There's nothing competitive about your bidding process

Thursday, August 25, 2011

Dear Uncle Sam: Coming off this most patriotic season bridging Memorial Day, Flag Day and Independence Day, I wanted to remove my cap, place a hand over my heart and ask you, with utmost respect and sincerity: Have you lost your freakin' mind?

I mean, do you have any understanding of the HME world? And did you give any thought to how competitive bidding--your misguided attempt to lower healthcare costs--would decimate the HME industry and raise costs across the healthcare spectrum?

It can't be over-dramatized: Competitive bidding will destroy the HME industry, and everyone will pay. Patients will endure declining services and quality, hospitals will overflow with patients who suddenly can't convalesce at home and you, Dear Uncle, will take the blame--and have to fix it, doubtlessly through massive tax hikes.

Don't take my word for it. Listen to Don Jones, president of Southern Medical Equivalent Corp., who's been busy since the Midwest's heartbreaking tornado outbreak this spring. Don cares for people in Huntsville, Ala., where an F4 decimated homes and businesses--one of seven Alabama twisters that killed hundreds and displaced thousands.

Among those storm victims were some 274 in-home patients with chronic obstructive pulmonary disease. Never mind collapsed buildings, impassable roads, downed power lines, food and fuel shortages, or anything else--they needed their oxygen equipment, or else.

Fortunately, Don is no stranger to emergencies or to his responsibilities as a healthcare provider, no matter the situation.

"Hurricanes all over the Gulf and Atlantic coasts, forest fires, ice and snow," he tells me, "HME people are always there."

Don's own business was damaged in the Alabama storms, but that didn't stop him. He dug into his own pocket to buy whatever new equipment he needed and make sure his people got paid, then went out and delivered everything those 274 critically ill patients required.

None died. And if you think Don's heroism is based purely on his bottom line, consider this: Those patients were also able to stay home. According to the U.S. Department of Health and Human Services, the average hospital stay for a COPD patient is 3.8 days and costs $7,500--that's 1,041 hospitalized-patient days and over $2 million in hospital costs, and that's just from the patients Don served in Huntsville. He's hardly alone.

Which brings me back to my point: You don't get this. That's probably because, unlike doctors and insurers, the HME community isn't wealthy and doesn't fund a powerful lobby. So when you take on the noble effort of lowering healthcare costs, because you have absolutely no appreciation for the HME professional, you introduce competitive bidding.

Rewarding the lowest responsible bidder is, of course, the American government way. But in terms of the HME world, you obviously didn't think it through.

First, you base your bid/award process on population statistics, so certain denser areas have numerous bid winners to cover all the patients. But with other fish in the pond, those "winners" must lower their costs to remain competitive--often below the break-even point--and enjoy no revenue guarantees. They can win a bid and make no sales.

Second, you categorize the bids. "You have one bid winner doing the hospital beds, one doing the wheelchairs and one doing the oxygen, all to serve one patient," Don notes. "For a social worker trying to get a patient discharged from a hospital, that's a logistical nightmare."

And "lowest bidder" may work when you're buying 8 billion screwdrivers for the Army Corps of Engineers, but when you're talking about Grandma, do you really want the cheapest services and products? As Don and his competitors cut costs to stay afloat, how long until the market is flooded with substandard wheelchairs from China that can't be delivered until next Thursday?

Look, commoditizing the HME industry is just a bad idea. Don doesn't sell screwdrivers by the millions. He's part of a critical sector that consumes a meager 1% of all healthcare spending. "Our concerns are not just monetary," he tells me. "We're concerned the government doesn't even realize the services we provide actually save taxpayers millions of dollars."

We all agree that steps can and should be taken to reduce healthcare costs, and the HME industry is absolutely willing to work with government on this. But competitive bidding is not the answer--and it might be the worst solution you could have pulled from your star-spangled hat.

Have a nice summer!

Michael Sperduti is president and CEO of Emerge Sales Inc, a high-impact HME growth consultant, coach and speaker. Learn more at or call 631-923-0223.