To mind your infusion business, mind your pennies

Wednesday, April 30, 2003

At first glance there appears to be a dichotomy in the outlook for home infusion therapy. Market research suggests that it is a growth business and that the future is rosy. Yet infusion leaders, such as Denver-based Coram, have endured well-documented adversity and a host of providers contacted by HME News said they found the market very stringent.

So if one sign points one way and another goes the opposite, what is the true direction? Slowly and steadily forward, say the infusion providers who are making it work. Yes, the future holds promise, they say, but providers who operate in this clinically intensive domain need to be super careful about cost control to protect margins that are fragile for many therapies.

Bob Simmons, president of Boston Home Infusion sums it up this way: “You need to manage your organization very tightly. Watch your pennies carefully. If you don’t, you’ll be pond water.”

Fiscal and operational challenges aside, infusion market consultant Tony D’Antonio sees a positive trend for injectable and enteral products.

“It’s growing steadily and slowly at about 2% to 5% per year,” said D’Antonio, who has 20 years experience in the infusion business. “Sales in the institutional market alone are over $700 million. Decent gross margins exist for most products, based of course, on Medicare rates.”

Infusion is certainly a diverse market, encompassing a vast array of therapies. Each of these services originates with a particular clinical referral source, while primary care physicians, hospital discharge planners and case managers can serve as referrals for all of them, providers say.

A sound growth strategy, D’Antonio says, is to find referral sources who correspond with the right markets.

“Segment the disease states that would lend themselves to use of the products,” he said. “Think about growing the pediatric, wound care, diabetic and adult bowel disease markets. Then find out who is referring the patients now to see if there are trends.”

Those who report success in the field are indeed following this approach. For instance, a new therapy for sickle cell anemia is allowing Chesapeake, Va.-based Sentara Home Care to work with internists.

“We’re just beginning with the sickle cell program, so it’s too early to tell how successful it may become,” said Sheila Schubert, director of pharmacy and infusion services. “But we see it as a way to access these patients before they have a crisis so they can avoid making a trip to the emergency room.”

Sentara, which Schubert says is “on the cutting edge” of developing new services, is also working on a diaretics program for congestive heart failure patients as well as treatments for high-risk obstetrics patients.

While enteral and parenteral nutrition are staples in the infusion market, Monroe, La.-based Professional Pharmacy Services is promoting the positive impact nutrients have on stroke patients.

“Stroke patients commonly get organic brain syndrome, which can put them in a vegetative state,” said President Tim Jacks. “We’ve learned this condition is caused by a lack of nutrients to the brain. So by getting them the proper nutrition early, they have a much better chance of retaining their mental capacity.”

Flint, Mich.-based Genesys Health is pursuing several new markets. Along with inotropic and diaretic therapies, the company offers pediatric catheter maintenance services, blood transfusions, chemotherapy and gastrointestinal therapies for conditions such as Crone’s Disease.

“We’re mainly working with specialists like hematologists and gastroenterologists, but we also deal with a lot of primary care physicians because this is a heavy managed care area,” said Debbie Holman, director of infusion services. “Managed care represents about 45% of our business.”

Managed care has been a reality for providers in St. Paul, Minn., for more than a decade. And while preferred provider contracts “aren’t the best,” Health East learned how to master them and has subsequently grown its infusion business by an average of 12% over the past three years, said Dennis Forsberg, senior director of business development for community-based services.

“We had some tough years – they were ready to close it up,” he said. “But now we’ve got some super people managing it who have a better handle on the costs. As a result, we’re growing fairly significantly.”

It is possible to earn healthy margins under managed care, Forsberg says, if a provider is selective and concentrates on the types of services it does well. It also means having the ability to say “no” to some business, he added.

“For the past couple of years, we have focused on getting some margin back,” he said. “And we’ve been successful in some areas. We’ve honed in on the therapies that have the higher volumes and leave the ones with lower volumes alone.”

Likewise, Peter Storey, president of Amherst, NY-based Associated Healthcare says infusion providers need to be judicious about which referrals to take.

“Four or five years ago, we had a manager who said ‘yes’ to everything and we lost our shirts,” Storey said. “We now have the good business sense to not take business we lose money on. So we’ll max out on patients for lower paying therapies like hydration faster than the more profitable ones.”

Still, refusing business is especially difficult in an environment where many independent providers must compete against hospital-run infusion enterprises. Storey admits that it takes some vigorous hunting to find physicians who “buck the system,” but the company recently hired a dedicated sales rep to work exclusively on building referrals.

Operating an ambulatory infusion facility is also a way to build business because it gives the company more latitude for treatment coverage along with giving referral sources a more “clinical” option. But as Gina Gosselin, pharmacist for Lifeline Medical in Somerset, Ky., explains, it’s not a recognized concept everywhere yet.

“By opening a free-standing infusion center, we can have a physician in attendance and serve Medicaid patients who are non-compliant for whatever reason,” Gosselin said. “The problem is there are no free-standing facilities in Kentucky, so the state doesn’t know what to tell us what we need to open one.”

Conversely, Genesys is successfully using a free-standing clinic to gain referrals in Michigan.

“It’s an effective way to reduce costs,” she said. “By getting independent patients to come in for lab work, dressing changes and assessments, we can eliminate more expensive home visits.” HME
Category: Infusion

Key Referral Source:
Hematologist, gastroenterologists, oncologists, cardiologists, OB/gyns, primary care physicians (family practitioners and internal medicine), discharge planners, case managers, internists, pharmacies.

Effective Marketing Techniques:

- Explore new markets and find the corresponding referral sources.

- Be judicious when deciding which referrals to accept. Focus on therapies with better margins.

- Consider ways to boost coverage and cut costs, such as developing a free-standing infusion center.