ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Sunday, January 21, 1996 TAG: 9601190097
SECTION: BUSINESS PAGE: G-1 EDITION: METRO
SOURCE: GREG EDWARDS STAFF WRITER
The sign on Ed Buchholz's office door reads "War Room."
Inside, Buchholz plots the strategies that will help his company -Diabetes Self Care - get paid for the products and services it sells diabetics across the country.
The reference on the door to combat is not entirely tongue-in-cheek.
To help win the business of people who buy its diabetic-care products via mail order, the company also files their insurance claims. Diabetes Self Care uses 75 of its 125 employees in Roanoke to file or follow up claims to private health care insurers or government insurers like Medicare and Medicaid.
The real struggle the company faces is with paperwork: filing claims, following up when they aren't paid, storing patient records and providing reams of background information that insurers require over and over again with each new prescription or product shipment.
"It's a battle and we try to win that battle," Buchholz said.
Diabetes Self Care, which last month moved to larger quarters near Roanoke Regional Airport, is a division of Universal Self Care Inc., a public, shareholder-owned company formed by the merger over the past two years of three companies, all providing products and services for diabetics. Those companies are based in Roanoke; Van Nuys, Calif.; and Livonia, Mich. Buchholz is divisional president for Diabetes Self Care and a vice president of the parent company, whose offices are now in Michigan.
The company offers a full-service pharmacy, home delivery, direct billing of insurance claims and in-home and telephone training in the use of its products, among other services.
Since 1994, it has been offering managed-care services for diabetics to health maintenance organizations and large, self-insured companies such as Black & Decker Corp. And it is that business that Buchholz sees as company's future.
The Roanoke operations, formerly known as the Thriftee Group, began eight years ago at a small pharmacy on Apperson Drive in Salem. The company's employment in Roanoke is 10 times what it was then and its sales have grown 40 percent annually for the past eight years, Buchholz said.
Before getting into the mail-order, health care business, Buchholz, 52, sold insurance and was a building contractor in Staunton.
Neither Buchholz nor anyone in his family has diabetes. It was the business opportunity that attracted him, he said.
He and partners Clay Wisely, a Staunton accountant, and Ken Payne, operator of a Roanoke computer software business, joined Roger Robinson, owner of the Thriftee Pharmacy in Salem to launch the business.
The company advertised its toll-free phone number in the American Diabetes Association's magazine and in the first year did $1 million in sales, Buchholz recalled.
For a couple of years, he and Wisely drove to Roanoke occasionally from Staunton to check on things; but then, with reimbursement from insurance companies becoming a major part of the business, Buchholz saw the need to get involved full time. Robinson left shortly after that over what Buchholz calls "philosophical differences" and formed his own competing company before his death two years ago.
The business grew so quickly that it was running out of working capital, Buchholz said. That's because Diabetes Self Care's suppliers demand payment within 30 days while insurance companies generally take up to 90 days to pay patients' claims. "The more successful you are at selling, the more working capital you need," he explained.
Because of its cash needs, the company started thinking about selling stock to the public or bringing in large investors. Then Buchholz said he met a competitor from California at an American Diabetes Association convention. The company had a different selling approach, seeking referrals from physicians and clinics for its products.
The California company, Universal Self Care Inc., operated a mail-order and retail outlet business, SugarFree Centers, and had made its first public stock offering in 1992. The Thriftee Group and SugarFree Centers merged in February 1994.
A distribution center and sales offices remain in California but all but one retail outlets were closed last year.
Also, the claims processing operation for the California business was moved to Roanoke. That created a demand in Roanoke for Spanish-speaking customer-service representatives, which Buchholz said presented a challenge. It also meant keeping the customer service lines in Roanoke staffed till 11 p.m. because of the time difference on the West Coast.
It was at another ADA convention that Universal Self Care linked up with Patient Care Services, a Michigan company, that also sold products and services to diabetics through referrals from doctors and other health care professionals. The two companies, both with annual sales of about $20 million, merged last April. All three of Universal's divisions began operating as Diabetes Self Care on Dec. 1.
Buchholz said that 40 more customer-service, data-entry and claims-processing jobs should be moved from Michigan to Roanoke in the next month as Roanoke becomes the operational center for the combined company.
Diabetes Self Care moved from a Starkey Road location into 16,000 square feet of space at the Valley Court office center on Thirlane Road on Dec. 1 and has an additional 50,000 square feet under option in case its needed. The offices, formerly occupied by a unit of Dominion Bank - now First Union National Bank of Virginia - are divided into dozens of cubicles containing computer terminals and telephones.
