Providers make more educated, but still painful, bid decisions

Thursday, February 2, 2012

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."



I wish the article had touched on the education that VGM, MedGroup and state associations are providing. I&#39;m guessing that not all your readers are members, and even for those who are, when MedGroup came to Indianapolis, attendance was not what it should have been.<br />
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The most important thing to take away from the education you may, or may not have received, is that Capacity drives the amount of the bid.<br />
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Most know that capacity refers to what percentage of the business in your CBA you tell CMS you intend to be able to provide. CMS uses these amounts to determine how many bids they need to set the new allowable charge. If the six lowest bids all say they can do 20% of the volume (120% being the minimum CMS is expected to want), then the allowable charge could be based on those six bids. By the same token, if the 120 lowest bids each said they can provide 1%, then the bid is based on the bottom 120 bids, instead of the bottom 6.<br />
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My understanding is that it doesn&#39;t matter how much you say your capacity is, you are required to take the business, or find someone who will, even if 100% of the business comes to your door. You can tell them 1% or 20%, and it has no effect on the amount of business your may receive.<br />
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If I am incorrect about ANY of this, I trust that I will be corrected right here. But my understanding of this process is, if you want to drive down the price, and drive out the competition, then show a high capacity. While it may seem that you will stand to gain more business, it hasn&#39;t worked that way so far.<br />
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If, on the other hand, you are not adverse to having more providers involved, and a higher rate of reimbursement, then don&#39;t overstate capacity.<br />
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Contact me if you wish.<br />

If CMS moves ahead with round 2 before they have resolved the massive utilization drop issue of round 1 then they risk creating a real political laibility for their bosses.<br />
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No one cares however much they harm providers, but if seniors feel like they are getting hit with backdoor medicare cuts, then a political fallout will be inevitable.

HI Dave. The article does mention that providers have the opportunity to take advantage of education. It&#39;s unfortunate if providers aren&#39;t attending these sessions. We&#39;ve written about them, and posted them on our calendar whenever possible.

I know, Theresa, that the education is available, but I have been extremely disappointed by all the HME publications, that none of them seem willing to actually educate us, preferring, as you indicate, to suggest we get education from another source. That is like a newspaper telling us that a story has happened, but you will need to go elsewhere to find out what you need to know. You call it unfortunate that suppliers don&#39;t seek out the courses available, and likewise it is unfortunate that voters don&#39;t attend debates and talk to candidates, but does that mean that newspapers and magazines shouldn&#39;t educate voters anyway?<br />
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With all due respect, Theresa, for all the work that you do, why should I read you, if hugely important aspects of a story, that will effect everyone&#39;s bottom line, are not there?

The object should be to bid on a contract for the purpose of making a profit servicing the contract but when you have thousands of DME owners that don&#39;t see viable margins under these contracts, they will and have bid just to secure the contract with no intent to service it. They are planning on selling. This in it self is going to continue to draw down the price in round 2.