelessly to their physician through
either personal or electronic health records, the company says.
Monitoring systems are continually improving with respect to meter
performance, and accuracy continues to improve with each generation
of products.
Along with diabetes management software, Home Diagnostics' line
includes the TRUEbalance no-coding system; the TRUEresult, which
delivers results in 4 seconds using only 0.5 mL of blood and offers
7-, 14- and 30-day averaging; the TRUEread, which offers alternate
site testing; and the TRUE2go, billed as the world's smallest
meter, for patients on the go.
Cost Pressures
Even though products are advancing, experts in this field wonder
whether some patients will get the opportunity to use them. In the
original Round 1 of Medicare competitive bidding, reimbursement
reductions for mail-order diabetic supplies averaged 43 percent.
For providers, such pricing pressures could surface again in the
Round 1 rebid.
"There may be many different points of view on the real goal of
competitive bidding and what long-term effects we will see," says
Sowards of Infopia. "We feel that the net result will ultimately
include increased regulatory compliance standards with an adverse
declining reimbursement schedule. To prosper, or maybe just
survive, suppliers will have to leverage advanced software
technologies to curb some of their activity-based costs associated
with these upcoming changes."
Walsh is concerned that Medicare's focus on lowering costs could
lead to low-cost but less-accurate devices that do not address the
larger aim of controlling blood glucose levels, which is a major
health need in the country. Speaking broadly, he says, the market
for diabetes supplies suffers from a misplaced focus on short-term
costs and doesn't address the long-term health care costs related
to managing diabetes.
"From a clinical standpoint, you don't want low cost as the
outcome," Walsh says. "The outcome should be good regulation of
glucose levels. The short-term cost of a meter doesn't address the
real issue of managing glucose. The diabetes industry could benefit
from an economic incentive to work more broadly to improve blood
glucose levels. A narrow focus only on cost will not bring about
real health improvements."
Provider Tim Binkley, president of Valentines Diabetic Supply,
notes that so far, Medicare has been unwilling to pay for more
expensive technologies, such as stick-free monitoring. As a result,
the market for some advanced products will be small and
specialized, aimed at the high-end where people are willing to pay
out-of-pocket.
When it comes to maximizing an HME provider's success in the
future, it comes back to value, says Medtronic's Clark. "When times
are tough, people value quality more than ever before. As a result,
companies must consider how their service and support offerings are
better than the competition." Examples include data management,
outcome surveys and customer experience metrics.
"The landscape of the industry is once again changing, and
suppliers can either embrace these changes and view them as
opportunities, or become jaded," says Sowards. "The industry is
looking for suppliers who will go above and beyond the typical
'pack and ship' for diabetes supplies. They want a supplier that
will take an active role and be part of the solution."
"Pricing pressure has the potential to change the HME and device
manufacturer community," says Clark. "In the future, we expect to
see requirements for performance standards with health plans and
government agencies related to how we serve their patients and the
impact of our offerings. Companies will need to provide value for
the payer, as well as the physician and patient communities, in
order to differentiate themselves."
Last November, the company opened a Diabetes Therapy and
Management Center in San Antonio. The new operation provides
customer care and education for diabetes patients and health care
professionals using Medtronic insulin pumps, continuous glucose
monitoring and therapy management software for the treatment of
diabetes. The center currently employs more than 200 diabetes
therapy professionals, but the company anticipates hiring nearly
1,400 people within the next five years.
Complications of Diabetes
Of those with diabetes, three out of five people have
one other serious health problem; one in three has two other
serious health problems; one out of 10 has three other serious
health problems; and one out of 13 has four or more.
- Diabetes is a leading cause of adult blindness, lower-limb
amputation, kidney disease and nerve damage. - 5.5 million people in the United States have diabetic
retinopathy; by 2050 it will increase to 16-18 million. - 40 percent of people with diabetes suffer some degree of
hearing impairment. - Two-thirds of people with diabetes die from a heart attack or
stroke. - Congestive heart failure occurs in 8 percent of Americans with
diabetes; heart attacks occur in almost 10 percent compared to less
than 2 percent in non-diabetics; coronary artery disease occurs in
9 percent. - Approximately 28 percent develop chronic kidney disease.
