Neighborhood Diabetes: 'Nudge' patients to better adherence

Many with diabetes suffer severe complications because they don't follow their prescribed treatment regimens. So when a diabetes provider effectively demonstrates how it can keep its patients healthy, referral sources take notice.

That's what has helped transform Woburn, Mass.-based Neighborhood Diabetes from a $6 million enterprise in 2004 to a $60 million corporation today. It is one of the leading providers of blood glucose and reagent strips in the industry, with its Woburn facility ranking 12th in 2009 with a total Medicare reimbursement of $8.1 million and nearly 26,000 allowed beneficiaries.

"From the beginning what we realized was special is that every Neighborhood employee was focused on changing the lives of people with diabetes in a positive way," said CEO Tom Cronin. "We thought with all the depressing results about diabetes and its complications from lack of adherence, if our team could nudge people to be more adherent to their treatment regimens, they would be less likely to have complications."

When Cronin and partner Bill Haylon purchased the company in 2004, they started a six-year "organic growth" pattern in which they added sales people, expanded their territory to include the entire East Coast and made small acquisitions in New York and Orlando, Fla.

The primary catalyst for Neighborhood Diabetes' growth has been showing referral sources how they help diabetic patients control their disease and showing payers how their approach saves money by preventing hospital admissions. To prove their effectiveness, Cronin cited a study performed by a payer that showed how 600 patients of Neighborhood fared compared to 500 patients of other providers. The difference: Neighborhood's patients showed a 70% lower inpatient hospital admission rate and 50% lower ER visit rate.

"Those results don't come on their own and require a high level of investment from us," Cronin said. "But we think it is far better to invest in training patients than doing TV ads."

Neighborhood has built its business solely on testing supplies and insulin pumps. It also has a pharmacy component to accommodate health plans that classify diabetes supplies under pharmacy rather than DME. Roughly half of its payer mix is Medicare, though Cronin concedes that it is the slowest growth portion of the business and that commercial payers will be a greater part of the company's mix going forward.

"Diabetes won't go away and there has been a lot of great work done for beneficiaries in testing supplies over the past 20 years, so it's sad that growth will be less from Medicare," he said. "CMS needs to realize that models focused on reducing system costs should be part of the program."