A lowdown story, bidding capacity, shocking news

Saturday, May 31, 2008

REDMOND, Wash.--Competitive bidding may look like a nightmare to many established providers, but that’s not the case for start-ups, said industry consultant Roberta Domos. “My business is booming for start-ups, all over the country,” she said recently. “We just did one in El Paso. I’m going to Indianapolis tomorrow for one. We have a new one coming up in Florida and one in Utah.” On average, Domos estimated, she works with three start-ups a month. The entrepreneurs have a few things in common: they like the country’s aging demographics; they focus on mid-level communities (not urban or rural) unaffected by competitive bidding; and they don’t have bad habits to break, allowing them to operate efficiently from the get-go. “The fact that a lot of people are getting out, prompts others to get in,” Domos added.

Capacity? What capacity

How’s this for a competitive bidding horror show? Another industry consultant said he’s heard from providers who won bids but don’t have the capacity to handle the new business. “It’s so screwed up that it’s unbelievable,” the consultant said. “They are calling to get some help, but there is no way to do it that makes sense.”

A real lowdown story

The VGM Group’s Vice President of Development Mark Higley has traveled around the country over the past year educating providers on competitive bidding. A number of providers, specifically those that do a larger percentage of Medicare business (50% or more), said, not surprisingly, that they were going to low ball the bid. “We’ve had a couple of providers say, ‘We are going to bid as low as possible. I’m not going to risk being excluded from the Medicare program.” Said another consultant: “All they did was drive down the price for everyone.”

Off the record…

“At the end of the day, the smart provider says, ‘The bad news is that reimbursement is down. The good news is that reimbursement is down,’” a vendor said. “There are idiots out there who are not going to change their model, and they are going to go out of business. At the end of the day, competitive bidding will wipe out a whole bunch of providers who don’t have their act together.”

‘It’s shocking’

“I’m very surprised that there hasn’t been any major consolidation among HME manufacturers--it’s shocking” said a manufacturer exec. “I think that will be one of the outgrowths of competitive bidding. The products are all pretty much the same, and there is way too much capacity that needs to be consolidated. That is how you take costs out of the industry. By consolidating the right companies, you are going to have a lot of synergies because there is a lot of duplication of effort across the spectrum of what we are dealing with.”