Test strips or wheelchairs: seeing where the larger profit margin lies does not take a financial genius. It is no wonder, then, that many HME providers chose to concentrate on the big-ticket merchandise. But Ron Eason and Porter Hail saw big potential in the smaller items, says Ray Candiano, vice president of operations at Chronic Care Solutions, Clearwater, Fla, the company Eason and Hail founded.

Some mail-order diabetic-supply companies had come on the scene in the late 1980s after the introduction of the home glucose meter only to fall by the wayside as managed care companies and Medicare slashed reimbursement.

“Ron and Porter saw a niche there to apply their business savvy and combine it with good automation,” Candiano says. “DME companies were almost throwing the business away because they did not want to do a lot of little items, they wanted to do big-profit items. Ron and Porter jumped in, formed relationships with manufacturers, and took off from there.”

Since then, other companies have seen the same opportunities, but not all of them can claim 8 years of solid revenue growth, from $400,000 in 1995 to $47 million last year. “The majority of what I have seen happen has to do with the reputation and the relationships we have had with manufacturers, with patients, and with doctors,” Candiano says.

Eason and Hail started the medical mail-order company with a focus on the needs of diabetic patients. It now offers a broader range of chronic care products directly to patients under the business names Diabetic Supply of USA, Respiratory Supply of USA, Ostomy Supply of USA, and Rx Supply of USA. Chronic Care Solutions provides Medicare and privately insured patients throughout the United States with a way to order medical supplies and medication by phone and have them shipped directly to the home as needed or on a personalized schedule, with no prepayment. Patients also need not file claim forms, and the company offers education, counseling, and follow-up services.

“What we have today has a tremendous amount to do with the reputation that we have established from day one,” Candiano says. “To us, the 25% of our business that comes from referrals is money we do not have to put into marketing. That is why reputation and word of mouth are everything to a company like ours and that is why ‘Doing the right thing’ is our motto.”

As a result, Chronic Care Solutions puts an emphasis on strict compliance with Medicare billing rules and on encouraging patient compliance with treatment, Candiano says. “When you are working with a physician, obviously the end goal is a win-win for the patient and the doctor, so we are going to do the right thing there,” he says. “We want the patients testing [their glucose levels], we want them taking their medications, and we are going to work with the doctors to get them to do that.”

Competing on Service
To maintain its good name and maximize patient referrals, Chronic Care Solutions also emphasizes customer service. “Our reputation is that patients can get a real person on the telephone every single time, not an automated system,” Candiano says. “We are here 7 days a week. That is not what Medicare patients are used to. They are used to getting automated systems, because usually the Medicare system creates low margins and customer service is commensurate with that.”

Chronic Care Solutions’ customer-service representatives are continually trained on the latest testing and treatment supplies, and once a customer has placed an order, the company’s proprietary patient management system software facilitates shipping, tracking, and billing. “The automation has allowed us to handle the volume of patients coming at us one at a time,” Candiano says. “We have kept ahead of the industry, I think, in having a proprietary system where we are not trying to mold ourselves to a system already created, we are molding the system to what we need. I really believe that is our competitive advantage.”

Having a customized flexible automated system is also key in keeping up with Medicare documentation requirements. “Somebody in a business like ours needs to collect money and that is from the billing,” Candiano says. “So the cycle really starts with handling the documentation. All that [billing programming] has been written in-house and customized to our company. That, over time, has allowed us to handle the larger volume.”

In addition to trying to do right by physicians and patients, the company strives to maintain good relationships with manufacturers. “It matters more now to these manufacturers that they link up with people who are going to represent them well, and I believe that is really what our company does,” Candiano says. “We are going to keep people on their products, we are going to treat the patients well, and again we believe it is just doing the right thing, but it comes down fundamentally to a reputation that we have established and are trying to maintain.”

Investing in the Future
In early 2002, Chronic Care Solutions partnered with KRG Capital Partners, a private equity investment firm in Denver, to gain additional capital to pursue growth opportunities. “I see us looking into fields related to diabetes and pharmacy, like managed care,” Candiano says. “There are a lot of chronic diseases out there.”

Currently, 95% of Chronic Care Solutions’ revenues are generated from its diabetes, respiratory, and pharmacy sales. In the future, however, the company may expand into ancillary areas. “I see us going out and looking for businesses that can be rolled into these areas that we are really strong in,” Candiano says. “I see us establishing ourselves as a searcher for contracts and relationships rather than just going out there trying to find direct-mail business. Obviously, we are going to be looking for a managed care contract or a relationship out there. You establish those relationships through the reputation of individuals who are interested in moving forward with you, and I think we have attracted the kind of people who can get that business for us.”

One of those people is Gordon Roll, a former director of Medicare and managed care sales for the diagnostics division of Bayer Corp who joined the company this year in the newly created position of vice president of sales and business development.

“Three or 4 years ago, if you had asked what we are trying to do, we would have said that we are just going to do what we are doing as good as we can possibly do it for the next few years,” Candiano says. “We didn’t have a grand scope. We didn’t have financial partners. Now, we have built our reputation, we have brought on board a strong financial partner that can support looking for business development, and we have an individual from a major manufacturer that has large contracts. Now we are going to take those and go out and search for business that makes sense to us, and I think that is really where our company is heading.”

Keith Bush is a contributing writer for Dealer/Provider.