Susan and John Genaro

A diabetic who runs short of test strips or syringes is a diabetic in trouble. Making sure that never happens is the job of Diabetic Medical Supply, an Ohio company operated by John and Susan Genaro. But just as it is bad for diabetics to run out of supplies, so too is it bad for a company like Diabetic Medical Supply to run out of diabetics—a distinct possibility in light of the spreading shadow of Medicare competitive bidding and other changes sweeping the insurance world.

To ensure itself a continual supply of diabetic patients, Diabetic Medical Supply has situated itself in a building owned by a physician specializing in treating diabetes, and shared by other practitioners who all number at least some diabetics among their patient bases. Because Diabetic Medical Supply is on the premises, these neighbors routinely send their diabetic patients to see the Genaros for blood-glucose test meters, test strips, and syringes. This proves tremendously convenient for the patients—and beneficial for the business hopes of Diabetic Medical Supply.

ATTRACTING WALK-INS

Diabetic Medical Supply occupies 1,600 square feet of the 15,000-square-foot, one-story complex, nestled in the heart of the medical district in the city of Warren. The Genaros were invited there by one of the building's owners—an endocrinologist. "His vision was to offer patients one-stop convenience. They would come to his building and find, under a single roof, the full package of services they would need for their particular medical condition," says Diabetic Medical Supply founder and president, John Genaro. "So, here at this address, there are dietitians, orthotists, a lab, a general physician, and others."

Prior to October 2006, Diabetic Medical Supply conducted business from another part of town, an office building that was showing its age. However, the condition of the building was of little concern since Diabetic Medical Supply had no walk-in business and did not need to put on a public face, so to speak. Now, though, in the new location, walk-ins are common. Indeed, about 20% of the company's total business is walk-in, with 80% of that in the form of referrals from physicians elsewhere in the building. "The doctors have been generous in referring their patients to us," Genaro reports.

The vast majority of walk-ins arrive with physician orders. Says customer service representative Karen L. Brooks, "We provide the doctors with forms that they can complete and give to their patients. All that patients need to do is bring us the order. We then complete on their behalf the required insurance paperwork."

Walk-in patients are provided a blood-glucose test meter and receive instruction in its use and care. "There's a process we go through to make sure we have matched the patient with the right meter, but it is this personal interaction—part of our overall intimate, friendly, personal service—that distinguishes us from the giant companies involved in mail-order diabetic supplies," says Genaro.

Patients are sent home with the meter and a 3-month supply of test strips, and meter maintenance materials. "These walk-in patients, after we give them their initial batch of supplies, are then converted to mail order, so from then on, there is no need for them to return to our office for supplies," says Brooks. "Of course, customers who prefer it are more than welcome to come back and see us, without appointment, at any time."

APPROACH APPRECIATED

Susan Genaro

About 2 weeks before a customer exhausts his supplies, Diabetic Medical Supply's computerized account system automatically produces a replenishment order. However, the order is not fulfilled until a Diabetic Medical Supply representative has reviewed it and then contacted the customer to confirm that what will be sent is in fact needed. "We don't like to oversupply," says Judy Gearheart, office manager. "We also don't like to surprise people with costs. If Medicare or their private insurance isn't going to cover an item, we discuss that with patients over the phone before we ship so they know ahead of time what their financial responsibilities are going to be. We're very up front with our customers, and that's one of the reasons why we are so trusted."

Orders are once a week electronically routed to Diabetic Medical Supply's fulfillment service, a drop-shipper in Florida. From there, packages fan out via parcel post to all corners of the United States.

Brooks says physicians and patients alike appreciate the Diabetic Medical Supply approach: "We've simplified things for them. Our system is streamlined, and as such, there is no delay when it comes to patients being set up with their initial supplies. They can be seen by their physician, then stop by to see us, and an hour later be on their way home with everything they need to get their blood glucose levels appropriately regulated."

Walk-ins have changed some aspects of life at Diabetic Medical Supply. For example, the staff must now be able to nimbly switch between working the phones and—the moment someone enters through the front door—working the front counter and demonstrating the operation of a meter.

At this time, no products are displayed in the front of the office, although the Genaros may someday set up a mini-showroom that eventually could be expanded to include shelves stocked with aids for daily living of interest to diabetics.

SOUGHT GREATER FREEDOM

John Genaro

Diabetic Medical Supplies began when John Genaro was a Charlotte, NC, social worker. Back then, part of his job involved arranging support services for the elderly. In 1994, he received a phone call from a diabetic products supplier wondering if he knew of any elderly people in the area who might be in need of such wares. "I told the caller I knew of many, but that few could afford them—a box of test strips at the time was $32, which was beyond the reach of anyone receiving $320 a month from Social Security," he recalls.

