With the increased use of specialty drug therapies, the infusion market has come back into focus this past year as a hot commodity. Add this to Medicare’s expanded coverage under Part D and you have a recipe for rapid growth. However, these growth areas have not proven that they stabilize and increase profit like our old friend nutritional therapy.

With Medicare and Medicaid now trying to cut costs and shift to ASP (average sale price), the current stable market for nutritional therapy patients looks more promising than ever. The revenue from a total parenteral nutrition (TPN) patient is usually equal to several antibiotic patients, because these patients tend to remain on service for longer periods of time—including those in the occasional lifetime category. We still like the antibiotic referrals, but in today’s market a diversified referral base is advisable.

At Westcare, the core business of providing enteral and TPN care still continues to be a solid base on which to grow the business. In today’s market, we continue to see strong referrals not only from our traditional referral sources, but also from oncologists supplementing chemotherapy, from skilled nursing units, and from assisted living facilities.

Change in Referrals
The current trend in the industry is toward more aggressive use of enteral therapy vs TPN in most cases. One of the challenges of growing the enteral therapy business is the impressive selection of products now available for all the different types of patients from diabetics to those who are ventilator dependent. At any given time, Westcare carries approximately 25 different types of enteral products on its shelves, and relies on the wholesaler for just-in-time deliveries to ensure all necessary medications are made available as prescribed.

Once the referrals are approved, it is critical to have knowledgeable billers/intake personnel who know the rules of coverage. Payors from Medicare to private pay have various requirements (prior authorization, out of network, high deductible/co-payments), which can significantly affect your DSO (days sales outstanding). Fortunately, most of the payors are now accepting electronic claims. With Westcare’s experience, this has been shown to reduce the denial rate by up to 50%.

Reimbursement
Medicare Part D has led to much confusion, and in most cases shortfalls in reimbursement for services and equipment provided. TPN and enteral therapy was not included in the Part D mix but rather left under the Prosthetic Device Act, which does pay for drug, supplies, and pump (billed under Part B). In fact, Medicare implemented a cost of living increase of 2.1% in 2004. Currently, Medicare has decided not to include TPN and enteral products in the competitive bidding process services until 2008.

As stipulated in the Medicare guidelines, enteral nutrition is covered for a patient who has a permanent nonfunction or disease of the structure that normally permits food to reach the small bowel—or a disease of the small bowel that impairs digestion and absorption of an oral diet. Further, the patient must have permanent impairment of their digestive tract that will require orders for at least 3 months from the physician. Failure to meet these requirements will result in denial of coverage. For more coverage information, consult your Regional DMERC.

Parenteral nutrition is covered for a patient with permanent, severe pathology of the alimentary tract that does not allow absorption of sufficient nutrients to maintain weight and strength. Again, there must be a permanent impairment and treatment ordered for at least 3 months.

Parenteral nutrition is not covered for patients with GI ailments relating to a:
• swallowing disorder;
• temporary defect in gastric emptying;
• psychological disorder;
• physical disorder, such as dyspnea or cardiac disease;
• side effect of medication; and
• renal failure or dialysis

Marketing
Not all providers of TPN continue to compound their own ingredients as we do. Instead, some choose to subcontract out to central admixing services. You can buy these services at a competitive price, thus reducing overhead cost, but we like to use the abilities of our pharmacist to consult with physicians and dietitians, which adds a dimension of customer service that we think drives referrals. Many of the doctors covering long-term care and rehabilitation centers have limited training in nutritional support, and our staff assists them to develop the formulas used in the compounding.

Biotech Dollars
The alternate site infusion market continues to grow at more than 5% per year, and now is estimated to exceed $6 billion annually (according to Wall Street Equity Research). The fastest-growing segment is specialty drugs, where in 2004 payors spent more than 22% of their outpatient pharmacy dollars, and by 2008 are projected to spend 35%. There are now more than 200 biotech drugs on the market and approximately 600 in development. Consequently, acquisitions within the entire home care market grew 16% from the second to third quarter of 2005, and infusion therapy was called the “new oxygen” in an October 2005 Dealer/Provider article by Dexter W. Braff (access the full article [M&A Communique] and comprehensive archives for free at www.hhcdealer.com). DP

John F. Davis III is president of Westcare Infusion Services, Centennial, Colo. He can be reached through his Web site: www.westcareinfusion.com.