It's time to do your bidding homework

Thursday, May 31, 2007

On April 2, 2007, one among many "key dates" the industry won't soon forget, CMS Acting Administrator Leslie Norwalk announced: "The final rule we are announcing today is focused on improving both service delivery and the quality of care, while getting savings for beneficiaries and taxpayers." Other dates include: Dec. 8, 2003, the MMA enactment, complete with its Section 302; and March 15, 1999, which marked the onset of the first "demonstration project" in Polk County, Fla.
If, for some reason, none of this introduction makes sense to you, may I politely suggest you pull your head out of the sand. CMS has released the long debated and long awaited "Final Rule" for DME competitive bidding. While we all will continue the fight to mitigate or repeal competitive bidding via legislation or litigation, the proverbial train has left the station. HME providers need to climb aboard now...or risk being left behind.
Yes, the entire "Competitive Acquisition Program" remains a bureaucratic mess, the Final Rule rife with need for further clarification, and many of the bidding procedures difficult to comprehend. Anyone reviewed the HCPC utilization weighting factors? Or obtained a bidding User ID and password on the first try? In any case, it's time to do your homework.
VGM, MED Group, and AAHomecare have extensive competitive bidding Web sites that include detailed instructions, sample forms, required documentation and useful tips. The "official" CMS contractor Web site ( is, for a nice change, reasonably user-friendly.
What should providers expect? While the anticipated reimbursement reductions are the source of much debate (CMS recently stated that it expects a $1 billion savings by 2010, based on the modeling of 90 large MSAs, and estimated that DME spending will be reduced 12.9% for competitive bid), "winning" providers should see increases in business. Some analysts suggest 25% to 75% per category.
And while we can't necessarily look at the demonstration projects and predict results in the 2008 competitive bidding areas (CBAs), most demonstration providers reported running more streamlined businesses...and many with higher profit margins. Diversification occurred and new services were offered. Overall, these providers indicated improved efficiencies and performance, superior compliance and enhanced employee training.
The Final Rule includes some important changes to the proposed rule. Winning providers who service beneficiaries that no longer obtain their capped rental items from their previous HME (because the previous HME elected not to become a "grandfathered supplier" or if the beneficiary elected to change providers), will receive 13 "new" monthly payments, regardless of how many Medicare previously paid. Winning oxygen providers that service beneficiaries from a previous HME are now guaranteed at least 10 monthly payments. Small HMEs (with less than $3.5 million annual revenues) are now subject to a 30% minimum participation "pool" of all winning providers in each product category.
And what if you should lose a category or two, not bid and/or are not willing to accept a contract rate? The Final Rule's "grandfathering" provisions should soften the effects of the initial round. Non-contract providers may continue to furnish most HME in accordance with existing rental reimbursement amounts. (Oxygen, however, reverts to the new contract price.)
Other items to keep in mind:
* Non-contract providers will continue to be paid if Medicare is the secondary payer to a primary insurer.
* The Final Rule requires providers to service the entire competitive bidding area, and many winning bidders will need subcontractors. Review the subcontracting procedures on the Web sites noted above, and begin discussions with other HME providers now.
* Consider expanding into geographic areas not covered by competitive bidding. (Also note that HME providers do not have to be located within the CBA to bid.)
* Explore expanding your retail sales.
* Increase your commercial insurance marketing efforts.
* M&A: A non-winning provider may acquire or merge with a winning provider. While not "automatic" (there are notification and other novation agreement conditions), assuming the non-winning provider meets all the program requirements, the Final Rule allows the transfer of a contract to the acquiring provider.
Finally, if you plan on bidding:
* Apply now for your bidder number.
* Complete your facility accreditation by Aug. 31, 2007.
* Download, print and follow CMS-10169 instructions and complete CMS-10169 Forms A and B.
* Assemble your financial information. Suppliers that submit corporate tax returns will submit Schedule L (balance sheet), Schedule of Changes in Financial Position (cash flow) and Statement of Operations (income statement) for the past three years of operations.
* Obtain and review a current credit report.
One more thing: Good luck! HME
Mark Higley is vice president-development of The VGM Group.