Subcontracting divides providers

Friday, May 17, 2013

YARMOUTH, Maine – In a nod to the complexity of subcontracting under competitive bidding, the number of non-contract suppliers that are seeking out agreements and those that aren’t is split down the middle, according to a recent HME Newspoll.

Fifty-four percent of non-contract suppliers in Round 2 who responded to the poll say they aren’t seeking out subcontracting agreements with contract suppliers, while 46% say they are.

“It’s a way to keep our workers employed and in front of our referrals until all the dust settles,” one respondent said.

Another remarked, “We have contacted suppliers and they have contacted us regarding these arrangements. Anything to maintain our revenue stream.”

The good news for non-contract suppliers seeking a subcontracting agreement? They say 73% percent of the time contract suppliers are receptive to the idea, according to the NewsPoll.

While some non-contract suppliers characterized subcontracting as a necessary evil—a way of staying in the Medicare game for the time being—others were opposed to the idea altogether. One respondent asked how, with reimbursement for Round 2 set at, on average, 45% below the current fee schedule, there would be enough to go around.

“Simple math will tell you that a contract winner whose reimbursement is in any of the bid categories is financially unsustainable,” said Fred Ivey, owner of Arden, N.C.-based CareMedical. “How in the world are these folks going to be able to hire a subcontractor if their margins will not sustain the contractor’s business?”

Provider Ed Huyke says he’s not seeking out subcontracting agreements because he would have to cut too many corners to make it work under the new reimbursement.

“It would hurt our reputation, but that’s just our opinion, and time will tell who’s right,” said Huyke, manager of Anything Medical in Bullhead City, Ariz.

The last straw for non-contract suppliers that aren’t seeking subcontracting agreements: the potential legal ramifications and audit burden of, among other things, having one provider rely on another provider to get the billing right.

There were also non-contract suppliers who object to subcontracting on principle.

“Why should I help a company that low-balled the bid?” one respondent said. “Then they want me to not only store their equipment in my warehouse, but do the delivery, set-up and explanation?”