Auditors gone wild

If you want a good idea of what's on an HME provider's plate right now, just spend a few minutes on the phone with industry attorneys Jeff Baird and Neil Caesar. What you'll hear: A greatest hits of concerns about selling your company, signing bad contracts, surviving audits and tackling accountable care organizations (ACOs).

Shifting selling strategies

Competitive bidding is driving HME providers of all shapes and sizes to sell their companies, says industry attorney Jeff Baird.

"I have one client, a large provider, who was unsuccessful landing contracts in Round 1 because his bids were too high and they have had a devil of a time trying to purchase players who were awarded contracts," said Baird, chairman of the healthcare group at Brown & Fortunato in Amarillo, Texas. "So they've finally thrown up their hands and said, 'The heck with it' and they have a buyer. They didn't want to sell, but it got to the point where they couldn't conduct business in the nine CBAs."

Additionally, sales are trending toward stock acquisitions vs. asset acquisitions, because various regulatory requirements have made the latter more difficult to complete, Baird says.

"Five years ago, it was the opposite," he said. "Now most of the sales we're working on are stock acquisitions where the companies being purchased continue on with the same tax ID and everything. There's no break in billing and no regulatory issues. That's a big deal. The only downside to the buyer: If the company they bought has Jimmy Hoffa's body buried in it, they've inherited Jimmy Hoffa's body."

Bad contracts and silent PPOs

The recent "preferred provider" contract between Humana and Apria Healthcare is only one of the many problems HME providers are having with managed care organizations these says, says industry attorney Neil Caesar.

"The degree of heavy handedness and bullying on the managed care side seems to be on the increase," said Caesar, president of the Health Law Center in Greenville, S.C. "I'm seeing a lot of really bad contracts out there and take-it-or-leave-it attitudes."

Caesar is most concerned about provisions that restrict a provider's ability to solicit customers and terminate a contract.

There's also this: Managed care organizations that apply these bad contract terms, especially cut-rate reimbursement, to providers they don't have relationships with, on the off chance that the providers won't notice.

"These are what are called silent PPOs," he said. "The only way you can chase these down is to have a system that matches up payments or to conduct spot audits. There are providers that assume that anything that's different than what's submitted must be because of something in a contract they've agreed to. They don't even evaluate it. This can easily take away 10%, 20%, 30%."

Auditors gone wild

Speaking of heavy handedness and bullying, Baird says that, in addition to getting requests for additional documentation from the ZPICs, providers are getting knocks on their doors from the auditors.

"We're now seeing the effects of the increased funding to the Medicare contractors," he said. "They've got warm bodies on the ground. And they're interviewing employees, patients and doctors, and they're asking questions about kickbacks, inducements to beneficiaries and all kinds of marketing practices."

The worst part: There's little rhyme or reason to the actions of the ZPICs, Baird says.

"There's little supervision from CMS; they're just doing their own thing," he said. "In fact, the standards and protocols of one auditor are different than the those of another auditor whose desk is five feet away."

The right side of ACOs

Both Baird and Caesar noted a steady stream of questions from their provider clients about ACOs. They say providers shouldn't wait around for an invitation to this party.

"If the supplier stands there and looks at all of these discussions about ACOs and says, 'This is all very interesting, I wonder what's going to happen,' they're going to wind up on the wrong side of this," Caesar said. "If you don't shape the discussion, you can't shape the organization, and if you don't shape the organization, you're not going to have any leverage once it's shaped."