With a projected annual figure of $5 billion, the wound care market for the year 2002 is bigger than the gross national product of some countries, bigger even than some Internet initial public offerings.

Home medical equipment providers might want to keep that figure in mind as they assess the wound care segments of their HME businesses. Most of that $5 billion will not wind up on their balance sheets, of course.

Hospitals, wound care clinics and enterostomal therapy nurses are encroaching on what once was an HME staple. And a technological revolution threatens to replace such traditional wound care products as dressings and gauze with state-of-the-art technology including artificial skin and tissue-engineered treatments.

But for the HME provider willing to specialize, wound care is still worthwhile.

"Wound care is the foundation of Medical West," says Kenneth Sandler, president of the St. Louis-based company. "It is 20 percent of our business, and it is increasing with early discharges from hospitals. Even though reimbursement is decreasing, volume of sales is increasing.

"We do a lot of retail sales that aren't sensitive to third-party billing," he continued. "Patients who can get only certain products and quantities through insurance buy what they need anyway. They are willing to purchase products from us even if the managed care carrier says order it elsewhere."

Specialization Sells THESE TRENDS ASIDE, Sandler believes that his company's success is the result of specialized service. "We have three ET nurses on staff, and we have treatment rooms that are available for patients to use for free. That's our big drawing card," he says. "If we do a dressing change, we don't charge for the service, only for the product. Our patients will pay for the luxury of working with a qualified nurse."

The nurse's expertise, says Sandler, is critical when dealing with highly specialized wound care products. "I don't know how a DME company can sell this type of product without knowing all of the applications and uses," he adds. "Every area of HME requires specialization. We focus on patient care and provide medical care.

"With wound care, you can't just open the door and say you carry the products. That's where a lot of companies fail," says Sandler. "They try to do large volume without having the medical background, and they get into trouble. It just doesn't work. Superstores like Med-Max try, but you can't deal with a medical product in that environment. Managed care wants a certain level of service. They may not want to pay for it, but they want it."

The Challenge of Wound Care TO BE FAIR, even Sandler acknowledges it's a challenge nowadays to make it in wound care. "We have a 40-year reputation," he says. "We're well-known. Whatever type of product they need, they know they can call us or come in and we can help. It's not easy to start this from scratch."

Tim Hensley, president of Home Care Plus in Knoxville, Tenn., agrees. "We tried to do a lot of wound care but had to regroup when the Medicare guidelines started to change," he says. "We were getting our claims denied, so we backed off. We decided we couldn't offer all the extras, so we set up a cookie-cutter kind of system. We simplified our operation and educated our patients and referral sources as to what Medicare will provide, regardless of what they wanted. We had to steer them.

"Just because they want something, if we get denied, it's useless," Hensley says. "Wecouldn't justify the expense of fighting Medicare, even if you win the appeals. You have to compromise. You can't stock and supply everything."

Hensley turned to his distributor, Medline Industries, Mundelein, Ill., for a game plan. Among other things, Medline suggested carrying a new product that is not Medicare-approved, but for which Hensley could have exclusive rights in his area. The product is designed to warm the wound to increase blood flow and oxygen to the area, and Hensley promotes it as a solution to chronic wounds. He says it has been well-received, allowing his business to capture patients who otherwise might turn to wound care clinics.

"Medicare hasn't accepted these products because of the initial cost, but in the long run, it's cheaper because the wound heals faster," Hensley says. "For us, it's an ace in the hole that sets us apart from any other company. Medline drop-ships for us, so we don't have to carry inventory.

"We've picked up a number of managed care contracts. I'm convinced the insurance companies understand we're not trying to gouge them," Hensley says. "Everybody focuses on price. If we can limit the time it takes to heal a wound, we limit reimbursement and reduce overall costs. Traditional products won't work on a lot of patients."

He even sells the product to some wound care clinics, Hensley says. "They are competitors, but they've become customers. Then they discharge the patient to us. These are the kinds of relationships you need to establish."

Officials at Medline acknowledge that Hensley's situation is unique because he already had extensive experience and interest in wound care.

"When you get into advanced products like these, you're paying for a lot of research and development costs, and the mom-and-pop DME companies are going to be on the bottom of the distribution chain," says Mike McMahon, Medline's director of special projects. "It's becoming increasingly difficult and more confusing for the mom-and-pops to remain a player in wound care. They can always sell gauze and bandages and the low-tech items, the simple dressings. I don't know that they will ever be totally eliminated. But this is an enormously expanding market, and the fastest-growing part is advanced wound care products."

McMahon said the high-tech aspects of the products require a risk-taking, entrepreneurial spirit. "It takes a certain personality to be in this market. The opportunity is there to be aggressive and break the mold from panic reaction to active pursuit," he says.

