Competitive bidding

Sunday, June 30, 2002

A Florida winner speaks his mind
ORLANDO, Fla. - Rotech Healthcare came out the big winner in Florida Medicaid's competitive bidding program, taking the prize in six of 11 geographic regions. Despite that success, CEO Steve Linehan has plenty of issues with states and the federal government using competitive bidding to slash reimbursement for durable medical equipment. Here's what he had to say when HME News talked to him last month.

HME: When it comes to competitive bidding, what concerns you most?

SL: The No. 1 concern is that you have adequate quality measures in place and that quality is more greatly weighted than price. No. 2 is that in trying to save money on home health, oxygen and respiratory services that there isn't a bubble in hospital and emergency room visits. If that happens it will more than off set any savings you realize in home health.

HME: Proponents of competitive bidding express a somewhat similar sentiment. They want the lowest price and good quality. In Florida, however, emphasis was placed on cost savings.

SL: I'm not sure of that. But what I can tell you is that we believe that the price we bid will insure good quality patient care and is something we will make a reasonable profit on.

HME: What's a reasonable profit?

SL: Somewhere between the Apria profit margin, which is a lot more managed care weighted, and the Lincare profit margin, which is more government and business weight.

HME: A single-digit margin?

SL: No.

HME: How do you make a double-digit margin at the reduced price?

SL: You are not paying a huge marketing force to go out and call on one doctor at a time to get one patient referral at a time. So I don't think the margins are going to be that different.

HME: What percentage of your business is Medicaid?

SL: It is in the single digits.

HME: How do you combat calls for Medicare competitive bidding?

SL: I think the best tack is to say that we are not opposed to competitive bidding, but before it can be good for patients and the country it has to be based on definitive quality measurements. Ours is not an obstructionist approach, but it says, "Go slow," because there's no statistically valid data that shows you don't lose more than you save. And until that data is available, I don't think it's prudent to move ahead full speed.

HME: Would you favor a reimbursement cut other than competitive bidding?

SL: I think the industry has already taken its lumps with a 25% cut in 1997 and a 5% cut in 1998. If there needs to be cuts, people should look elsewhere.

HME: The industry's message that competitive bidding is bad for patients doesn't seem to be getting across to lawmakers. Why is that?

SL: We have to do a better job convincing people in charge that home health care is the most cost efficient, most patient preferred way of receiving care. Maybe our mantra becomes: We can care fors a patient at home for one year for less than the cost of an average hospital admission for a person over 65. If we get that simple message across, I think we'd hammer home the fact that they are looking in the wrong places to save money. HME