The caller then informed Genaro that Medicare covered the cost of diabetic supplies and insisted there was no reason any of those elderly should be deprived. This came as wonderful news; Genaro promptly added the caller—a Finnish immigrant who had launched a Florida-based diabetic supply organization—to his list of resources. Genaro and the supplier quickly developed a mutually beneficial relationship that culminated with the supplier asking Genaro to become a franchisee, the company's first.

Susan Genaro recognized this as an excellent opportunity whereby she and her husband could become their own boss. "We had been wanting to do something like this for a long time," she says. "We were looking to have a little more freedom."

Their venture originally was called Diabetic Supply Foundation of Belmont. It debuted with a $16 classified ad in a local newspaper catering to the elderly. Although nearly invisible, the small ad nonetheless generated dozens of phone inquiries. "John and I would go to our regular jobs in the morning—I was an administrative assistant for a property management company—then, at night, we'd come home, answer the responses to our ad, and fill out orders," says Susan Genaro. "The operation was located in a back bedroom with two filing cabinets and within 5 months we were able to quit our jobs. We committed ourselves to aggressively growing the business."

A management shakeup within the supplier's explosively growing company in 1995 led the Genaros to strike off on their own. That's when Diabetic Supply Foundation of Belmont became Diabetic Medical Supply. The couple shortly afterward relocated to Warren, Ohio, to take care of John's ailing and aging parents. "The nice thing about being a mail-order business is you can operate from anywhere," says Susan Genaro. "We were able to be in Ohio and still take care of all our customers in North Carolina."

Their efforts soon returned big dividends. "We were able to take the business to the next level," he says. "Before long, we were generating revenues in the neighborhood of a million dollars a year."

NCB NOT YET AN ISSUE

(left to right): John Genaro; Susan Genaro; Judy Gearheart; Marcia Banca; and Karen Brooks.

It helped that Diabetic Medical Supply faced little in the way of competition. "This was before the giants of diabetic supply really even had gotten started," says John Genaro.

Diabetic Medical Supply experienced its first serious contraction only fairly recently when many of their patients switched their insurance coverage to HMOs. "We've had limited success in becoming a provider n the HMO provider roster," added Susan. "We lost about 30% of our patient base because of those changes," John Genaro reveals. "We're still in the process of recovering, which we've been doing by ramping up our marketing and becoming much stronger in our efforts to attract new business.

"A problem for young growing businesses is that success makes it easy to become complacent," adds Genaro. "It's as if you're sailing along down a big, wide river, and, as long as you don't drift toward either of the sides where the rocks are, everything is just fine. But then, after a while, you get lulled into thinking that nothing really can go wrong, even though you're aware that the conditions in the comfortable middle of the river are changing. That's what happened to me. Our customers' insurance coverage was going through significant change, and little by little our customers were moving into these HMO programs, which resulted in restrictions as to whom we were able to serve. We were aware it was happening, but we lulled ourselves into thinking that our niche was so big and wide that nothing bad would come of it."

Currently, the bulk of Diabetic Medical Supply's business derives from customers in rural areas outside the bounds of either of the two big markets currently affected by Medicare competitive bidding—the Cleveland and Cincinnati MSAs. "Less than 3% of our patient base is in those and in the other eight initial MSAs combined," John Genaro estimates. "Mail-order services are most in demand in rural markets, which is why we've always targeted rural customers first and urban customers second."

Accordingly, the company's strategy now is to bolster its focus on rural areas, those locales not slated to be ensnared by competitive bidding for some time yet. "There is a lot of geography still free of competitive bidding, and in those areas are a lot of senior citizen diabetics," he says. "We could have participated in the first-round bidding this past summer, but we chose not to. Later, when CMS opens the other 70 MSAs for bidding, we'll take a close look at them and see which ones make sense for us. As I see it, the opportunities for us as a mail-order firm will most likely be in those MSAs where we have an actual physical presence, an existing customer base, or both."

In anticipation of joining the future bidding, Diabetic Medical Supply has sought and obtained accreditation. The company earned this designation through The Compliance Team, completing the process (and earning a near-perfect score to boot) in mid August. "We did this not just because Medicare requires it, but also to attract business from private insurance companies and other organizations that lately have been insisting on it as a precondition for any kind of contractual relationship," says Susan Genaro. "Now that we are accredited, we're taking the step of submitting applications to the various insurance companies that we're targeting. We won't know for a while what fruits this will bear, but we are convinced that accreditation sets the stage for us to better diversify our patient base. We view diversification as the key to putting our company in a much healthier position."

Rich Smith is a contributing writer for HME Today.