Know Your Numbers

A whiteboard at The Diabetes Store in Memphis, Tenn., displays comments from diabetic patients who have attended the provider’s free, three-hour Diabetes 101 education classes, which are held seven times a week and sometimes attract up to 35 attendees. “You’re a lifesaver,” reads one of the comments scrawled on the board. “You are my angel sent from God,” says another.

The comments are typical of feedback The Diabetes Store gets after its classes, which sometimes end with a standing ovation, says Greg Nuckles, COO. “It’s horrible to have diabetes, to go to a class, to sit through it. But it’s rare at the end of a class that they don’t stand up and clap.”

Attendees are provided a blood glucose meter during the class and are trained to use it, but it is the education that appeals to diabetic patients because it offers them hope. “It’s very clinical,” says Nuckles, who has owned The Diabetes Store with his wife Charlotte since 2006. “We don’t do a sales pitch.”

Even so, reading the messages, Nuckles reflects on the state of the business of providing diabetes supplies to patients. “If I wasn’t a glass-half-full kind of person, I would be looking for a way out as fast as I could,” he admits. “It’s the toughest business I ever thought about being in.”

Medicare developments including Round 1 of competitive bidding and the prospect of a nationwide mail-order bid promise to strip margins from the category and push providers such as Nuckles toward lower-cost products and less service.

Sidebar: Diabetic Supplies National Mail-Order Bid On the Way

“Today, our education is free and our product sales fund it,” he says. “In the future, we may have to charge for it or bill insurance. We’ll keep from doing that as long as we can.” The provider also operates locations in Southaven, Miss., and Homewood, Ala. (near Birmingham), and offers diabetes classes in the Chattanooga, Tenn., market.

The need for diabetes care and education is increasing even as the government looks to decrease the money it spends on the disease. According to the latest CDC report, diabetes affects 25.8 million people — about 8.3 percent of the U.S. population — including 18.8 million people who are diagnosed and another 7 million who are undiagnosed. Among those 65 and older, 26.9 percent, or about 10.9 million, had diabetes in 2010. It is the leading cause of kidney failure, non-traumatic lower-limb amputations, new cases of adult blindness and a major cause of heart disease and stroke.

The CDC estimated the direct medical costs of diabetes at $116 billion in 2007, with another $58 billion in indirect costs including disability, work loss and premature mortality.

Tough Times for Reimbursement

In the Round 1 rebid, mail-order pricing for diabetic supplies averaged 56 percent lower than former reimbursements. Test strips fell to a range between $13.88 and $15.62, leaving providers wondering who could supply the products at rates so low.

A study by University of Maryland economist Peter Cramton shows that 87 percent of existing providers in mail-order diabetic supplies lost contracts in the rebid, with 100 percent losing out in five of the nine competitive bidding areas. According to industry estimates, that means more than 90 percent of Medicare’s diabetic beneficiaries will be forced to find new providers because the nation’s top diabetic supply companies — including giant Liberty Medical — and other established diabetic providers did not win contracts.

Given the typical 90-day supplies and that the bid contracts began in January, the problem is expected to emerge even more clearly this month.

Nuckles says he is sometimes getting 15 calls a day from beneficiaries who can no longer get their brand-name supplies and are looking for a less expensive alternative. The Diabetes Store was not a Round 1 bidder and can only offer the alternative of a cash-pay product.

“We tell them to contact their representatives and their senators and to call Medicare,” says Nuckles.

Under the Medicare Improvements for Patients and Providers Act (MIPPA), contract suppliers are mandated to carry 50 percent, by volume, of all types of test strips. But the reimbursement levels make the majority of the top products too costly for bid winners to provide. The law also requires a nationwide bid for mail-order diabetic supplies, but the timeframe is still uncertain.

Sidebar: Top 19 Medicare Mail-Order Diabetic Test Strips

Like many other providers, Nuckles says Medicare makes up about 40 percent of his business, which is now at risk and represents a loss that would have a “devastating effect.”

“We have taken the position that we provide education and have always provided brand-name products. But those products are 30 to 40 percent above the bid,” he says. Historically, the company has offered Roche’s Accu-Check and Aviva products.

Now Nuckles is looking to improve processes to help lower costs, but “it’s impossible to lower costs enough to offset a product that costs more than it sells for,” he points out. He’s also expanding lines to include products such as diabetic shoes, and to emphasize products that are not part of competitive bidding.

At the end of the day, patient well-being is at stake, emphasizes Nuckles. “I don’t ever want an insulin-dependent person to look at a [low-cost] meter and inject themselves and then the meter be inaccurate,” he says. “Everybody wants to reduce health care costs. Unfortunately, lowering the quality of the product won’t get you there, and this could have a devastating effect on overall health care costs.”

Do More than Provide Products

Bryan Sowards, CEO of Infopia USA, agrees. “In the competitive bidding environment, suppliers eventually won’t have the luxury of paying close attention to their customers’ needs and concerns,” he warns. “They are going to have to focus all of their attention on acquisition costs and crunching numbers. This will lead to sifting through cheap products that may lack the quality their customers deserve.”

Like others in the industry, Sowards is concerned competitive bidding will have such a negative impact that smaller providers may eventually have to close their doors if they are not able to adjust. He’s urging his customers to continue to fight the bidding program before its effects are irreversible.

