Small supplier networks face steep hurdles in next bid round

WASHINGTON – There may be strength in numbers, but the logistics of smaller suppliers submitting bids as part of a network in the next round of Medicare’s competitive bidding program (CBP) may be too prohibitive, says health care attorney Jeff Baird.

In the next round of CBP, the Centers for Medicare and Medicaid Services (CMS) will implement a nationwide Remote Item Delivery (RID) program that effectively shuts out smaller, independent suppliers.

“The goal of CMS that at least 30% of the winning bidders be small suppliers – that’s unrealistic,” said Baird, chairman of the Health Care Group at Brown & Fortunato. “

Network option comes with strict requirements & administrative challenges

CMS will, as it has in previous rounds of competitive bidding, allow small suppliers to form networks, although Baird, to his knowledge, said he doesn’t believe any did in the past.

Key requirements to form a network, he said:

• Each small supplier network cannot have more than 20 suppliers whose gross revenue cannot exceed $3.5M annually.
• The small suppliers must certify that they cannot service the entire competitive bidding area (the entire country) but must agree to furnish all the items in the category for which the network is awarded a contract.
• The combined market share of all suppliers in the network cannot exceed 20% of demand for that particular category.
• All network members must meet enrollment, accreditation and state licensure requirements.

“The challenge with putting this together,” Baird said, “is let’s say we have a small DME that grosses $3.5 million – it will have to contact (other small suppliers around the country) and bring them onboard. They’d have to determine does each supplier meet the criteria, combined do they all have the licensure and so on and so forth. Logistically, it can be a challenge.”

Many small providers may sit out bidding, but there’s a silver lining

Realistically, the majority of small providers will opt not to submit bids at all, choosing not to bill for fee-for-service Medicare, says Baird.

“Keep in mind: approximately 54% of beneficiaries are covered by Medicare Advantage plans,” he said. “It’s not part of bidding and so this program only applies to 46% of beneficiaries.”

Related reading:

• Stakeholders urged members of the House Committee on Small Business during a recent Hill day to hold the Centers for Medicare & Medicaid Services (CMS) accountable for a new remote-item delivery (RID) framework for competitive bidding that they say will decimate small businesses.
• The Office of Advocacy within the U.S. Small Business Administration will host a virtual listening session on June 23 on the next round of Medicare’s competitive bidding program (CBP).