Squeezing Profits

Economists routinely opine that business hates uncertainty, and the truism applies to the HME world in no small measure. At press time, single payment amounts for Round 2 of competitive bidding were in effect for 91 communities in the United States. The miseries that accompany the massive reimbursement reduction (45 percent on average) add up to a whole lot of uncertainty.

While compression hosiery is not one of the product categories affected by competitive bidding, some providers are still hesitant to buy the largely retail product. After all, a delay of the program may take shape and/or legislation may emerge to change competitive bidding to a market pricing model. Add it all up and providers are hesitant to act.

For Mike Murphy, national account manager for Texas-based Alex Orthopedic Inc., the hesitancy has led to relatively flat sales at the midway point of 2013. “I think it has to do with the question marks surrounding competitive bidding,” he says. “Some providers are holding back and reducing inventory levels in anticipation of what might happen. I think that’s had an effect on the market.”

The flat trend, at least for now, is a paradox because manufacturers across the board agree that the patient demographics for compression hosiery are continuing to grow. Medicare rarely pays for hosiery, so patients are usually paying out of pocket, or occasionally using private insurance. Manufacturers see the trend, and they are altering their behavior as a result.

“If you look at the big companies that do compression garments, their trend has been more and more away from the prescription business,” says Murphy. “These companies are pulling their reps away from calling on physicians, which used to be the meat of the business. They’re all now concentrated on dealers, so it’s becoming less of a physician-driven business, and more of a dealer-driven business. The shift to retail should be a plus for everybody in the compression hosiery business.”

Michael Cannon, product manager, Phlebology/Lymphology, medi USA, agrees that more HME businesses are turning their focus to retail. For providers who continue to shy away from cash sales, Cannon says, “I think they need to realize that people are paying cash for most things in life that they want, and this is just another step in that direction. Businesses need to know their customers and pay attention to details such as offering discounts for cash pay when possible.”

With so much coming out of the pockets of patients, it’s no wonder that cost is a concern. Brian Kletch, senior marketing manager at BSN Medical Inc. in Charlotte, N.C., has seen this concern reflected in a growing emphasis on lower-cost products. “It’s largely because of the challenging economic environment,” he says. “The average wage has not gone up in years. But one of the biggest misconceptions is that premium brands are expensive.”

Despite a consistent focus on the cash market for compression garments, the specter of competitive bidding continues to spread its tentacles. Some providers are pondering a radical change in business model, while others could possibly go out of business.

“Question marks are everywhere,” Murphy says. “A month ago I went to a DME dealer meeting in Birmingham, Ala., and there was a Medicare representative there. All these dealers had very specific questions, and this guy did not have any answers. That’s the kind of thing that scares dealers to death, because if they know what they have to deal with, that’s one thing—but they do not. The hosiery market is not directly affected. It’s a secondary thing, but the question marks surrounding competitive bidding affect everybody.”

A Younger Demographic

Medicare is largely off the table in the compression hosiery market (unless there is an open ulcer), and that is not a problem considering that an increasingly younger demographic requires the product. These younger individuals are not interested in sporting “medical looking” gear, and manufacturers are getting the message. 

“Every spring/summer and fall/winter we launch fashion colors in our upper and lower extremity products,” says Tom Musone, director of marketing, Juzo. “The compression market is getting younger, and more fashion options add up to better compliance and a greater sales opportunity.” 

Much like fashion accessories in a clothing store, SIGVARIS North America offers products in a variety of sizes and styles, including petite and plus-size options. “Women want their legs to look beautiful and feel great,” says Melissa Gwozdz, public relations spokesperson for the company. “These products feature on-trend colors and are perfect for both professional and casual settings.”

“We see a trend of people getting into compression at an earlier stage than in the past, and as a result we sell more non-prescription level products than in years past,” adds Cannon. “None of these is covered by insurance, and that underscores the need to be in the cash market for compression. These patients will be patients for life, and will choose to wear compression rather than be told to do so.”

Gwozdz agrees that retailers have a huge opportunity to expand the compression business across a variety of ages. SIGVARIS partners with businesses while also offering leg health training courses in an effort to improve dealer knowledge. “Once consumers have revived their legs with SIGVARIS, they keep coming back because their legs feel amazing,” Gwozdz says. “We find this creates a steady stream of revenue for the SIGVARIS dealers who take the time to educate consumers about the health benefits of graduated compression.”

Those who come to realize these health benefits may actually want to wear compression, thus creating a demand that transcends mere medical need. “None of us like to wear something that we ‘have to wear,’” muses Cannon. “But if everyone focuses on education of prospective wearers of compression, then more people will choose to wear it. It is important to include the patient in the process. Find out what the patient knows about compression and what it will do. Learn about the patient’s lifestyle and goals so that you can match up products to patients and help them achieve those goals.”

Trade Show Trend

When Jeff Stoner, director of national accounts at DJO Professional Retail, is manning the exhibit booths at the various trade shows, he can pretty much predict what attendees will ask. “The number one question has been, ‘What do you have for cash sales?’” says Stoner. “And to sell cash items, you must have a store that is clean, well lit, with product that is merchandised—not just placed on the wall, but thought out—and have the philosophy of serving the customer. These should be fundamentals in any store, but often they are not.” 

The experience at last year’s Medtrade in Atlanta was similar for Mike Murphy at Alex Orthopedic, and Murphy expects the focus at this year’s Medtrade in Orlando, Fla. (Oct 7-10) to be much the same. “We had people coming by our booth, and every single one was interested in retail product,” he says. “But there is a difference between being interested in retail and doing it right.”

If the fundamentals are executed correctly and providers “do it right,” Stoner says the compression category can lead to ongoing repeat business. “Something as simple as a name file for consumer history of product and size,” says Stoner, “is so valuable.” 

Coverage Mandates

Compression garments/hosiery occupy the cash/retail market space for the most part, but there are exceptions. According to Michael Cannon, product manager, Phlebology/Lymphology, medi USA, there is no Medicare reimbursement (unless there is an open ulcer), and private insurance may or may not exist with an insurance policy. “It is important to look into whether or not the insurer offers coverage, but it is also important to look into whether or not your state has a mandate requiring coverage for compression based on the diagnosis,” says Cannon. “An example is the state of North Carolina which has had a mandate since 2009.”

Cannon also points out that the Women’s Health and Cancer Rights Act of 1998 states that insurance companies that provide mastectomy coverage must provide coverage for certain services relating to the mastectomy in a manner determined in consultation with an attending physician. “To learn more, go to www.dol.gov/ebsa/publications/whcra.html,” says Cannon. “Also, if patients are interested in helping to improve coverage through legislation, they can go to lymphedematreatmentact.org. The Lymphedema Diagnosis and Treatment Cost Saving Act will improve coverage for the treatment of lymphedema.”

Go Online

Alex Orthopedic
www.alexorthopedic.com

BSN Medical
www.bsnmedical.com

Juzo
www.juzousa.com

medi USA
www.mediusa.com

SIGVARIS North America
www.sigvarisusa.com