Contract winners cautious about ramping up

Sunday, June 1, 2008

YARMOUTH, Maine - They may be "in the game," but many Round 1 winners of Medicare's competitive bidding contracts plan to stick close to the sidelines--at least until the program starts July 1. The reason: Industry efforts to delay or repeal competitive bidding have them reluctant to invest money in ramping up.

"I'm not going to pour my resources into this only to have Medicare pull out 10 months later," said Tom Mullaney, president of Cincinnati-based Mullaney Medical, which won three contracts. "They keep having meetings and people are filing lawsuits. It's an indecisive approach as far as Congress and everybody talking."

Many providers agree it is better to play catch up then go out on a financial limb if masses of new customers fail to materialize for them.

"If the phone rings 50 times on July 1, I'll be behind the eight-ball, but not in debt," said Phil Sandlin, owner of Leading Respiratory in Cincinnati. "I've got bankers and others on hold that are willing to help me, but what if I go ahead and spend $500,000 on equipment and then the phone doesn't ring?"

With an average 26% cut to the fee schedule, providers are cutting operations to the bone to stay solvent under tight margins.

To help him fulfill the contracts he won, Ron Majerus, president of Landmark Healthcare in Dallas-Fort Worth, just laid off several employees.

"Even though we won, we are trying to scale back some of our growth," he said. "It's awkward. And we're trying to grow some of our top lines to make up some of the loss."

Customer service and product lines are also under close scrutiny.

"We're changing our service model and delivery areas and times," said Mullaney. "We're not going to drive all over town every day. And for product selection, they wanted the lowest price, so that's what they are going to get."

Nancy Cozzie, president of Southlake, Texas-based Southlake Medical is pleased with the oxygen contracts she won, both locally and in Riverside, Calif., but she isn't mourning the loss of other Medicare business.

"I'm not going to miss the rolling walkers with Medicare," she said. "If you want to do them for that price, go ahead."