Diabetes: Post-bid, time to rethink Plan B

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Tuesday, February 26, 2013

YARMOUTH, Maine – Providers barely had time to absorb the news that Medicare will pay for all diabetes supplies at the mail-order rate, when those rates were announced, far below the industry’s low expectations.

The double whammy left many wondering whether or not any small providers would be able to stay in the Medicare game. Provider Mark Gielniak submitted a bid knowing it was a long shot (he didn’t get a contract offer), but he banked on offsetting any losses by beefing up other aspects of his business, including encouraging his current mail order customers to come in and pick up their supplies. 

“We do a lot of local business,” said Gielniak, vice president of Diabetes Plus in Warren, Mich. “If we didn’t win the bid our Plan B was we were hoping we could still do retail and shoes. We’d be limping along, but we’d still be here.”

But, with such a steep cut—an average of 72%, CMS announced on Jan. 30—that may not be feasible, he says, especially if other payers follow suit. The provision setting all supplies at the mail-order rate passed as part of the “fiscal cliff” deal on Jan. 2. 

The loss of diabetes revenues will create a ripple effect, says Robert Salmon, who relies on Medicare for about 48% of his diabetes supply business. His business includes therapeutic shoes, which created a nice synergy with the supplies.

“If we have to limit the amount of exposure we have, that’s at risk,” said Salmon, president of Charleston, Miss.-based The Diabetic Shoppe, which employs about 60. “If we have to start slimming workforce, it’s going to hurt the other (parts) of our business.”

The low payment rates—test strips will be reimbursed at $10.41 per box of 50—also have the potential to hurt providers’ referral relationships, they say. Off-brand products, even some of the better-known ones, can be a tough sell, say providers.

“I’ve got one major endocrinologist that refuses to do business with us if we are not going to supply the brand names,” said Dave Doubek, president of Doubek Medical Supply in Alsip, Ill. “Referrals need to understand that, at some point, it’s impossible.”

What does all this mean for beneficiaries? For starters, less choice and a lot less service, say providers.

“I presently stock lower-priced products, but I am not at the mail-order rate,” said John Keegan, pharmacist/owner of Heights Terrace Pharmacy in Hazelton, Pa. “I see these people and I discuss their diabetes with them. I can initiate a conversation with the physician if there needs to be a change in therapy.”

That kind of one-on-one attention will disappear under these prices, say providers.

“The government is reimbursing for delivery of a product,” said one provider. “There will be no more of the add-ons like the certified diabetes educators—that goes away.”