"In many cases, HME dealers aren't even aware these products exist," he adds. "It's a lot more complicated than (just traditional) wound care. Just keeping up with the product changes will make your head spin. Wound care centers are very aggressively marketing themselves to doctors for referrals and definitely are taking patients away from the mom-and-pop HME. They do a better job of documenting results and making the right call. It's their specialty."

Selling Traditional Care ADVANCED PRODUCTS, THEIR manufacturers say, are designed to accelerate healing rates, lower infection rates and improve patient comfort. But until those become widely accepted, the traditional products will continue to pace the market, experts believe.

One route some HME providers take to improve margins for traditional wound care products is generics. "We have an approach where it warrants being in the business," says Richard Lerner, president of AllCare Medical, Old Bridge, N.J. "You have to buy right. You can't afford name brands. We buy products comparable to Johnson & Johnson, without having to pay top dollar. Our buying group, Homecare Providers Co-op, does a good job getting discounts. The margins are decent, and the profits are there. You've got to know what strategy to play.

"Then when you're talking reimbursement," Lerner continues, "you have to pick which products you will take assignment on. You can't make a blanket statement that you'll take all assignment. You don't want to get into a situation like ostomy. That's a no-no. Right now, there is room for profit. Of course, with inherent reasonableness coming, all bets are off."

Buying groups such as HPC are incorporating wound care into bids for managed care. The VGM Group, which started HomeLink to seek managed care contracts in sleep therapy, is formulating plans for WoundLink, a similar program for wound care therapy, although a VGM spokesman said details were not finalized.

Unlike ostomy products, which have shifted to a commodity market dominated by mailhouses and discounters, the specialization required for wound-care products has prompted mail-order powerhouse Express-Med, Columbus, Ohio, to drop out of wound care completely.

"We were having great difficulty making money and seeing how it would work in the future," says Alan Scantland, Express-Med vice president of commercial development. "We had to write off a bunch of money. It's very discouraging. I don't see us getting back into it unless Medicare reversed itself. Much of wound care is clinical management. Private pay will have to pick up the slack. There will be an increase of wound care centers and specialized care centers."

And, perhaps, an increase of people like Betty Reeb of Mount Prospect, Ill. Board-certified in the practice of wound management, Reeb is a registered nurse who has developed her own wound management center. "I started a year and a half ago and, with the prospective payment system coming, there will be more people doing this," Reeb says. "I bill like a physician would. I have a provider number and a supplier number. I think home care people are too short-sighted to realize wound care treatment is changing."

The Fight for Survival SOME HME PROVIDERS, however, are not giving up the wound care business without a fight.

"Wound care clinics can be very costly, especially for those with insurance that does not cover the cost or with high deductibles or co-pays," says Gloria Gerard, an ET nurse and manager of clinical services for Milwaukee-based Home Care Medical. "We encourage home care nurses to use our services and showroom as a source for keeping their education current about wound care and to compare the new products on the market. Not all patients with wounds need to be seen in a wound care clinic."

Ben David, vice president of operations at Homecare America, Farmingdale, N.Y., claims wound care centers are helping his business. "They are actually a referral source for both our DME and retail businesses," he says. "We find wound care is growing. Reimbursable items don't always meet the needs of the customer, and customers are willing to pay cash for items they are seeking."

Richard Meer, a director with the Center for Tissue Trauma Research, Stuart, Fla., and a nationally known expert on wound care, says providers also need to acknowledge the changes that have occurred in the market in order to deal with it.

"Dealers are up against distributors that sometimes are owned by manufacturers with an ability to negotiate contracts over a broad line of products," Meer says. "If a dealer gets involved in wound care, it's not just dressings, it's also support surfaces, nutrition-a broad list. It's not just wound care anymore. In the past, the way billing was, it could stand alone. Not anymore. Now there are support surfaces, a focus on the prevention of recurrence of injury and many noninvasive modalities. Without the broad picture, you can't make much progress." HC

THE WOUND care products market consists of three generations: traditional (gauze and dressings), synthetic (polymer film, hydrocolloid and alginate) and advanced (artificial skin, tissue-engineered treatments). An anticipated revolution toward advanced products could dramatically shift dollars from traditional to more modern products.

In 1997, the breakdown was 82 percent traditional, 15 percent synthetic and 3 percent advanced. Theta Reports, Rocky Hill, Conn., in research released this summer, projects the breakdown by 2002 to be 44 percent traditional, 29 percent synthetic and 27 percent advanced.

But it also expects total dollars spent on wound care to nearly double from $2.8 billion in 1997 to $5 billion in 2002 as earlier patient releases increase the demand for alternate-site treatment such as home care and wound care clinics.

While early results of advanced products are promising, Theta Reports noted that resistance by the medical community to high initial cost is likely to slow acceptance of advanced products, as it did when synthetic products were introduced two decades ago.

"In today's cost-conscious managed care environment," the report states, "it appears the price of wound care products takes preference over their healing benefits." -K.G.