Competitive bidding chronicles: Month 1

Sunday, January 23, 2011

Editor's note: Each month, HME News will be following two providers--one contract supplier and one non-contract supplier--as they try to navigate a new Medicare landscape that includes competitive bidding.

ST. PETERSBURG, Fla. - The game may have changed on Jan. 1 for contract suppliers like RxStat, but president Sam Jarczynski hasn't yet changed how he's playing it.

RxStat is one of 16 providers who won contracts to service sleep patients in the Orlando competitive bidding area (CBA). It's an area the St. Petersburg-based company was already servicing and the only area he accepted out of several sleep bids he won. He won several bids in the original Round 1, so he saw the benefits of staying in the game.

"We accepted Orlando just to keep our feet wet," said Jarczynski. "When you're a bid winner, you have information quicker than those who weren't winners. You had the allowables a little bit quicker, and a feel for what they were looking for."

The original Round 1's false start has Jarczynski understandably cautious this time around.

"We did some marketing in the original Round 1, and when they killed it, we'd wasted a lot of money," he said. "This time around we're going to take a wait-and-see attitude."

That attitude means that in the first month of the contract, Jarczynski hasn't done a thing differently. He's taking advantage of the grandfathering provision to continue servicing patients for oxygen in Orlando, but he's doing zero additional marketing to referral sources for sleep there.

Even with allowables 29% to 32% lower, "the sleep categories are doable at those prices," said Jarczynski. In oxygen, RxStat's bread-and-butter, "it's borderline," he said.

"It's going to be crappy patient care, but it could be done," he said.

Yet Jarczynski believes the program will fail, and that the tipping point may lie in diabetic supplies.

"Diabetic supplies cannot be supplied at the rates posted," he said. "If they tie all the bid categories to the same complaints they get from diabetic patients, it will kill the whole deal."

The program may fail, but Jarczynski doesn't believe it will die. He said competitive bidding can work if done properly, and he fully expects such a re-work to occur. It's just a matter of when.

"I don't want to make an investment until I see it's going to stick," he said.

Pro2 downsizes

By Jennifer Keirn Contributing Editor

Before losing the bid to provide oxygen in its hometown market of Cincinnati, Pro2 Respiratory served a full quarter of the area's oxygen patients, about 1,300 individuals.

The company could boast that half of its staff were respiratory therapists (RTs), and it provided little extras that patients and referral sources loved, like ultra-portable M6 cylinders, quick care coordination and a focus on helping patients achieve "life quality goals." Now all those extras are gone.

"The sad thing about it is, we never got paid any more than anyone else for having that clinical mix," said COO John Reed. "When we lose 40% of our revenue stream on Jan. 1, we go back to the pioneer days."

Pro2 started downsizing last fall, slashing one-third of its Cincinnati staff. RTs now make up only 15% of personnel and the standard oxygen set-up is down to bare bones. Everyone's doing extra work--Pro2's chief clinical officer is back to taking calls and doing set-ups--and morale has suffered.

Preparation for Jan. 1 meant tough decision-making for Reed and his team. They opted to grandfather about 1,000 patients rather than face discharging about 30 a day to a winning provider whom they didn't have confidence could handle the volume.

"We had a hard time (using patients) like guinea pigs in a lab experiment," said Reed.

A growing number of Pro2 patients on Medicare HMOs has been a bright spot, but the company has also decided to stop accepting certain insurance plans. Going into the first month of competitive bidding, Pro2's management was still actively debating whether they should accept subcontracts, purchase a bid-winning provider or diversify their product lines.

Reed predicted to HME News in January that the program would be in repeal status within four weeks.

"We'll be back to the table trying to negotiate a new competitive bid program around economist Peter Cramton's model," he said.

And if that doesn't happen?

"We'll either acquire somebody, be acquired by somebody, reinvent ourselves as a non-clinician-based business or go outside the Cincinnati area," said Reed.