Whether you provide diabetes products exclusively or merely carry them as part of your repertoire, your business is changing. We asked three manufacturers for their takes on how HME providers can continue to thrive and tame the two-headed beasts of competitive bidding and increased competition.

Doug Kuzyk

Kevin R. Mernone

HME Today:  For providers looking to get into or expand their diabetes offerings, what is the single best piece of advice you can offer?

Doug Kuzyk, vice president and general manager of GEMCO Medical Inc, Hudson, Ohio: Get accredited! With competitive bidding launching this year, one of the key requirements in the proposed ruling is that providers must be accredited before they can bid. We anticipate that up to 70% of independent pharmacy retailers will not go through the extensive and costly accreditation requirements because their patient base is too small to justify the cost. This will create a shift in Medicare population purchasing from pharmacies to accredited DMEs. Today, approximately 25% or 2 million Medicare recipients with diabetes obtain their test strips from pharmacies that bill Medicare.

Kevin R. Mernone, CEO, Gluco Perfect, Richmond Hill, NY: Providers looking to maximize their presence in the diabetes market should focus on and partner with a manufacturer that does not compete against them. Gluco Perfect sells only through HME providers and distributors, and will never sell to chain drugstores or big box super stores. We have made the commitment that our HME providers will be able to promote our products and know that the chain store down the street will not have the same product or a lower price.

Frank Suess

Frank Suess, president, Pharma Supply Inc, West Palm Beach, Fla: If diabetes supplies are the only products you are planning to carry, then it might be a little too late to go into this business. There is a lot of well-financed competition in this field. If you are in medical supplies already, then diabetes products might be a good add-on. Surely, many of your regular patients are also diabetics and would prefer to receive supplies from a familiar source. If you can afford to hire a pedorthist, go into therapeutic footwear. Diabetic shoes are excluded from the competitive bidding program.

HME Today:  What is the reimbursement climate for diabetes supplies and related services?

Kuzyk: Currently, 95% of consumers with diabetes have coverage for meters, strips, and other supplies. Most medical plans recognize that consistent long-term testing is the cornerstone of good diabetes management. Many studies have proven good control of blood glucose can lower the risk of costly complications such as heart attacks, strokes, amputation, blindness, and kidney disease. Each consumer will test 30 to 100 times per month (100 to 300 times per quarter).

Medicare on average pays approximately $36 per box of 50 test strips, while the average cost ranges from $15 to $28 for a box of 50, depending on the manufacturer. Medicare reimburses approximately $62 per meter, but allows only one new meter every 5 years. However, most manufacturers are willing to provide a free meter as the ongoing strip sales will pay for its cost.

With competitive bidding on the horizon, there will be price pressure and squeezed margins. However, if competitive bidding is launched as proposed, CMS will eliminate up to 35% of all Medicare providers. Those eliminated will primarily be the small or poorly run providers. Therefore, whatever profit is lost in squeezed margins will be made up in volume from new Medicare consumers. We also anticipate the major manufacturers of blood glucose meters to launch new, less-featured, lower-cost blood glucose meter systems to help providers overcome part of the price pressure from competitive bidding.

Mernone: Providers used to tell us that they can’t make money in diabetic products. Gluco Perfect is proud of our “Direct To You Pricing,” which allows HME providers to purchase their diabetic products directly from the manufacturer, and at a lower cost than ever before. When providers sell Gluco Perfect, they maximize their reimbursement and improve their competitive position in the marketplace.

Suess: Diabetes supplies are still profitable if you can buy in volume at the right prices, or if you supply less expensive brands. Unfortunately, with Medicare’s competitive bidding program around the corner, my crystal ball is blacking out.

HME Today:  What is the most important factor that HME providers should consider when deciding which brands to carry?

Kuzyk: There are two main strategies a provider can implement to grow their business—one is to gain a referral source. Providers would then carry the brand or brands their key referral sources are recommending. The second is an advertising strategy, where the provider attracts consumers based on service and convenience—offering to handle all paperwork on behalf of the patient. Under this strategy, providers can promote the blood glucose meter system that meets their needs, is competitively priced, and offers a full feature set.

The key factor HMEs should consider is 24/7 customer service. We strongly recommend that HMEs stay away from companies with meter systems that do not have 24/7 customer service. This is a sign that they may not have the resources to provide the necessary support for problems that may arise. Note that the newest meters available on the market have improved in technology over meters from the past. They have eliminated the complicated technique once required to obtain an accurate blood glucose test. Each meter has a slight variation in its operation, but all are simple to use. Providers will need to have a clear understanding of the differences of each so they can address customer questions on the differences.

Mernone: Providers need to have a unique product that differentiates them from their competition and helps them stand out in a crowded field. Gluco Perfect’s new “Perfect 2” meter introduces Bluetooth and the wireless transmission of data—as well as underfill detection and a self-coding chip—all at the lowest cost.

Suess: It’s hard to make money with the name brands. Choose a happy medium between a less expensive, but accurate line of glucose monitors and strips. If the patients are happy with the product, they will let your referral sources know. Small blood samples and fast results are important. Younger patients look also for the ability to download and average results.

HME Today:  While the competitive bidding final rule has not yet come out as of press time, how do you anticipate that competitive bidding will affect the diabetes market?

Kuzyk: With the changing CMS regulation requiring all providers to be accredited before they can bill Medicare, we anticipate many pharmacies will stop accepting Medicare assignment, which could cause a large shift of Medicare consumers going from pharmacy to HME/DME providers or mail-order companies to obtain their diabetes supplies.

With this pending legislation, there may never be a better time for HMEs or DMEs to enter or reenter the Medicare market. In addition, only recently have the major manufacturers offered Medicare pricing to DMEs through specialized Medicare wholesalers such as GEMCO Medical—pricing that is typically offered only to pharmacies and mail orders.

Mernone: Competitive bidding will completely change the diabetic market by forcing many providers who are selling the high-priced “name brands” out of the business. Gluco Perfect is responsible for cutting the wholesale price of diabetic products in half during the past 2 years. We have established our “Direct To You Pricing,” so that our HME providers will be best positioned when competitive bidding is established in their areas.

Suess: The only certainty is that the patients will suffer. Will the winning bidder be able to provide quality service or quality products? Will the winning bidder be able to stay in business? The only good thing about the competitive bidding program is forced accreditation. If you run a sloppy business, you won’t be able to pass.

Want more diabetes articles along with the latest news? Visit the free online archives section to access additional articles such as our Feb 2007 cover story featuring Neighborhood Diabetes of Wakefield, Mass. For a listing of companies who offer diabetic supplies, visit our online buyer’s guide.

HME Today:  What type of referral relationships should diabetes providers be cultivating?

Suess: In my mind, diabetes educators are just as important as physicians’ offices. They are on the front line and know what’s going on in this business. Podiatrists see a fair amount of diabetics also. Assisted living facilities and clubhouses in senior communities are a great place to drop off advertising.

Mernone: Referral sources recognize when diabetes providers promote products and features not commonly offered by the competition. Gluco Perfect will continue to introduce cutting-edge advancements so that our HME providers can offer state-of-the-art products with features that are unavailable in other brands.