Session spotlight: Bid with eyes wide open

PHOENIX – Preparing a bid for CMS’s next competitive bidding program (CBP) is not only about knowing your prices but also about knowing your business, say Cadie McGonagill and Mina Uehara of AAHomecare. 

McGonagill, senior director of payer relations, and Uehara, senior director of regulatory affairs, will co-hosted the session “Essential considerations for suppliers submitting bids” on March 2 to break down what’s new with the program and what’s at stake. 

HME News: What makes this upcoming round of bidding different? 

Mina Uehara: First, CMS is not moving forward with what we call “legacy product categories,” such as oxygen, wheelchairs and hospital beds. Instead, this upcoming round only includes items that are typically shipped. CMS refers to this as Remote Item Delivery (RID) items. Bidders will be submitting one bid to provide nationally (and) it’s expected that there will be significantly less contracted suppliers than in any previous round and product category. Second, CMS is lowering the bid ceiling from Round 2021, which was the 2015 unadjusted fee schedule. In addition, the single payment amount (SPA) will be set at the 75th percentile of winning bids. Lastly, CMS will rely primarily on credit reports to evaluate a supplier’s financial viability. 

HME: What should suppliers know when pricing their lead item bids? 

Uehara: While suppliers will only be submitting a single bid for the lead item in a product category, the bid will directly impact the payment rates for all the rest of the items. CMS establishes the non-lead item rates based on a fixed ratio to the lead item bid rather than accounting for the actual costs of servicing each individual item. 

HME: What have we learned from previous rounds? 

Cadie McGonagill: An increase in volume at reimbursement below a supplier’s true costs does not translate into profitability – the higher volume simply multiplies the financial losses rather than offsetting them. Low bids in earlier rounds of bidding forced reimbursement rates below true operating costs, (making) it difficult to sustain staffing, inventory and service levels. At the same time, shrinking margins pushed many suppliers to purchase lower‑quality products and cut back on service levels to stay financially afloat. Supplier attrition and consolidation increased as some organizations exited the market due to unsustainable margins, resulting in reduced local competition and market instability.