Making the jump to chronic diseases

Your gamble: Big risks with big rewards

Chronic disease management has been somewhat of a buzzword in recent years, with many national and local providers trying to get a piece of the action; however, they're often met with less than stellar success.

If you're looking for a quick and easy way to diversify your business, you'd better consider other alternatives. But for providers willing to make the necessary time and financial commitment, the rewards can be huge.

Pete DeComo, vice president of infusion therapy and biotech operations for Philadelphia-based Olsten Health Services, will speak on providing infusion services for patients with chronic disease at the National Home Infusion Association's annual meeting May 6-9 in Pittsburgh. He says there's a simple reason many providers have attempted to add chronic disease patients to their list of clients.

"When you have a chronic patient on service, that is a recurring business stream," he says. "An acute company sees a patient for a very short period of time and is more therapy focused than disease focused. But with chronic patients, you have a lifelong patient on service."

The difference is obvious. For acute services, you're constantly looking for new patients to replace those who no longer require therapy. But if you land a chronic disease patient, that person will likely stay with you for an extended period of time and need recurring orders every month.

Don't fall short in analysis

Sounds simple, but DeComo says too many providers don't analyze any further, and therefore, fall short.

"Providers don't necessarily understand the business or clinical model necessary to provide chronic disease services," he says. "It is more of a leap than most people believe."

The fact is, it's very costly to enter some of the niches. But if you do your research and can afford to take the risk, DeComo says it may be well worth your time.

"If you choose to put forth the investment, the return on that investment can be rewarding," he says. "If you can float that initial financial investment, you potentially have a patient who is on service for the rest of his or her life."

DeComo notes that to enter a chronic disease niche, you'll likely have to change your clinical and business models. He offers these suggestions:

1. Business model.

"The mission of the company as it relates to treating chronic patients really needs to be different," he says. "Chronic patients are not only lifelong patients; they also have significant reimbursement challenges, they have significant lifestyle challenges, and you need a product and service model that addresses those needs and challenges, or you're not going to be successful."

For example, high staff turnover may be enough to thwart a move into chronic disease.

"You need a strong customer service function that enters into a relationship with the patient," notes DeComo. "When that patient calls, they want to know they're talking to Suzy, and if they call a month from today, they will still talk to Suzy."

Start with a large investment

But the business model is much more than keeping staff happy. It comes down to making a financial investment.

DeComo notes that some of the drugs used for chronic patients are prohibitively expensive. Combined with the fact that you usually are required to carry significant amounts of inventory, you may need to make a significant investment to get the ball rolling.

"In the area headquarters I'm in, we might have $2 million of inventory sitting on our shelves on any given day, and the typical pharmacy isn't going to be prepared for that," he says.

Such large inventory is required for several reasons. First, Olsten provides services for a handful of chronic diseases, some of which can be costly, such as hemophilia. Because coagulation factor contains diverse units of concentrate from one to the next, you'll have to keep a hefty supply on hand.

"One 50 ml vial of coagulation factor might have 1,000 units of factor concentrate, while another 50 ml vial might have 250 units," says DeComo. "If you have a patient on high dose, you're going to need the 1000 unit vial. If you have a pediatric patient, you're going to need the 250 unit vial, so you have to carry multiple doses of factors or brands."

With the average cost of coagulation factor at about 70 cents per unit, a single vial of 1,000 units could cost upwards of $700.

In addition to inventory, you've also got to make a commitment to educate staff regarding any chronic diseases you wish to treat.

"You also need to support your own infrastructure through training and development," says DeComo. "These clinicians typically demand a higher price because they have unique training that few people in the marketplace have, so you have a bigger receivable to support."

2. Clinical model.

It's likely your current staff - pharmacists and nurses - will need significant training in the disease state. Olsten uses three levels of education for professional staff and two levels for nonprofessional staff.

Level I consists of self-study models and tests. Level II entails Olsten's own internal training and development program. Levels I and II are required of any employee who will have contact - even non-clinical contact - with a patient.

Level III is reserved for clinicians and consists of external education. For Olsten, it holds three-day preceptorships at Georgetown University.

The training for staff is important for several reasons. Clinical staff won't just be treating chronic disease patients; they'll also be interacting with them on a regular basis.

"Your customer service staff and clinical professionals get involved in the community," notes DeComo. "They go to support group meetings, meet with patients in focus groups, and become involved in advocacy groups, so it's a totally different mentality."

It's not Mission Impossible

DeComo is quick to note that despite the time and financial considerations, entering a chronic disease niche is difficult but not impossible.

"People with the right model can still penetrate this market," he says. "Competitors have sprung up who have focused on one disease, established their niche either in their local or regional market, and are now getting market share. So yes, it is possible to get in."

First realize that unless you've got an exceedingly strong balance sheet, you should concentrate on one affordable chronic disease to begin. The best way to choose which chronic disease you'll pursue is to let the marketplace tell you.

"You may be in a marketplace where there is a university or teaching center," he says. "See what type of chronic diseases are aggregated at that institution. If it's a growth deficiency program, you might decide to get into growth hormones."

DeComo points out that growth hormones are required by the patient each month, is an easy product to buy, does not require high-cost inventory, and although you will need special services and skills to support the product, it is a niche within the financial capabilities of many home infusion providers.

"The receivable is not going to be high," he says. "You might need to hire a specialist, such as a pediatric endocrine nurse, but those are typically easy to find."

Reasons for failure

DeComo notes that many providers, both small and large, have unsuccessfully attempted to enter the chronic disease market. Here are the common mistakes you'll need to avoid:

o Lack of research.

A common mistake is thinking that all infusion is alike. That may be the case with acute patients - but not with chronic disease.

"It's easy to say 'We're an infusion therapy company, we can do that,' but you need to conduct good research and market assessment in terms of what the need is and what resources are needed," says DeComo. "If you don't do those two basic things, you're going to come to the wrong conclusion."

o Failure to account for market saturation.

The marketplace for many chronic diseases is already saturated, DeComo says. So you'll have to approach the niche in one of two ways: Take patients from another company through a managed care contract, or start small and become a preferred provider for a treatment center.

However, he cautions that a local treatment center happy with its current provider won't likely be willing to switch. You'll need to show them you are willing to do more than their current provider.

o Not establishing trust with referral sources.

Treatment centers aren't going to refer patients who will require a lifetime of care to a fly-by-night outfit. You must be prepared to show the referral source the extent you've gone to provide quality care and top-notch customer service to patients.

"The treatment centers, clinics, and local support chapters and foundations need to believe that you are committed," says DeComo. "They need to see that you are making an investment in people who truly understand. Trust has to be established. Because they are trusting you with a patient who requires lifelong care and has specialized and unique needs, you have to become their partner."

o Starting with an unprepared reimbursement staff.

Most providers don't realize the full extent of reimbursement issues they'll be faced with once taking on chronic disease patients. Here are just some of the obstacles DeComo says your reimbursement staff will face.

· Lifetime limits. Because some therapies are so expensive, you may have patients reaching their lifetime insurance limits. You'll have to find new sources of funding.

· Children becoming adults. Similar to lifetime limits, once children turn 18 to 22, they no longer are covered under their parents' insurance. Again, you'll have to find new sources of funding so they can continue treatment.

· Analytical insurance companies. With large bills being forwarded to payer sources, DeComo notes, you'll frequently deal with payers saying "I need to see more documentation; It needs to go to medical review; or "We're going to send this out for bid because we're not happy with your price."