Re-make, sub or buy

Friday, September 26, 2014

ATLANTA – It’s no secret that many quality DME providers have not been awarded competitive bidding contracts, but according to Jeff Baird, chairman of the Health Care Group at Brown & Fortunato, all hope is not lost. At Medtrade, in a session entitled “After the Fact: How the Non-Contract Supplier Can Enter the Competitive Bid Arena,” Baird will lay out options for continuing to service Medicare patients.

HME News: What are the options for providers who haven’t been awarded contracts?

Jeff Baird: One option is to re-make the supplier’s business model so it’s not reliant on Medicare fee-for-service. A simple way to stay in the current game, however, is to be a sub-contractor for a winning bidder. That allows a losing bidder to maintain relationships with referring doctors and to continue to serve Medicare patients. Beyond that, a losing bidder can essentially buy its way into competitive bidding. The easiest way would be for a losing bidder to buy all of the assets of a winning bidder. Another way, though, is a losing bidder can engage in a partial asset acquisition of a winning bidder. The buyer can buy the hard assets relating to the seller’s successful competitive bid process, taking the seller out of competitive bidding but allowing them to continue to do other business. Finally, another scenario is a classic stock sell. Under the 5% rule, for example, if a losing bidder buys 5% or more of the stock of the winning bidder, they become “commonly owned.” 

HME: Is one of these options more or less attractive than the others?

Baird: What I have found is that of the big four, the partial asset purchase and the 5% rule are the most attractive, because they involve less money.

HME: What are the pitfalls to consider before pursuing one of these options?

Baird: With an asset purchase, the seller (meaning the contract winner) is either totally in or totally out. You can’t transfer partially, so it’s the transfer of the whole contract or not at all. With either a 100% or partial purchase, the buyer needs to submit documents attesting to the ability to take the contract, and the CBIC can reject the deal if they feel the buyer is not financially sound.