Bid Winners Report Ups, Downs in First Week

ATLANTA — Round 1
rebid winners reported a mixed bag of results Friday, the end
of the program’s first week, but they were united on at least one
issue: The worst is yet to come.

While some contract providers reported smooth transitions and an
uptick in business, one said the CMS project was hitting small HME
businesses that won single contracts very hard.

“It’s a dark day for small businesses that didn’t receive five
or more contracts,” said Barry Johnson, president of Texas Home
Medical in Duncanville, Texas, who won a contract for oxygen.
“Competitive bidding
does not work. It’s going to take a month or two to come down
really hard. And when it does, it’s going to really hurt. We’re
just seeing the tip of the iceberg.”

Johnson, who is also the president of the Texas Alliance for
Home Care Services, said it was patently apparent in the Dallas-Ft.
Worth competitive bidding area that referral sources — once
they learned of the program — were not contacting providers
who held only a few contracts.

“Basically, what we’ve seen is that the people who won less than
the five top product categories — oxygen, hospital beds,
standard and complex wheelchairs and CPAPs — are not getting
called. The small businesses are really taking a hit,” he said.

“It doesn’t do you any good [to have won one contract]. It’s not
doing you any favors; you might as well not have bid,” Johnson
added. “No one is calling.”

The long-time provider said he did not ramp up to accommodate
competitive bidding and he’s glad he didn’t. There’s been no flood
of new business, and the calls that are coming in are generally
from Medicare beneficiaries trying desperately to find someone to
serve their needs.

In one instance, a beneficiary called who had switched from a
Medicare Advantage plan to straight Medicare and was having
difficulty finding a provider for his liquid oxygen. Even providers
that had won oxygen contracts were refusing to provide the liquid
oxygen because Medicare doesn’t pay enough, Johnson said.

“We have problems with patients switching from Advantage plans
to straight Medicare finding someone to take them,” he said. He’s
also been receiving calls from people wanting diabetic supplies who
apparently were turned down by contract winners, Johnson said.

At Diamond Respiratory in Riverside, Calif., the news was
brighter. “It’s been running pretty smoothly here,” said Chris
Rice, whose company won seven contracts. “We did a lot of work
educating our staff, our patients and the community (referral
sources) about the program before it began. For the most part, they
knew what to expect.”

Rice said the company has received more than the usual number of
calls. “We’ve been getting a lot of phone calls from beneficiaries
directly as a result of CMS mailers,” he said. “We’re experiencing
a 40 to 50 percent increase in daily order volume.”

The company has been able to accommodate the influx, he said,
even though its ramp-up was “more measured” than the first time
around in 2008. “That was due in part to having implemented a lot
of infrastructure back in ’08 [with] technology, vehicles, etc.,”
Rice said. “This time we were able to scale up very quickly.
Further, the manufacturers have been doing a great job of providing
inventory quickly. Most deliver the next day.”

It helps, he said, that Diamond Respiratory is 20 minutes from
two major manufacturers’ distribution centers.

Rice said he believes it will take some time — as long as
the entire first quarter, perhaps — to see the impacts of
competitive bidding clearly.

“There are lots of unanswered questions as to what will happen
to order volumes, how subcontractor relations will play out, etc.,”
he said. “With Obamacare being vilified in the media, I expect that
the talk of a repeal may provide hope of a vehicle similar to H.R.
3790 (last year’s bill that would have eliminated competitive
bidding).”

But that’s not a shoo-in, he cautioned, noting that if the
Congressional Budget Office’s calculation of $20 billion in savings
over 10 years stands, it’s a hurdle the industry would have to
overcome.

New Braunfels, Texas-based The Scooter Store, which won multiple
contracts in every CBA, also found the transition to be a smooth
one. Calls appeared to be at normal levels for this time of year,
according to Mark Leita, senior director, government relations.
Leita said the company’s preparations — including the
addition of more than 50 new store locations last year and broadening its product
offerings from mobility to encompass all the product categories
— were paying off.

“So far, things are going OK,” Leita said. “All of our
preparations over the last 24 months have positioned us to serve
beneficiaries successfully under the new program. It is very early
in the transition to this new business world. As a result, medical
professionals who traditionally provide DME referrals to
beneficiaries in competitive bidding areas are not very familiar
with all the changes.”

Leita said it was too early to tell if the company had ramped up
enough. “So far, we are handling the current levels of demand and
we are ready to scale up as needed,” he said.

While there have been no particular challenges as yet, Leita
said, the company does anticipate some in the future. “We expect
there will be some learning [curves] we as move deeper into the
program rollout and gain more experience under the new regulations
and guidelines and form new referral relationships,” he said.

“This is not a traditional bid program, as commented on by the
bidding program experts,” said Leita, referring to the 167
economists who have warned the
program’s design will cause it to fail. “Because no one has
implemented a bidding program like this before, no one really knows
how it will ultimately play out.

“Regardless,” he continued, “this is a major transition for CMS
and our industry, and with any major transition, it’s natural that
there may be some business-related bumps along the way. We do
expect that there will be a dramatic and painful consolidation of
the industry as non-contract providers are forced out of
business.”

It’s already beginning in Dallas-Ft. Worth, Johnson said, and
not just to non-contract providers. National companies are looking
to buy up small contract winners, thus consolidating the market,
and many small businesses have already closed their doors or are
preparing to, he said.

“The market is flooded with equipment from people leaving,”
Johnson said. “I don’t think it’s a bright future up here for
anybody.”

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