Go figure: Near bankrupt company wins 17 bids

Thursday, July 15, 2010

ORLANDO, Fla. - Industry watchers went ballistic last week after learning that CMS awarded 17 competitive bidding contracts in the Round One rebid to Rotech, a publicly traded company that stated earlier this year that it may have to file for bankruptcy.

"Medicare's talking about their rigorous financial standards and yet they give contracts to a company with one foot in the grave," said one industry watcher. "What are their financial standards: Just don't be $1 billion in debt, $500 million is okay?"

In May, Rotech filed a report with the Securities and Exchange Commission, stating that it had "approximately $514.6 million of long term debt" and that it all must be paid back by April 2012. "There can be no assurance, however, that we will be able to refinance any of our debt...in which case we may be required to consider all of our alternatives in restructuring our business and our capital structure, including filing for bankruptcy protection."

CMS announced July 1 that competitive bidding in the first nine cities will reduce reimbursement by, on average, 32%.

Jack Marquez, vice president of the Accredited Medical Equipment Providers of America, said he was appalled to learn that Rotech had won 17 contracts. He and others say this demonstrates serious flaws in the bidding process.

"This again shows that Medicare is only looking at the lowest bids and not a company's ability to stay in business while attempting to provide products and services to the elderly," he said.

What's more, there are reports out of Florida that some bids in that state have gone to companies that "in the not too distant past were convicted of Medicare fraud," said another industry watcher.

"CMS is thumping its chest and saying, 'Look how brilliant we are,' but it appears to have flunked both competitive bidding tests: anti-fraud and financial stability," he said. "It's interesting that Lincare, which is solid as a rock, won no bids, and Rotech, which is technically bankrupt, got awarded bids. Go figure."

CMS and Rotech did not return calls for this story.