Florida competitive bidding: It's insane, says one provider

Tuesday, April 30, 2002

TALLAHASEE, Fla. — In the aftermath of the April 5 deadline for proposals, bewildered providers are trying to piece together how the state believes independent and smaller providers can compete in its competitive bidding project for hospital beds and oxygen equipment and supplies.
"We're the largest independent in Polk County, and we can't handle this project," said Medi-Health Care owner Robert Slama, who didn't submit a bid. "There's no way anyone can handle it, unless they've got three stores in each county."

For starters, the RFP indicated Medicaid would select one provider for each of 11 regions, with most of the regions representing a handful of counties. Granted, the RFP also indicated sub-contracting is allowed, but providers say the state gave them too little time to forge partnerships with other companies (The RFP was released Feb. 28).

Providers say few independent and smaller providers have the presence needed to accommodate any of those regions single handedly. Slama, who has one location in Lakeland, Fla., said he would have had to cover six counties. So would Joan Cross, president of the Bradenton, Fla.-based C&C Homecare. She didn't submit a bid, either.

But providers say it'd be easier for bigger companies with multiple locations. They wouldn't name names, but O2 giants Lincare and Apria, with 46 and 20 locations in Florida, respectively, have the biggest presence in the state.

"I think it's a forgone conclusion," Slama said. "I think they've already made a decision as to who's going to get the bids."

And providers say the geographic restraints of the competitive bidding project are only the tip of the iceberg.

The RFP also required several bonds that industry sources say made it difficult for independent and smaller providers to bid. In addition to the $50,000 bond providers must post to do Medicaid business, there's a proposal bond of $6,000 and a performance bond of 20% of the expected volume of purchases under the bid. One provider called the latter, "insane."

"It would be like telling an HME provider that he had to send $200 to a customer now who he thought might purchase a $1,000 product during the next year," said Jim Walsh, president of VGM Management, whose insurance division writes bonds for HME providers. "When we first read it, we thought it had to be a mistake."

Walsh said performance bonds are difficult for smaller providers to acquire and likens it to applying for a bank loan. Moreover, he said many bonding companies insist on escrow arrangements and/or personal guarantees.

"Unfortunately, our expectation is that this poorly thought through project will end up causing considerable consolidation in Medicaid service providers in Florida and possibly lead to a practical oligopoly that ends up costing even more than the current system does," Walsh said.

Providers say consolidation among providers is only the first in a long line of impacts the competitive bidding project could have on the Medicaid landscape in Florida.
Another impact is service. Providers say they worry about the lives of oxygen patients being left in the hands of the lowest bidder. With the Medicaid allowable already lower than Medicare's, they fear bidders will cut corners and service will suffer.

"You know the saying, 'You get what you pay for,'" said Cross, who's also president of the Florida Association of Medical Equipment Services (FAMES). "I think it's going to apply here."

Brian Seeley, president of the Ormond Beach, Fla.-based Seeley Medical, said the state's competitive bidding project doesn't take into consideration the "human side of things." Seeley didn't submit a bid because he does little Medicaid business, but he sees clearly the impact the competitive bidding project could have on beneficiaries.

"I especially feel bad for families taking care of children at home," he said. "They're going to be told they can't get oxygen from a company they've been leaning on since Johnny's been one year old."

Moreover, Slama said if Florida goes through with the competitive bidding project, he'll obviously be forced out of his oxygen Medicaid business, but he'll also drop his other Medicaid business.

"We're one of the few providers that handles supplies for Medicaid, like knee braces, but we're going to stop Medicaid across the board," he said. "I hope whoever wins the bid is prepared to provide Medicaid with more than just oxygen." HME