Roanoke is probably one of the best places for the kind of business Diabetes Self Care operates because it is centrally located for the heavily populated East Coast, Buchholz said. More of the company's customers are located in New York than any other state, followed in the top five by Florida, California, Virginia and Pennsylvania.
Other factors making Roanoke a good location are the cost and quality of labor, he said. In Roanoke, he can run an ad for employees and get 20 applicants, all of them qualified to do the job. The same ad in California may draw 1,000 responses but only three may be qualified, Buchholz said.
The company pays its hourly workers an average of $7.50 an hour and pays fully for a range of benefits including hospitalization, long- and short-term disability and life insurance, Buchholz said. It uses its benefit package to attract better-qualified workers, he said. They are mostly young - average age is 24 - mostly female and many are college educated.
Most of the company's new customers, 70 percent, result from the in-home training on the use of the company's products such as glucose monitors. Doctors refer patients to the company for training, which frees their nurses to do other work, Buchholz said.
In one part of the Roanoke office, a group of customer-service representatives calls patients and doctors' offices to establish if patients are eligible for the company's services. They then notify trainers who go to the patients' homes. Across the room, another group of workers makes sure the company receives the paperwork that is required for each new customer.
Once diabetics join the company's maintenance program, their names are handed over to another group of company representatives that call every 30, 60 or 90 days to make sure their needs are being met.
Because these employees often call the same customers month after month, they get to know them well. Some customers have even made trips to Roanoke to meet the company employees who call them, Buchholz said.
Christmas cards from customers still decorate the bulletin board in the office of Jeni Cameron, a department team leader. "I get more Christmas presents from my customers than I do from my own family," she said. "It's like having 25 grandmothers across the nation."
Cameron, 22, is one of three of a dozen employees who were with Buchholz when he went full time with the company six years ago. She was a co-op student in a marketing class at Salem High School when she started with the company.
Although it is possible to send and store documents electronically now, many insurance companies still require claims be filed on paper, Buchholz said. So in another part of the building, workers stay busy filing paperwork in customers' folders. Elsewhere, more workers make sure that payments are credited to the right customer accounts.
After the initial diagnosis, most of the care for diabetics consists of monitoring their blood sugar levels and making sure they get the right amount of insulin to keep them in balance. Most diabetics, Buchholz said, spend between $2,500 and $4,500 a year for supplies. Three-fourths of his company's customers carry two insurance polices to cover those costs, he said.
"We just fight the paper war with the insurance company to get the money," Buchholz said. The business is unlike any other he's been in because he can't set his own prices, he said.
"The insurance companies tell me what they're going to pay me, and the suppliers tell me what I'm going to pay them, and if they're real kind they'll leave me a little bit [of profit] in between."
A few years ago, Buchholz feared the Clinton administration's health care reform was going to cost him all his customers except those with self-insured corporations of more than 5,000 employees. That prompted Buchholz to develop a managed-care proposal for serving the diabetes patients insured by those kinds of companies.
Black & Decker Corp., the Towson, Md., maker of power tools and household appliances, became the company's first managed-care client in February 1994. Others, including HMOs and individuals, have signed on since. In December, the company announced it had been picked as the preferred provider of diabetes supplies and services for Ford Motor Co., the Michigan Public School Employee Retirement System and certain General Motors Corp. employees in a Michigan Blue Cross plan with the potential of increasing the company's patient base by 50 percent and revenues by $6 million annually.
Under the managed-care plan, the company becomes a sort of "gentle nagger," Buchholz explained. Company representatives call patients on a regular cycle just before their medicine should run out to determine how much they still have on hand.
This enables the company to determine if patients are following the courses of treatment prescribed by their doctors. If the patient isn't following the treatment, they may be encouraged to call his or her doctor or the company may make the call itself.
Black & Decker has publicly reported that its employees have reacted positively to the program. And this month, the tool maker notified Buchholz that the company had been picked as Black & Decker's benefit vendor of the year for 1995.
LENGTH: Long : 187 lines ILLUSTRATION: PHOTO: Keith Graham. 1. Because most insurance companies stillby CNBrequire a paper claim, some Diabetes Self Care workers stay busy
filing paperwork in custormer's folder. 2. The comapny occupies
16,000 feet of space in the Valley Court officecenter on Thirlane
Road and has an additional 50,000 square feet under option for
possible expansion. 3. Ed Buchholz. color. 4. Customer-service
representatives in Roanoke take orders by phone. Graphic: Chart:
Universal Self Care Inc. KEYWORDS: PROFILE