Changes in how Medicare pays for products used by people with diabetes have made David Kohll's life much busier.
Kohll, who co-owns Kohll's Pharmacy & Homecare in Omaha with his brother Justin, has hired 27 new workers and anticipates hiring more, installed 70 new phone lines and set aside 2,000 square feet for a call center to handle orders for diabetic testing strips.
Kohll's is one of 18 companies nationwide that have been awarded three-year Medicare contracts to provide diabetic supplies, including test strips, lancets (used to draw a small amount of blood for the test) and blood glucose monitors, through a new Medicare mail-order system.
Kohll's, a family-owned business that opened in 1948, is the only Nebraska-based company to be awarded a national diabetic supply contract.
Kohll's bid was accepted, as were bids from companies in Arizona, California, Florida, Michigan, Missouri, North Carolina, Ohio and Virginia.
The diabetic supplies program — Medicare's first national program — goes into effect Monday, but sales already are picking up, said Laurie Dondelinger, the company's marketing director.
“We knew that there would be an increase — there's 4.5 million customers among 18 companies,” Dondelinger said.
The contract has also been a boon for the area's U.S. Postal Service, which Kohll's uses for deliveries. “A couple weeks ago we were mailing 30 packages a day, now it's up to 75 and it's expected to increase,” Dondelinger said.
The diabetic supply program is one of several Medicare competitive bidding programs intended to save taxpayers nearly $26 billion over the next decade by cracking down on waste and fraud in the medical equipment industry.
A Medicare program that provides medical equipment also launches July 1, but for now is limited to 100 major metropolitan areas around the country, including Omaha-Council Bluffs, Wichita, Kan., Minneapolis, Chicago, St. Louis and major cities in other states. The program is scheduled to be available nationwide by 2016, under the 2003 Medicare Modernization Act.
Kohll's and other Nebraska medical equipment companies also are among those who won contracts to provide medical equipment, such as home oxygen gear, walkers, hospital beds and other supplies, to Medicare recipients.
Lincare Inc., Focus Respiratory Inc., AHP-MHR Home Care, Apria Homecare, PSI Health Care, and Helget Home Care were among the Omaha-area firms awarded Medicare medical equipment contracts.
Medicare recipients currently can order diabetic-related products from hundreds of suppliers, but prices can vary widely.
Kohll said diabetic test strips, which are used to test a person's blood-sugar levels, cost about $33 for a box of 50.
Under the government's mail- order program, the price for a box of test strips is set at $10.40, and Medicare pays 80 percent of that.
Medicare recipients who want to be reimbursed for diabetic supplies delivered to their home will have to use one of the 18 designated mail-order suppliers.
Patients still can opt to purchase diabetic supplies from their local drugstore, but to be reimbursed the pharmacy must honor Medicare's mail-order prices as payment in full. If the pharmacy doesn't participate, the recipient won't receive any reimbursement. As a result, people should check with their pharmacy to see if it accepts Medicare reimbursement as payment in full, agency officials say.
“Those who like the face-to-face interaction with the pharmacist have that choice,” said Jonathan Blum, Medicare deputy administrator. “We want to preserve both options.”
Critics of the competitive bidding programs, including People for Quality Care, a Waterloo, Iowa-based advocacy group, say the new diabetes and medical equipment programs will limit consumer choice, delay delivery and repair of beneficiaries' medical devices and force small medical equipment firms that cannot match prices offered by contract suppliers to cut staff or close their doors.
The group, which advocates for senior citizens and people with disabilities, said that 93 percent of all medical care providers will not be awarded contracts, resulting in the closure of more than 40 percent of those firms.
“Contract-winning providers are located many states away from beneficiaries and may not be experienced in selling and servicing the equipment they won a contract for,” the group said in a press release, citing a Kansas Medicare beneficiary who waited three months for his scooter to be repaired because none of the area's winning providers were capable of servicing his brand of scooter. The advocacy group and others are promoting an alternate system.
Medicare's competitive bidding program was piloted in nine cities, including the Kansas City metro area, beginning in 2011.
Helget Home Care in Omaha was among those chosen to provide certain types of medical equipment under Medicare's competitive bidding program. Owner Tom Victor said he's glad his bid was accepted but said he doesn't yet know the impact on his company.
“It's hard to forecast how this comes out. Some other organizations have grown rapidly and increased their volume,” said Victor, referring to medical equipment companies doing business in one of the nine metropolitan test areas.
The selection of certain suppliers, Victor said, may result in patients having to go from one firm to the next to get all the medical equipment they need.
“It's more of a hassle for patients,” he said. “It's saving some money but also costing some money in the meantime.”
Kohll's, a third-generation family business, was founded in 1948 by Louis and Leona Kohll. The couple opened their first drugstore and pharmacy, which had a soda fountain, at 29th and Leavenworth Streets. That location still exists today.
The pharmacy and medical supply chain operates eight stores in the Omaha area and a ninth in Malvern, Iowa. The company expanded its offerings to include medical equipment in the 1990s.
About 10 family members currently work part time or full time at Kohll's, including David and Justin's father, Marvin Kohll, who is in his 80s and works about three days a week.
For years, Kohll's has been delivering test strips to people who are homebound or live in assisted-living facilities.
Such deliveries will be prohibited under the program's rules, and that ban spurred Kohll to submit a bid.
“I thought, 'You know what? I'm going to aggressively bid on this thing because I don't want to lose my customers and my patients,' ” Kohll said.
He hopes the venture pays off.
Although the lower price he bid doesn't leave much of a profit margin, Kohll said, winning the bid has resulted in thousands more customers for Kohll's.
One group of pharmacists in Wisconsin, for example, is moving 8,000 of its customers to Kohll's because they want to connect to a pharmacy instead of a mail-order company, Kohll said. Kohll's is the only pharmacy-based company among the 18 firms that were awarded three-year diabetes mail-order contracts.
“If I do everything just right,” he said, “I'll end up nice and profitable. If I do something wrong, I can lose millions.”
But Kohll is happy he won the bid.
“It's a challenge. I love challenges. It's exciting. We're talking to people from all over the country.”
This report includes material from the Associated Press.