How will Lincare, Apria bid?
In the weeks running up to the July 20th competitive bidding deadline, industry sources debated whether nationals like Lincare and Apria would, instead of submitting their own bids, buy one of the companies awarded contracts in December. Lincare used a similar strategy during a competitive bidding demonstration projects in Florida and Texas.
Some sources called the likelihood of that approach next to nil; one even labeled the idea "ludicrous." Other sources believe the nationals may take that approach in some competitive bidding areas (CBA) but not others.
"It's certainly not going to be as easy to do that this time," said Gina Bienkowski, vice president of Ultimate Resource in Newtown, Pa. "There's too much revenue at risk not to submit bids."
During the demo projects, Lincare never submitted bids because, sources speculated, it didn't want to set a precedent that lower reimbursement is acceptable. Once Lincare knew what the bid prices were and determined it could provide services at those prices, it bought companies that won contracts.
Some sources believe, however, that, like Bienkowski said, it's different this time around. There are more stringent requirements for participating in competitive bidding and changing ownership (See box). Additionally, CMS is no longer "practicing" competitive bidding.
"I would be very surprised if the nationals didn't submit bids," said Rick Glass, president of Steven Richards & Associates in Tarpon Springs, Fla. "I think they've accepted, unlike some of the independents, that competitive bidding is going to happen. It's for real this time."
Some sources still hold onto the belief that the nationals may not bid in CBAs where they don't have large market shares. If Lincare, for example, has only a 10% market share in Pittsburgh, it may sit back and let other bidders dictate pricing.
"If there are going to be foolish bidders, why play at their price if you don't have to?" asked Balaji Gandhi, an analyst who follows Lincare for Oppenheimer & Co. in New York. "The best course might be to lose that 10% market share for three years, and if the winning bidders are able to make a decent go of it, then make some acquisitions or submit a bid for the next three years."
Conversely, in CBAs like Miami, the nationals probably can't afford not to submit bids, because it would mean losing too much of their market share, sources said.
The nationals aren't talking--much. Joe Grillo, a spokesman for Lincare, said: "Lincare doesn't believe that large companies can purchase smaller competitors as they did in the past."
Lisa Getson, Apria's executive vice president of government relations, investor services and compliance, would only say: "To print any speculative information from people who are absolutely not in-the-know would not be worth the ink."