VA contracts: Providers duke it out

Monday, July 31, 2006

DETROIT - If a protest filed by Rotech Healthcare passes muster in a federal court of claims, Mitchell Home Medical could lose a Department of Veterans Affairs contract to service 700 oxygen patients in the metropolitan Detroit area.
The VA on April 1, 2006, notified the Ypsilanti, Mich.-based Mitchell and another provider, First Community Care, of its intent to award them a contract to service two of seven locations in its Veterans Integrated Service Network 11 (Michigan, Indiana and Illinois). The total worth of the VISN 11 contract: up to 3,000 oxygen patients and $7 million over five years.
Rotech, which held the previous contract for VISN 11, filed a pre-award protest on April 19, 2006, sending Mitchell's contract to the federal court of claims. In what one industry source called a "carpet bomb," Rotech has since protested several of the contracts for the remaining locations in VISN 11.
As a result, Rotech and the VA appeared in court to present their cases in early June; they still awaited a judge's ruling at press time in early July, industry sources said.
A lot's at stake for all the parties involved. With Congress recently capping Medicare oxygen reimbursement at 36 months, providers are scrambling to find other payers, and the VA is a "nice shelter," said one industry source.
"It used to be that everyone was trying to get Medicare oxygen business," said Jim Frederick, the compliance officer and director of clinical services for Mitchell. "Those days are over."
If Rotech's protest succeeds, "it could really change the nature of our contracts," said VA spokeswoman Jo Schuda.
According to court documents, Rotech argues that the VA's contracts are supply--not service--contracts, and therefore, they shouldn't be small business set-aside contracts. (See story 23.)
While awaiting a ruling, the VA has awarded Mitchell a short-term contract from June 1 through August. During that time, the provider expected to help about 30 oxygen patients per month transfer from Rotech to Mitchell, said Larry Loewen, Mitchell's former vice president and COO.