Good news: Winning bidders could boost their purchasing power

Sunday, May 4, 2008

YARMOUTH, Maine - If you're a winning provider in Round 1 of national competitive bidding, prepare to be inundated by manufacturers' sales reps eager to help you service what could be a giant increase in Medicare business.

"We're after that, and I bet every manufacturer will do the same," said Tom Bannon, president of Responsive Respiratory, a respiratory products manufacturer. "They are going to be deluged."

The reason is simple. While there's no guarantee that winning providers will grab a ton more marketshare, the opportunity certainly exists, and that potential is not lost on manufacturers.

"Anytime you have a more select group of customers who have access to the major payer in home care, I think you are going to change your focus a little bit," said Larry de la Haba, Graham-Field's senior vice president of marketing.

That could be very good news for the winners. While manufacturers have slowly raised product prices to offset inflation over the past few months (and say they don't see any decreases on the horizon), winning providers who increase their marketshare could see prices fall thanks to volume discounts and rebates, say industry watchers.

"Winning bidders will have more people coming to them with product offerings," de la Haba said. "They will have the ability to say, 'I got this price from this person. Can you do better?' I think it boosts their power significantly."

With this power should come prudence, said industry consultant Wallace Weeks. You don't want to tie up money in inventory or arrange for additional product until you know what the increased demand will be.

"Maybe last month they were getting five new bed referrals a week and this month they are getting seven a week; they need to see that kind of change before they jump in and acquire new equipment," Weeks said.

But while manufacturers will most likely lavish more resources on doing business with winning providers, they won't neglect losing bidders. Just the opposite. It behooves manufacturers to work with these providers to help them adjust and seek out new business opportunities, say industry watchers.

"Your best customers may be out of the bid," de la Haba said. "You can't ignore them."