With nearly 4,110 new diagnoses every day, diabetes affects an estimated 7% of the American population. For providers looking to serve this growing patient population, Kathleen Belmonte, MS, RN-CS, CDE, vice president of clinical services for Neighborhood Diabetes, Wakefield, Mass, (on right in picture to the left) recommends caution. "I think people have the impression that the industry is far less complicated than it is," she says.

The complication lies in increasingly difficult reimbursement requirements. "Diabetes is not going away; it is growing exponentially," Belmonte says. "It is just that the climate of reimbursement and the industry itself have changed drastically even in the 9 years we have been in business, and most drastically in the last 3 to 4 years. Competitive bidding and the changes it will bring should be strongly considered before moving into this area."

"BRUTAL" BILLING

Because diabetes is a lifelong condition, patients require support to manage the disease in addition to supplies. Out of this need, Belmonte, a trained nurse and certified diabetes educator, and her husband, Lou, founded Neighborhood Diabetes to serve New England's diabetic population. "I was struggling with finding support and services that my patients with diabetes could actually access with their insurance plans," says Belmonte, adding that her patients were primarily covered by Medicaid and state-funded insurance. "We just came up with this idea and started in our house." Nine years later, the company boasts 70 employees, with sales representatives in each of the New England states as well as New York. In addition to the corporate headquarters in Wakefield, Neighborhood Diabetes has sales offices in Exeter, NH; Fall River, Mass; Lowell, Mass; and Long Island, NY.

Neighborhood Diabetes specializes almost exclusively in diabetes testing supplies, although it does offer a small selection of related items such as creams and socks. While there is a steady market for testing equipment, both Belmonte and Jennifer Delphia, MBA, vice president of client services, caution that providing these supplies is not as easy as it may appear, especially when it comes to reimbursement guidelines. For example, insurance plans do not necessarily cover all diabetic supplies under the same benefit; a blood-glucose meter may be covered by a DME benefit, while strips and lancets may fall under a pharmacy benefit. To address this problem and accommodate more patients, Neighborhood Diabetes added a pharmacy to its Wakefield location in 2005. "Typically, a person with diabetes spends three to four times more on prescription medications than a [person without diabetes]," Delphia says. "We assumed that to serve our clients better, we could be a one-stop shop by offering medications as well as testing supplies."

The full-service pharmacy caters almost exclusively to patients with diabetes. "We are not the typical CVS where you would walk in off the street and get your deodorant with your antibiotics," Delphia says.

Belmonte adds that 95% of the pharmacy business is mail-order, accommodating clients in every state the company services. "It is a big convenience, especially for a lot of our homebound clients," she says. "That is probably one of the most rapidly growing areas of our business."

On the DME side, reimbursement guidelines can be complicated, especially under Medicare. "Medicare appears to be for the most part the most stringent payor that we work with. They have a lot of pre- and post-payment auditing around documentation," Belmonte says. "The Medicaid plans and the private payors seem to be less stringent than some of the Medicare documentation requirements. It's pretty brutal, though, any way that you look at it."

According to Belmonte, health care providers often prescribe treatments that exceed Medicare's "basic utilization requirements" for glucose monitors and testing supplies. "For someone who is not insulin injecting, Medicare would say that testing one time a day is sufficient and that if you want a client to test above that, then you need to jump through hoops X, Y, and Z," says Belmonte, adding that health care providers often recommend that these patients test twice a day. "If [a client] falls above these guidelines, not only do you have to get more frequent documentation to justify that need to test more, but the client also has to prove that they are testing more by providing additional documentation." Such documentation may include log books with recorded testing times, certified letters with blood-sugar readings, or information from providers regarding co-morbid conditions such as obesity or hypertension.

Kathleen Belmonte, MS, RN-CS, CDE

Explaining these intricacies to both health care providers and patients has become routine for Neighborhood Diabetes employees, and Belmonte and Delphia stress that a thorough knowledge of reimbursement issues is vital to providers looking to enter the diabetes supply market. "For us, the challenge becomes that, in general, most referral sources are not aware of the guidelines," Delphia says. "It can be both burdensome and difficult to explain to a health care provider why we need something different, or more documentation, or more patient health information."

INDUSTRY ACTIVISM

A couple of years ago, the company joined other regional HME providers to successfully influence the state's Medicaid product guidelines and reimbursement rates. Since Neighborhood Diabetes is the largest provider of diabetes supplies in the area, Belmonte says that the company often represents the diabetes industry as advocates whenever diabetes-related initiatives arise. "It is a lot of work," Belmonte says. "It is rewarding, it's worthwhile, and it's something we're very passionate about."

As part of a group from the New England Medical Equipment Dealers Association (NEMED), Belmonte recently visited the Boston office of Sen Edward M. Kennedy (D-Mass) to voice the industry's concerns about competitive bidding. If enacted, competitive bidding will likely reduce profit margins, forcing many diabetic supply providers to cut nonreimburseable patient education and support services. "Our business does a lot of home training, and that's not a service that we bill for; that's just part of what our business model is," Belmonte says. "Should competitive bidding take place and we are in a situation where we are bidding on a product—and we have to take a significant cut in our reimbursement level—then those are services that we may not be able to offer."

