Providers make more educated, but still painful, bid decisions

YARMOUTH, Maine - With the bid window now open for Round 2, the big question is: Will the single payment amounts be higher, lower or the same as Round 1 of competitive bidding?

No one will know for sure until this fall, when CMS plans to announce the payment amounts, but HME providers like Doug Crana like to think the increase in education leading up to Round 2, led by The VGM Group, The MED Group and state associations, will result in more rational bidding.

"If we understand the process, and we also understand the lessons from Round 1, we'll bid correctly," said Crana, owner of Consolidated Medical in Newburgh, N.Y. "We'll bid within our limits and not cut ourselves off at the knees. There'll always be wild cards, but hopefully this will be suppressed and limited."

The Round 1 re-bid payment amounts came in at, on average, 32% below the current Medicare fee schedule across nine product categories. The original Round 1 came in at, on average, 27% below the fee schedule.

Even with more rational bidding in Round 2, providers know they still have to prepare themselves for lower payment amounts. HME providers like Bill Armstrong hope non-delivery business models will help them soften that blow to their bottom lines and help them maintain their service levels.

"We believe HomeFill will give us an advantage," said Armstrong, owner of American Oxygen Kompany in Centennial, Colo., a suburb of Denver.

Additionally, providers like Matt Kneeland plan to make up for lower payments with non-Medicare businesses.

"Our plan has been massive diversification," said Kneeland, CEO of Care Medical, which has branches in four bid areas in California. "We have an (e-commerce) site now that, within a year, will completely replace any lost profit that they're going to his us with in Round 2."

The whole process of determining bids, and what they and their patients can do without, has been unpleasant for providers like Irene Magee.

"We're trying to cut out waste and excess cost, but this gets us into having to take a serious look at services we can no longer provide," said Magee, vice president and director at Northeast Home Medical Equipment in Green Island, N.Y., outside of Albany. "There are a lot of services we provide that are on no one's radar. It's a painful strategy, because you want to do what's best for the patient."