Growth, pricing pressures to dominate home IV

No need to sound taps for small providers

A study by FIND/SVP, a New York City-based research and information company, notes that the growing number of patients receiving home infusion therapies is likely to continue through the near future. Unfortunately, so will lower profit margins and the need for small home infusion agencies to find specialty services.1

The study, "The Market for Infusion Products," points to changing demographics as being the most likely reason for the sustained growth of home infusion. FIND/SVP estimates that almost 556,000 people received infusion therapy in the home in 1995, a number that it expects to more than double before the year 2000. (See chart, p. 122.)

The study points to three fundamental reasons for the continued growth of home infusion:

1. The home infusion of enteral nutrition and antibiotic drugs, in large part because of AIDS and the increase in the number of mothers older than age 35, who are more prone to complications.

2. Patients prefer home to hospital.

3. An increase in the number of home care providers.

Lorrie Kline Kaplan, the executive director of the Alexandria, VA-based National Home Infusion Association (NHIA), isn’t so quick to point to AIDS as a potential growth market for home infusion.

"We are seeing fewer HIV patients in home infusion, which is a good thing, but it changes the services we provide and the core business for some providers," she says. However, she adds that "at this point, we don’t have the long-term clinical research to know what’s going to happen to those patients."

The success of protease inhibitors is a major plus for AIDS patients, but the clinical long-term benefit isn’t the only looming question mark.

"There is an extraordinary cost of those therapies, and many payer sources are grappling with the long-term question of who receives these therapies and whether they can afford to provide them to everyone who needs them," says Kaplan.

The second question is what services, if any, patients being kept healthy with protease inhibitors will require.

"Are they going to need to receive infusion therapy services? We don’t know," notes Kaplan. "It’s going to change what we’re doing, but we don’t know how."

Kaplan notes that one area in particular that has suffered with the success of protease inhibitors is nutritional therapy.

"We’ve seen a real reduction in the use of parenteral nutrition through the expanded use of less invasive enteral nutrition and the use of these new agents," she says.

However, Kaplan notes that there are still areas in which home infusion can benefit AIDS patients.

"We believe that this is wide open because there are still patients receiving antibiotics in the hospital or in long-term care facilities that could be treated more effectively elsewhere, in alternate site settings," says Kaplan.

Taking patient preference into consideration points to home infusion as a preferred arena for providing services. However, Kaplan feels the continued success of the industry will hinge on the ability to overcome the us vs. them mentality possessed by home care agencies and hospitals.

"As providers, we need to stop seeing the world as a dichotomy between home care and hospital care," says Kaplan. "I think the industry depends on our ability to look at a continuum of care and determine the most cost-effective treatment option, not just see our competition as acute care."

Regarding an increase in the number of home care providers adding to the growth of home infusion, Kaplan sees the reasoning as flawed logic.

"I don’t think markets are driven that way, that you have more companies selling, therefore the market grows," says Kaplan. Not to mention that although agencies are diversifying and entering new markets and service niches, she doesn’t anticipate any significant growth in the number of home care providers.

The report notes that there will be inhibitors to the growth of home infusion, with public enemy number one continuing to be the federal government.

"While private payers have been champions of home care generally and home infusion in particular, federal health care regulations have not fostered its growth," notes the study. "Except for parenteral nutrition therapy, Medicare does not currently pay for home infusion. As a result, many of those 65 and older who need infusion therapy and who rely on Medicare for reimbursement must stay in the hospital to receive their treatment."

Tim Redmon, the director of governmental affairs for NHIA, doesn’t expect a bright future for agencies relying heavily on Medicare.

"Nothing’s going to change [regarding the lack of Medicare reimbursement], and it doesn’t pay much, anyway," he says. "What should have happened, and is happening, is providers are weaning themselves off Medicare by going after better-paying sources and ones that know what they are doing. Medicare doesn’t seem to understand IV therapy and how it would save money."

However, agencies have made their share of mistakes you can learn from. First and foremost is giving away the house.

"Managed care wants Cadillac service but wants the Chevy price," says Redmon, something many agencies too often agree to just to get the business. Those that don’t know what it costs to provide therapies then end up losing money.

"If you do not know your costs either on a capitated or managed care basis, you will not bid correctly," he adds. "If you bid too high, your neighbor is going to take it away from you, and if you bid too low, your neighbor is going to laugh at you because he knows you’re going to lose money. The only way to stay in this business is to know your costs."

When you know what you can charge for a certain therapy and make money, you can then properly approach managed care organizations.

"What you have to do is say to the managed care organizations ‘Here is my package of what I can do. This is the Cadillac. What is it out of this package you don’t want me to do to take it down to your Chevy level?’"

Such "options" can include the amount of nursing services, on-call services, and number of visits per week.

While many agencies have learned the above lesson the hard way, Redmon isn’t so sure everyone has learned the lesson.

"I’m afraid it’s going to get worse a little before it gets better, but people are realizing they can’t do business like they used to," says Redmon.

The future isn’t exactly bright for small, independent companies, according to the study. It expects several large companies to continue to dominate the market. The ability of these large providers to acquire volume discounts from suppliers likely will lead to tighter margins for home infusion suppliers.

Kaplan strongly disagrees that the future lies with large national providers and notes that the need for local providers isn’t likely to disappear any time soon.

"I think there is still a need for local providers with relationships with local hospitals and their physicians," she says.

The study predicts that small, and even regional, home infusion providers may be forced to find distinct niches in the market that will reduce their vulnerability to pricing competition. (See related story on diversification, p. 117.)

"For example, one firm might specialize in parenteral feeding, while another might focus on pain control," notes the study. "A related trend involves the bundling of services for specific groups of diseases."

Redmon doesn’t view this as bad for an agency that enters the right niche. First, see what services are needed in your area but lack a specialist.

"You need to be the expert in one thing," says Redmon. "It can work if you get the word out that you specialize in that area."

Another trend will be the popularity of specific infusion clinics or stand-alone centers where patients can go for treatments and therapies, a trend that is already well underway.

[Editor’s note: For more information on FIND/SVP or to order The Market for Infusion Products, call (212) 807-2648. ]

Reference

1. Find/SVP. The Market for Infusion Products, New York, NY; 1996.