The competitive bidding chronicles: Month 3

Thursday, March 24, 2011

Commitment, confusion hold RxStat back

One month ago, Sam Jarczynski of RxStat was ready to "jump in" to marketing himself actively as a sleep contract winner in Orlando. But he's delayed that effort because he's still afraid to make too much of a commitment.

"To go through the cost of hiring and training an outside sales rep (in that market) is too risky at this time," he said. "How much marketing is justified to generate slim-margin business?"

Jarczynski's also delaying that effort because of persistent confusion over competitive bidding in the marketplace. He's hearing reports of providers receiving conflicting information from the CMS hotline or--worse yet--contract suppliers who don't pick up the phone when patients or referral sources call.

"Basically, they were shell companies set up to win the bid with no true intention of supplying the market," said Jarczynski. "(CMS) is saying everything's rosy, but it's not."

In March, "the problems will continue to compound," predicts Jarczynski, especially as patients who last placed three-month supply reorders in December call for refills.

Even without any marketing, Jarczynski is seeing an uptick in orders from non-contract suppliers directing CPAP supply customers RxStat's way.

"We're pretty well-known in Florida, but we're not a direct competitor for oxygen in that market," said Jarczynski, "so we're a non-threatening way for them to give away their sleep supply patients."

With each passing month, Jarczynski's expectation that competitive bidding will die lowers. Today, he's putting the odds at 50/50, but he still believes the program's flaws are fatal.

"Patients aren't getting the service they need, (CMS) isn't really saving money because patients are staying in the hospital longer, and providers are having a tough time financially because they were expecting this huge windfall of business and it's not appearing," he said.

From the perspective of a Round 1 contract supplier peering out at providers in the Round 2 MSAs, Jarczynski sees largely inadequate preparation.

"Most providers, especially small providers, have their heads in the sand," he said. "(They're operating) based on how they've always done business."

Keep it up, warns Jarczynski, and your days may be numbered.

"Those are the guys who scramble and go away very quickly," he said. "It happened in Round 1, but some stuck it out to make it to the rebid. Now we're starting to see them go away."

Pro2 Respiratory fights 'predatory marketing'By Jennifer Keirn

To any Cincinnati contract suppliers who might be clipping this article, know this--PRO2 Respiratory may not have a contract, but they're not going away.

PRO2's local competitors want referral sources to believe otherwise; they've been engaging in what PRO2's John Reed calls "predatory marketing," sending out copies of "The competitive bidding chronicles" to support their claim that the company's going belly-up.

"They're taking opportunistic advantage of us talking about the realities of the program--this is happening to everyone, not just to us," Reed said. "The implied message that winning a contract means you're financially strong, clinically superior and secure in your long-term existence--it's just wrong."

Operating in this climate has required some marketing tweaks--"we now have to go in prepared to open our comments with, 'You may have heard...'" said Reed--but their relationships remain strong.

Since Jan. 1, Reed and his team have been mulling creative new ideas for the company's future that will "look at different ways to compensate us for care rather than through DME reimbursement," though he's still not ready to share details.

All seven of PRO2's branches outside of Cincinnati will likely be part of a Round 2 CBA, and the company's making efficiency-boosting adjustments in all offices.

In Reed's view, the only way to guarantee a contract in Round 2 is to make sure your credit, taxes and finances look great, "then bid irresponsibly."

"If Round 2 occurs before we see a full year's financial impact of Round 1, I think you'll still see suicide bids," he said.

Reed remains convinced the program will fail, but he said the program's flaws might be misconstrued as progress.

"If you see a 5% to 7% reduction in patients served per capita (from patients who refuse service rather than pay co-pays or deductibles), then someone's going to claim that's a success," he said. "In my view, you have a patient with a medical need who's going unserved."

Some of the blame for the program's persistence, Reed added, lies squarely at the feet of providers.

"As an industry, we've consistently enabled patient care remaining relatively constant whether or not it's profitable," he said.