Competitive bidding survival guides from MED and VGM

Wednesday, July 28, 2010

LUBBOCK, Texas - The MED Group intends to "fight like hell" to eliminate competitive bidding, but until that happens, it's laid out a multi-pronged strategy to help members survive.

"The shock of it is still there," said Wayne Grau, MED's vice president of supplier relations and government affairs. "People are going: What am I going to do? What am I going to do?"

The answer, he said, depends on the provider.

For those who won a Round 1 rebid, MED has begun developing marketing material.

"Overall, they're taking a 32% cut, and they have to make it up somehow," he said. "We have an obligation to give them the marketing tools they need."

For providers who lost the Round 1 rebid and those in Round 2, MED is developing a three-pronged approach that includes product and payer diversification, as well as cost-reduction strategies.

The key, Grau said, is for providers to generate no more than 20% of their revenue from products included in the competitive bidding program.

"That will give them the freedom to put in a bid that they can work with," he said. "If they win, fine. If the lose, it's only 20% of their revenue. Providers who receive 80% of their revenue from competitive bidding products have a gun to their head. If they don't win, they are done."

Even as they develop and refine these programs, MED will "fight like hell to eliminate competitive bidding," Grau said.

"These rates are not sustainable, and we're worried what other payers are going to do once they see them," he said.

Since many payers set their reimbursement below what Medicare pays, the "trickle down could be devastating," he said.

How do you survive the impossible?

VGM says: Start with grandfathering and subcontracting

By Mike Moran Executive Editor

WATERLOO, Iowa - The VGM Group is on the road this summer to help competitive bidding winners and losers make the best of an impossible situation.

"People are nervous and want to know what to do," said Alan Morris, VGM's regulatory analyst. "Whether it's this year or next, our belief is that this program is ultimately going away. We try to keep people upbeat and give them tools for survival."

Providers in the first nine competitive bidding areas bid down prices, on average, 32%. No one can survive that kind of a cut long term or do so and take good care of patients--not winning providers, not losing providers. The key, say VGM officials, is for providers to develop strategies that allow them to hold on until the program is eliminated.

During its seminar tour, VGM covers, among other things, two areas that hold that key to survival: subcontracting and grandfathering, Higley said,

In short, a grandfathered provider is a provider who failed to win a bid but opts to continue servicing his existing Medicare patients--some, depending on the product category, at the new bid price and others under the current fee schedule. In a subcontracting arrangement, a winning bidder hires a losing bidder to perform certain duties, such as delivering product.

Morris and Mark Higley, VGM's vice president-development, are quick to point out that these strategies are short-term fixes, not long-term solutions.

"We believe some providers, perhaps many of them, are considering exiting this market or looking for alterative revenue sources," Higley said. "Our program allows them some time to develop their long-term business plans and business strategies as compared to having to panic."

For more on VGM's competitive bidding seminars, go to