Contract suppliers: 'We had no choice'

Thursday, November 4, 2010

BALTIMORE - The contract suppliers named by CMS last week may have signed on the dotted line, but they're not optimistic about their prospects under competitive bidding.

"It was either don't accept the contract and get a bullet to the head or accept the contract and have terminal cancer," said Franklin Trammell, president of Carolinas Home Medical Equipment in Matthews, N.C., which accepted a contract to provide oxygen in the Charlotte competitive bidding area (CBA). "We had no choice. You're either in the game or you're out of the game, and if you're out of the game, you're dead. You've got no chance."

When CMS officials named the contract suppliers last week, they bragged that 92% of their offers were accepted, a sign, they said, that the program was acceptable. In all, the agency signed 1,217 contracts with 356 suppliers.

While the majority of contract suppliers contacted by HME News echoed Trammel's outlook, a few, like Mike Marnhout, were happy to accept contracts.

"There's always opportunity in any situation," said Marnhout, president of Bluegrass Oxygen in Lexington, Ky., which accepted contracts to provide oxygen in the Cincinnati, Pittsburgh and Dallas CBAs. "We, basically, have a triangle--Cincinnati, Pittsburgh, Dallas--and we're going to try to be a regional."

Even providers like Marnhout acknowledge, however, that they must make some hard decisions about their businesses, employees and beneficiaries if they're going to make do with, on average, 32% less reimbursement. They talked about diversifying their product and payer mixes, and centralizing business processes like billing; hiring employees fresh out of college and on a part-time basis; and limiting the services they provide to beneficiaries.

"This industry is going to have to reinvent itself," said William Griffin, president of Griffin Home Health Care in Charlotte, which accepted a contract to provide oxygen in the Charlotte CBA. "Otherwise, there will be very, very few of us, in the short future, still standing."

None of the suppliers contacted by HME News were pleased about having to make these decisions based on a bid they didn't submit.

"Someone else bid this; I didn't," said Carl Wallman, president of Galaxy Medical in Fort Lauderdale, Fla., which accepted contracts to provide oxygen and CPAP in the Miami CBA. "Who bid that? Why did they bid that? No one explains it. It's just, 'It's $125 a month, take it or leave it.' It's the most ridiculous thing I've ever had to do."



I have friends in respiratory and I feel so sorry for them. Basically they are a bunch of zombie companies who make no money but cannot accept a scenario where their hundreds of concentrators are sitting idle in a warehouse. Margins are paper thin. If your utilization goes too high then you get audited. If your utilization goes too low then you can't cover overhead. If you believe in karma then those people must have done something really, really bad in a prior life.