Like much of the rest of the HME market, providers of mail-order diabetes supplies are playing a waiting game when it comes to rates and winners in the Round 1 rebid. But even the looming questions about competitive bidding can't upstage the growing product demand by a rapidly expanding population of diabetics.
Beyond competitive bidding, there are major concerns about the big-picture economics of what has been called an epidemic of diabetes, driven in part by Americans' alarming tendency toward obesity. According to the CDC, 23.6 million people in the United States (7.8 percent of the total population) have diabetes. Of those, 5.7 million are undiagnosed. If current trends continue, one in three Americans will develop diabetes in their lifetime, and those with diabetes will lose, on average, 10 to 15 years of life.
"The economics involved in regulating glucose levels and diabetes are going to hit everyone, from suppliers to dealers to patients," says John Walsh, president of Diabetes Mall, an online source for diabetes information, books and non-insurance-covered test strips.
The author of Pumping Insulin and several other books, Walsh has been a physician's assistant for more than 30 years and founded the Diabetesnet.com Web site in 1994. "If our health care efforts are focused solely on cost, real health issues will not be addressed, and neither will health care costs over the long term," he says.
Product Development
Currently, a steady stream of new products for diabetics continues, especially new blood glucose meters. Some products enable the use of smaller blood samples from the palm, forearm or thigh as well as a fingertip.
"There are a number of new devices coming with improved color high-contrast screens, and with direct USB or local radio or Bluetooth connections, along with more helpful online communications," adds Walsh. "Continuous monitors are being better integrated into pump devices."
But issues related to bolus recommendations are a problem, he says, when relying on devices to guide improvements in glucose levels. "There is a gradual improvement in technology that may assist in controlling glucose levels over time," Walsh says.
Other examples of new and emerging technologies are continuous monitors that can shut off insulin pump delivery at night to reduce hypoglycemia and "talking" pumps and meters. The Prodigy Voice from Prodigy Diabetes Care and Accu-Chek's Voicemate Plus, which comes with the Accu-Chek Compact Plus blood glucose monitor, are among the options offering help for blind and visually impaired people in managing their disease independently.
"In today's market, the common denominators used to calculate the hierarchy of diabetes technology are based on blood sample size, result test time and automatic meter calibration," says Bryan Sowards, CEO of Infopia USA. "We now feel that those features, although important, will be viewed merely as qualifiers in order to compete in the diabetic marketplace." Sowards says moving forward, manufacturers and providers must partner "to provide a connectivity bridge between the patient and their health care team."
The company's Eocene Remote Home Patient Monitoring System is a comprehensive telehealth platform that enables providers to capture daily diagnostic results for health coaching, trending and interventions. The system gathers information through glucose monitors, a blood pressure cuff, thermo weight scale and even an enabled home care bed.
Adam Clark, national director of sales channels for Medtronic Diabetes, notes the trend in technology toward the use of mobile devices is also growing. The manufacturer has connected its CareLink Therapy Management Software to the Internet and is eying mobile devices. "These types of technologies have the promise to notify the caregivers when a patient has abnormal trends in blood glucose or is in danger of having low or high readings," says Clark.
While insulin pumps and supplies have historically made up the majority of the manufacturer's sales to HME providers, sales of its continuous glucose monitoring line have grown over the past two years, Clark says. The company's MiniMed Paradigm REAL-Time System combines insulin pump technology with continuous glucose monitoring. The system displays updated readings every five minutes to guide therapy adjustments and identify patterns and problems that fingerstick and A1C testing, alone, may miss.
Other trends Clark points out: simplifying technology to make products easier for patients to use, and a focus on aesthetics.
According to Home Diagnostics, meters that can track and analyze daily changes help patients better understand and control their blood glucose levels. While some devices with storage capability allow users to download data onto their computers, soon patients will be able to transmit data wirelessly to their physician through either personal or electronic health records, the company says. Monitoring systems are continually improving with respect to meter performance, and accuracy continues to improve with each generation of products.
Along with diabetes management software, Home Diagnostics' line includes the TRUEbalance no-coding system; the TRUEresult, which delivers results in 4 seconds using only 0.5 mL of blood and offers 7-, 14- and 30-day averaging; the TRUEread, which offers alternate site testing; and the TRUE2go, billed as the world's smallest meter, for patients on the go.
Cost Pressures
Even though products are advancing, experts in this field wonder whether some patients will get the opportunity to use them. In the original Round 1 of Medicare competitive bidding, reimbursement reductions for mail-order diabetic supplies averaged 43 percent. For providers, such pricing pressures could surface again in the Round 1 rebid.
"There may be many different points of view on the real goal of competitive bidding and what long-term effects we will see," says Sowards of Infopia. "We feel that the net result will ultimately include increased regulatory compliance standards with an adverse declining reimbursement schedule. To prosper, or maybe just survive, suppliers will have to leverage advanced software technologies to curb some of their activity-based costs associated with these upcoming changes."
Walsh is concerned that Medicare's focus on lowering costs could lead to low-cost but less-accurate devices that do not address the larger aim of controlling blood glucose levels, which is a major health need in the country. Speaking broadly, he says, the market for diabetes supplies suffers from a misplaced focus on short-term costs and doesn't address the long-term health care costs related to managing diabetes.
"From a clinical standpoint, you don't want low cost as the outcome," Walsh says. "The outcome should be good regulation of glucose levels. The short-term cost of a meter doesn't address the real issue of managing glucose. The diabetes industry could benefit from an economic incentive to work more broadly to improve blood glucose levels. A narrow focus only on cost will not bring about real health improvements."
Provider Tim Binkley, president of Valentines Diabetic Supply, notes that so far, Medicare has been unwilling to pay for more expensive technologies, such as stick-free monitoring. As a result, the market for some advanced products will be small and specialized, aimed at the high-end where people are willing to pay out-of-pocket.