- 7 percent develop strokes.
- 23 percent have foot problems, including numbness and
amputations. - Therisk for lower extremity amputation is estimated at 15 to 40
times higher among people with diabetes than among those without
diabetes. - Every 24 hours:
- 4,100 new diabetes cases are diagnosed;
- 810 die from diabetes;
- 230 people with diabetes will have a diabetes-related
amputation; - 120 new patients will require kidney dialysis or transplant;
and - 55 will go blind.
- Nearly 65 percent of individuals with diabetes die from
cardiovascular disease in the U.S., establishing it as the leading
cause of death among this growing segment of the population.
SOURCES: National Diabetes Fact Sheet of the National Center for
Chronic Disease Prevention and Heath Promotion; NCHS; CDC; ADA;
AACE
- Read the "Waiting on
Round 1 Rebid" sidebar to learn about competitive
bidding impacts on the diabetic supplies market.
Experts Interviewed
- Tim Binkley, president, Valentines Diabetic
Supply, Atlanta - Adam Clark, national director of sales
channels, Medtronic Diabetes, Northridge, Calif. - Home Diagnostics Inc., Ft. Lauderdale, Fla.
(In February, HDI announced it will be acquired by Japan's Nipro
Corp.) - Bryan Sowards, CEO, Infopia USA, Titusville,
Fla. - John Walsh, president, Diabetes Mall, San
Diego
Waiting on Round 1 Rebid
Valentines Diabetic Supply in Roswell, Ga., bid in the Round 1
rebid for mail-order diabetic supplies in three CBAs. The provider
has patients in 35 states and supplies diabetic strips, meters,
lancets and pump supplies through the mail, but "we wanted to stay
within states where we have some business," says Tim Binkley,
president.
In placing the company's bid, Binkley says, "We bid what we can
live with while operating a business with the kind of service we
want to provide. That was the only way we could do it intelligently
and keep our business intact. We have tried to be competitive but
realistic."
The window for the rebid closed in December, and now bidders
must wait to learn the results. Reimbursements resulting from the
bid are expected to be released in June, with contract winners
announced in September.
Like his company, Binkley points out, there are thousands of
local and regional diabetic providers that use the professional
referral model in contrast to the direct-to-consumer model used by
national companies such as Liberty Medical or CCS Medical. Their
fate, just like his, hinges on the outcome of the rebid.
Valentines' bids in the Charlotte, Cincinnati and Columbus CBAs
represent only 10 to 15 percent of the company's business, so its
entire future is not at stake. But if they lose, the company will
need to diversify into non-Medicare products (such as incontinence
aids, wound care, etc.) to remain in those MSAs, Binkley says. And
if drastic Medicare cuts extend nationwide, he says the company
will have to "change our business model some if we want to stay
around."
While Binkley does not expect the rebid rates to be as "severely
reduced" as they were in the original Round 1 — payments for
mail-order diabetic suppliers were as much as 43 percent lower than
then-current reimbursements — he predicts the range will be
lower than the 9.5 percent across-the-board decrease CMS imposed
when the first Round 1 was abandoned.
"That's the problem with it: It's like throwing at a dartboard,"
he says.
"We like our business and believe it is a very good business
model for patients. The mail-order model is very efficient, and a
lot of our patients have transportation issues. Think about your
grandmother at home who lives alone. How is she going to get to the
drug store?" Binkley says.
He questions the wisdom of CMS exempting drug stores and
pharmacies from the 9.5 percent decrease, in effect favoring a less
cost-effective solution to providing diabetic supplies to home care
patients. "It's unfair and doesn't make any sense," he says.
Another result of competitive bidding will be that patients with
diabetes won't have a choice, which was a basic tenet of Medicare
— to provide a choice of suppliers, says Binkley. He notes
that elderly patients who have to use a different provider aren't
going to be happy.
"They don't handle change very well," he says.
