Respiratory category forces hands of providers in Round 2 re-compete

Friday, March 6, 2015

YARMOUTH, Maine – Providers who do CPAP but not oxygen therapy have had to make some hard decisions as part of the Round 2 re-compete.

It’s the first time they’ve been faced with the combined product category. 

“If you are not accredited in one, you can’t bid on the other,” said Steve Ackerman, owner of Spectrum Medical in Silver Spring, Md., which does both. “I am seeing people either not bidding or forming alliances.”

CMS combined CPAP and oxygen into one product category for the first time as part of the Round 1 re-compete in 2012.

While CPAP and oxygen seem like a natural fit—many providers do, indeed, offer both—there are plenty that do strictly CPAP.

“We found out that if you weren’t going to provide oxygen therapy, you couldn’t bid,” said Jo Lloyd, general manager and clinical manager for Raleigh, N.C.-based Active Healthcare, which focuses on CPAP. “There are too many hurdles and it’s too complex to even attempt to provide oxygen therapy. We’re disappointed.”

Other providers are biting the bullet and using the requirement to push into a new market. National Sleep Therapy is in the process of acquiring an oxygen provider.

“My sense is that the number of oxygen referrals we’d get wouldn’t be great, but we’ll be prepared nonetheless,” said Eric Cohen, president. “So that’s how we are handling the bid.”

But not everyone is interested in submitting a bid. Detroit, Mich.-based Sleep Solutions does both CPAP and oxygen, but it’s still saying, “no thanks.”

“I’ve asked a lot of people in the industry why I should bid and nobody could give me a good reason why I should,” said Robyn Parrott, president. “We’re doing very well without the bid, so why put ourselves in that situation?”

In Round 2, the CPAP category saw an average reimbursement reduction of 47%. In the Round 1 re-compete, the average reimbursement reduction for the combined category was 40%.

One thing’s for certain: Those rates aren’t sustainable, says Cohen, who created a calculator that uses cost per item sold and a selected profit margin rate to calculate a bid rate.

“It’s pretty apparent that the current bid rates are about equal to our costs, when you factor everything in,” he said. “If you enter a zero in the profit margin, you basically get the bid rate.”