When it comes to maximizing an HME provider's success in the future, it comes back to value, says Medtronic's Clark. "When times are tough, people value quality more than ever before. As a result, companies must consider how their service and support offerings are better than the competition." Examples include data management, outcome surveys and customer experience metrics.
"The landscape of the industry is once again changing, and suppliers can either embrace these changes and view them as opportunities, or become jaded," says Sowards. "The industry is looking for suppliers who will go above and beyond the typical 'pack and ship' for diabetes supplies. They want a supplier that will take an active role and be part of the solution."
"Pricing pressure has the potential to change the HME and device manufacturer community," says Clark. "In the future, we expect to see requirements for performance standards with health plans and government agencies related to how we serve their patients and the impact of our offerings. Companies will need to provide value for the payer, as well as the physician and patient communities, in order to differentiate themselves."
Last November, the company opened a Diabetes Therapy and Management Center in San Antonio. The new operation provides customer care and education for diabetes patients and health care professionals using Medtronic insulin pumps, continuous glucose monitoring and therapy management software for the treatment of diabetes. The center currently employs more than 200 diabetes therapy professionals, but the company anticipates hiring nearly 1,400 people within the next five years.
Complications of Diabetes
Of those with diabetes, three out of five people have one other serious health problem; one in three has two other serious health problems; one out of 10 has three other serious health problems; and one out of 13 has four or more.
- Diabetes is a leading cause of adult blindness, lower-limb amputation, kidney disease and nerve damage.
- 5.5 million people in the United States have diabetic retinopathy; by 2050 it will increase to 16-18 million.
- 40 percent of people with diabetes suffer some degree of hearing impairment.
- Two-thirds of people with diabetes die from a heart attack or stroke.
- Congestive heart failure occurs in 8 percent of Americans with diabetes; heart attacks occur in almost 10 percent compared to less than 2 percent in non-diabetics; coronary artery disease occurs in 9 percent.
- Approximately 28 percent develop chronic kidney disease.
- 7 percent develop strokes.
- 23 percent have foot problems, including numbness and amputations.
- Therisk for lower extremity amputation is estimated at 15 to 40 times higher among people with diabetes than among those without diabetes.
- Every 24 hours:
- 4,100 new diabetes cases are diagnosed;
- 810 die from diabetes;
- 230 people with diabetes will have a diabetes-related amputation;
- 120 new patients will require kidney dialysis or transplant; and
- 55 will go blind.
- Nearly 65 percent of individuals with diabetes die from cardiovascular disease in the U.S., establishing it as the leading cause of death among this growing segment of the population.
SOURCES: National Diabetes Fact Sheet of the National Center for Chronic Disease Prevention and Heath Promotion; NCHS; CDC; ADA; AACE
- Read the "Waiting on Round 1 Rebid" sidebar to learn about competitive bidding impacts on the diabetic supplies market.
Experts Interviewed
- Tim Binkley, president, Valentines Diabetic Supply, Atlanta
- Adam Clark, national director of sales channels, Medtronic Diabetes, Northridge, Calif.
- Home Diagnostics Inc., Ft. Lauderdale, Fla. (In February, HDI announced it will be acquired by Japan's Nipro Corp.)
- Bryan Sowards, CEO, Infopia USA, Titusville, Fla.
- John Walsh, president, Diabetes Mall, San Diego
Waiting on Round 1 Rebid
Valentines Diabetic Supply in Roswell, Ga., bid in the Round 1 rebid for mail-order diabetic supplies in three CBAs. The provider has patients in 35 states and supplies diabetic strips, meters, lancets and pump supplies through the mail, but "we wanted to stay within states where we have some business," says Tim Binkley, president.
In placing the company's bid, Binkley says, "We bid what we can live with while operating a business with the kind of service we want to provide. That was the only way we could do it intelligently and keep our business intact. We have tried to be competitive but realistic."
The window for the rebid closed in December, and now bidders must wait to learn the results. Reimbursements resulting from the bid are expected to be released in June, with contract winners announced in September.
Like his company, Binkley points out, there are thousands of local and regional diabetic providers that use the professional referral model in contrast to the direct-to-consumer model used by national companies such as Liberty Medical or CCS Medical. Their fate, just like his, hinges on the outcome of the rebid.
Valentines' bids in the Charlotte, Cincinnati and Columbus CBAs represent only 10 to 15 percent of the company's business, so its entire future is not at stake. But if they lose, the company will need to diversify into non-Medicare products (such as incontinence aids, wound care, etc.) to remain in those MSAs, Binkley says. And if drastic Medicare cuts extend nationwide, he says the company will have to "change our business model some if we want to stay around."
While Binkley does not expect the rebid rates to be as "severely reduced" as they were in the original Round 1 — payments for mail-order diabetic suppliers were as much as 43 percent lower than then-current reimbursements — he predicts the range will be lower than the 9.5 percent across-the-board decrease CMS imposed when the first Round 1 was abandoned.
"That's the problem with it: It's like throwing at a dartboard," he says.
"We like our business and believe it is a very good business model for patients. The mail-order model is very efficient, and a lot of our patients have transportation issues. Think about your grandmother at home who lives alone. How is she going to get to the drug store?" Binkley says.
He questions the wisdom of CMS exempting drug stores and pharmacies from the 9.5 percent decrease, in effect favoring a less cost-effective solution to providing diabetic supplies to home care patients. "It's unfair and doesn't make any sense," he says.
Another result of competitive bidding will be that patients with diabetes won't have a choice, which was a basic tenet of Medicare — to provide a choice of suppliers, says Binkley. He notes that elderly patients who have to use a different provider aren't going to be happy.
"They don't handle change very well," he says.