Along with blood glucose meters and test strips, Infopia offers the Ecocene Remote Home Patient Monitoring System, a telehealth platform. The system utilizes the components of health management through a line of glucose monitors, blood pressure cuffs and weight scales.

Infopia’s new Element with Voice blood glucose meter offers a three-second test time, requires 0.3 microliters of blood, uses light reflective technology and is now available with a talking feature. Used with the Eocene Remote Home Companion, the results are transferred from the meter across the patient’s home telephone line to the Eocene system, and the data is compiled into patient logbooks, reports and graphs that can be viewed by the patient’s care team.

Providers can also use the logbooks to obtain claims documentation; they can simply log-in and print the documentation they need from their customer.

“To sell more [in the diabetic sector], you have to do more than just provide products. You must identify, create and promote the differentiating aspects of your diabetic supply services,” Sowards says.

He also recommends continuously evaluating competitors’ tactics and using them as a stepping stone for a more proactive marketing approach. “Upgrade your product line and get out of the rut of selling by just a brand name and start selling with features and benefits to your customers,” he suggests.

Helping Providers through the Hurdles

Arkray USA’s Randy Turpin, senior marketing manager, says his company is concentrating on helping its customers “through the hurdles. We are flexible. We can customize programs to retain customers and customize pricing to help them with their margins.”

Regarding price, Turpin says “we can’t go below profitability, but we can figure out how to live in the [competitive bidding] arena if that arena stays around.”

Arkray, which offers the Glucocard family of products, is working with providers in marketing efforts and to set up business models to help them shift their costs.

“We have positioned our pricing in case competitive bidding goes national,” Turpin says. “We’re like every manufacturer; we are looking to position ourselves well, building strong partnerships with suppliers.” The company is working to bring more awareness to diabetic end-users through Glucocard YouChoose educational programs, a sales support team and in-service assistance, Turpin says, because HME providers need partners who can help them maneuver through the changing market.

Will lower prices limit service? Turpin says no. “We can’t allow it to limit our service,” he contends. “We still have to be able to service that diabetic patient, and giving them a meter and strip is not enough. At the end of the day, it’s about the patient, and we have to find a way to get around [cost pressures].

“I don’t think anybody in the industry looks at competitive bidding as a user-friendly program, but our government thought it was necessary,” he says. “We just need to make sure that survivors provide the patient what they need, when they need it.”

Needed: New Technologies

Wes Morrison, vice president of marketing and sales, VPI Diabetes Management, which distributes Infopia’s products, rejects the idea that increases in regulatory demands and better patient care must have a negative correlation with profitability. With remote home patient monitoring and new diabetes technology, providers can supply more for their customers and actually increase their profits, he says.

Too many providers, he says, are using “inefficient and expensive methods for collecting the documentation they need for reimbursements.”

Some providers may just decide not to deal with it at all, Morrison says. “They will not accept customers who are high-frequency testers and require more documentation for reimbursements.” If that happens, he says, “they are decreasing patient care and leaving money on the table.”

Stay Ahead of Changing Dynamics

Here are some factors to consider about today’s diabetes market, says Wes Morrison of VPI Diabetes Management:

• Understand the limitations and regulations that currently exist.
• Educate yourself on the conditions and products necessary to manage diabetes. There are more items available to your customers than just blood glucose meters and test strips.
• Have an understanding of your patients’ needs and the guidelines that managed care organizations and Medicare have defined.
• In order to be successful you can no longer exclusively promote more expensive name-brand products. However, the products you carry are a reflection of you and your company, so it’s important to keep quality in mind when looking for a lower cost.
• Keep your business well-rounded and become your customers’ “diabetes one-stop shop.”

Don’t Overlook Diabetic Shoes

Tom Derrick, C.Ped, a pedorthic footwear consultant, advised Medtrade 2010 attendees on various aspects of providing diabetic shoes. Here are some of his insights:

• Medicare regulations require providers to be educated, trained and accredited specifically for diabetic footwear. They must resubmit a CMS 855S form indicating diabetic footwear services and must adhere to state licensure guidelines, if applicable. Laws in Alabama, Arkansas, Florida, Illinois, Ohio, Oklahoma, Tennessee and Texas require a specific state license for all diabetic footwear providers.
• Industry certification is highly recommended, and may be required by accreditation agencies; it also improves marketability and helps gain referrals. Accreditations are Certified Fitter of Therapeutic Shoes (CFts) and Certified Pedorthist (C.Ped). For information: American Board for Certification in Orthotics, Prosthetics, & Pedorthics (www.abcop.org)
• When choosing among the dozen or so shoe manufacturers, look for quality, style, selection and simplicity. Be aware that prices vary. Ask what else the company offers and how they can help you be successful.
• Medicare’s therapeutic shoe benefit provides for one pair of extra-depth shoes (A5500) each year, as well as three pairs of heat moldable or custom inserts (A5512 or A5513). Documentation from a physician is needed to support the use of custom inserts.
• Diabetic patients must be receiving active diabetic treatment, and shoes must be needed for the treatment plan.
• Paperwork requirements include a certifying statement signed by the physician treating the patient’s diabetes (not a podiatrist) in addition to a prescription.
• Medicare rules require trained, educated providers to be present for both initial evaluation of a diabetic’s feet and the fitting and delivery of footwear.