Provider networks hone NCB strategies

Sunday, July 16, 2006

LUBBOCK, Texas - The MED Group plans to confront Medicare competitive bidding head-on by leveraging the combined muscle of its 240 members. Rather than bid individually, many MED members will join forces and bid as part of a provider network, said MED President and CEO Bill Elliott, who oversees the provider service organization.

"We're not supportive of the Medicare competitive bidding model as it has been laid out by CMS, but we want to be prepared to support our membership in that environment," he said.

MED is not alone in seeing strength in numbers. The industry's other two major provider organizations, Northwood and The VGM Group, also plan to bid as networks--provided CMS's final draft for competitive bidding allows that strategy.

CMS plans to kick off competitive bidding in 10 cities in 2007. As a way to ensure that small providers can compete with larger HMEs, the draft bidding plan allows providers to form networks and bid collectively. Whether CMS, in crafting its draft plan, intended large organizations like MED, VGM and Northwood to bid as individual networks remains to be seen.

"The way they wrote the rules, it leads me to believe that they are looking at networks as being some kind of ad hoc arrangement where a few small suppliers come together," said Northwood President Ken Fasse. "I think their information is outdated and doesn't reflect what is in the market: large, fully structured and viable networks. We'll see what happens."

Still, the organizations are preparing for that possibility.

"It's likely we'll do a few of the MSAs and see how that works out," said VGM CFO Mike Mallaro. "We'll hone our approach so when rounds two, three and four come around we would, hopefully, have a model down that would work across the country if necessary."

MED's 240 company members operate 800 to 900 locations around the country. Northwood's 2,000 members operate about 4,200 locations nationally. VGM's 2,318 members operate 4,366 locations.

By working together and taking advantage of group economies of scale and a mutual dedication to quality, MED members should be well positioned to operate profitably in a competitive bidding environment, said Elliott.

In each bidding location, MED will form bidding networks. By buying select products from MED's vendor partners at contracted prices, network members will have access to the "most competitively priced products available," Elliott said.

"For a specific product category, we will be supplier and product specific," he said. "It may not be a single product. You may have a choice between these two or three. But it will not be the full universe."
Additionally, MED will "tweak" its member services, where necessary, to meet the needs of network providers.

Finally, not only will network members know and have confidence in each other, but MED also plans to use each bidding location as a laboratory.

"We'll learn by participating and bring forward what we learn to the next market," Elliot said.