Without these services, Belmonte predicts patients will be less knowledgeable, resulting in less compliance. "The secondary effects of that are high blood-sugar levels, higher HbA1cs [a subtype of hemoglobin that is tested for blood-sugar levels], increased complications secondary to diabetes, and longer-term cost issues than just saving on a box of test strips or on a glucose meter," Belmonte says.

Jennifer Delphia, MBA

Delphia adds that a system focused on pricing alone could also reduce the product options available to patients; for example, it may prove cost-effective for providers to carry only one type of meter. "At Neighborhood Diabetes, we find is there is no one meter that is appropriate for all clients," she says, adding that patients who are uncomfortable with their meters will be less likely to adhere to their treatment regimens.

According to Delphia, price-focused bidding could also hinder the industry's push for patient empowerment. "You would like to see more competition around value. What are value-added services that you can provide?" Delphia says. "We talk about the industry and technology moving toward self-management, but programs like competitive bidding will move us away from that direction."

Competitive bidding may also serve as a barrier to entry for providers considering the diabetic supply market. "I would imagine that competitive bidding will lead to consolidation, leaving few big players in the marketplace," Delphia says. "It will be an interesting market to watch over the next few years."

MEASUREMENT VS MANAGEMENT

Despite tighter reimbursement restrictions, diabetes testing has undergone significant improvements in the past decade, according to Belmonte. Blood-glucose meters, which once produced readings in 30 to 45 seconds, now give the same results in 5 seconds. "Small sample sizes, fast testing times, the convenience of carrying a kit that can slide into a purse or a pocket—those are becoming expected with new equipment," Belmonte says.

According to Delphia, some patients comply with daily testing regimens but do not use the information to make the necessary lifestyle changes. To address this disconnect, manufacturers have added features such as pre- and post-meal blood-sugar tests so that patients can see the effect of different foods on their glucose levels.

In the future, blood-glucose meters will likely be interfaced with insulin pumps to help patients see the connection between blood-sugar and insulin requirements. "Industry forces are converging around self-management of diabetes versus just ‘testing,' " says Delphia, who adds that future devices will continuously monitor patients.

A large part of Neighborhood Diabetes' business model is providing hands-on education to patients. Staff members visit the homes of nearly 40% of new referrals to give personal glucose-monitoring tutorials. The company also provides continuing education on other diabetes-related topics to organizations and individuals.

These services ease the burden for referral sources. "When you diagnose a client with diabetes, there are a myriad of things you should cover: lifestyle changes, medications, exercise—and knowing that you don't need to take the extra time to train someone on the equipment—you can pass that off to someone you know is going to do a good job—is certainly a value-add that our referral sources appreciate," Delphia says.

STEPS FOR SUCCESS

Although most diabetic testing suppliers market directly to consumers, nearly all of Neighborhood Diabetes' referrals come directly from health care providers, including endocrinologists, internists, family physicians, nurse practitioners, certified diabetes educators, nutritionists, social workers, and even community groups, such as the Department of Mental Retardation. The company also has arrangements with nondiabetes suppliers, usually fellow NEMED members. "We do not do any type of diabetic shoes, so we have someone that we refer to, and in turn, she will refer back to us clients who may need testing supplies," Belmonte says.

In a competitive industry like diabetic supplies, Delphia recommends investing in staff training so that referral sources always have a knowledgeable resource who has the latest product and insurance information. Staff education also helps ensure the company's reliability. "You need to deliver on what you promise," she says. "If you promise that the turnaround is less than 24 hours, then you'd better deliver in less than 24 hours. A huge part of that is making sure your staff is trained adequately."

In addition to maintaining a well-trained staff, Belmonte and Delphia attribute success to building solid reputations, providing clinical support and knowledge to customers, exercising operational control, and understanding the business—all while forming strong partnerships with payors, patients, manufacturers, and providers. "We've been around for a while, but we are meeting the promises that we make to clients, whether they be our customers with diabetes, our physicians, our health care providers, or our insurance companies," Belmonte says.

Although Belmonte and Delphia are open to expanding their product line to include items such as diabetic shoes, they have no immediate plans to do so. Instead, they are expanding on what they do best—providing diabetic testing education to their clients.

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As part of this effort, Neighborhood Diabetes is focusing on its "disease strategic program," which involves partnerships with clinics and hospitals. The company will provide these partners with testing supplies, medications, education, and support, which includes holding office hours at each location and offering hands-on training to patients. "It comes back to making sure people are properly trained," Belmonte says. "If they're properly trained, they're going to be more adherent to their treatment regimen. They're going to take blood-sugar readings, understand what they mean, and hopefully make behavioral changes that will make those better."

Ann Carlson is a contributing writer for  HME Today.