Ready or Not

Home medical equipment providers let out a collective sigh of relief when CMS issued its final quality standards in August — you know, the standards they had been waiting on for months, the ones they will have to meet in order to take part in competitive bidding and continue as Medicare Part B suppliers.

Many had viewed the draft standards — 104 pages filled with stringent product-specific, business and financial requirements — as a stumbling block to accreditation and participation in national competitive bidding. But in an unexpected turn, the agency’s final version numbers only 14 pages, and many of the toughest standards in the draft were either dropped entirely or relaxed. (For more on the quality standards, see page 16.)

However, the industry’s providers say, there’s still plenty to overcome on the road to competitive bidding.

In late June, HomeCare surveyed the magazine’s readers for their thoughts on the government program, and boy, did we get a lot of them. In fact, a majority of the survey respondents are disturbed by every portion of the competitive bidding proposal we asked about, including its most basic building blocks — how bidding areas will be chosen, how winners will be selected, how payment amounts will be set and more.

Only about half (52 percent) of these providers are currently accredited, so for the rest — despite the downscaled quality standards — there’s one big worry right there. More than half of the unaccredited companies say they are waiting to start the process until CMS decides which accrediting organizations will be approved.

Less than a third of those we surveyed (31 percent) use activity-based costing, so there’s another big concern since HME experts say without knowing costs, it will be impossible to come up with a reasonable bid. Forty-three percent aren’t sure whether they will have to add employees to deal with bid submission, and many said they have no clue how much it will cost or how much time it will take to prepare and submit one.

And the really big headache: Medicare accounts for an average 39 percent of respondent companies’ revenues, with 30 percent reporting that it represents more than half of their business. Can you imagine what will happen if we don’t win our bid, these companies asked?

In short, nearly three-fourths of the providers we surveyed (73 percent) feel that their companies are, to say the least, unprepared for NCB.

To Network or Not

Ready or not, 60 percent of the companies reporting said they plan to enter the bid for Medicare DME business, and 61 percent of these said they plan to bid individually. Respondents were fairly evenly split over whether building a supplier network to bid is a workable concept. Forty-nine percent said it is, and 43 percent said it isn’t.

“Being small,” wrote one provider, “[a network] is our only option.”

“This will allow small, independent HMEs to provide continued levels of quality while not sacrificing the idea of business, which is to make money,” explained another.

On the other hand, some providers aren’t so sure about network benefits. One noted there “probably [won’t be] enough profit margin to go around.”

Another on the negative side said he thought smaller companies would be “wasting their time” dealing with a network bid because in all likelihood, “the bid price of bigger providers will still be less” than a network of smaller providers could abide.

Among the other reasons providers don’t like the network concept:

• Too many variables (location, equipment and delivery range);
• Too many restrictive rules;
• Too much detailed information required;
• Too much risk in depending on other companies to be compliant;
• Too much information that must be shared with competitors;
• Too much complicated and time-consuming administration, too many billing headaches; and
• Too many chiefs and not enough Indians. “It would be like herding cats,” one provider commented.

“The control of our business and our market would be surrendered to the supplier network,” one respondent complained. “The network would become our new boss. It would write our new rules and determine our options and our profit potential … Eventually, [the network] would be as burdensome and controlling as Medicare.”

So Tell Us What You Really Think

Providers were equally disheartened about other aspects of the DME bidding proposal, citing issues with:

• How bidding areas will be selected. Survey respondents said the lack of information about the cities where NCB will roll out, and exactly how CMS will determine service areas once the locations have been chosen, is making it tough to prepare. With service areas that can be sized as CMS deems, a product list that may vary by city and the first 10 MSAs where bidding will start yet to be named, “it’s very confusing,” was one frustrated provider’s understatement. “I don’t believe the factors used are fair and consistent with the variable demographics of each metropolitan area,” stated another. Chimed in others, “It’s just too hard to plan,” and “There won’t be time” to develop bidding strategies, much less build networks, without information on MSAs and service areas from CMS. The most typical response on this subject, however, came from small providers in large cities who are distressed that because they have limited service areas, “that will keep us from being selected.”
• The requirement to bid on all items within a product category. Of main concern to readers here is that they might not carry all the products CMS chooses to include in its DME bidding categories. As a result, this could be another reason they might not be able to participate. “The industry is not as narrowly focused into niche product group providers as the proposed rule suggests,” one commenter said. “The vast majority of providers offer a wide range of products and are not merely Medicare mills for one item. “Dividing up all these products into separate bids will be too confusing and burdensome on the providers and the patients. It guarantees that most, if not all, providers lose a large segment of business and runs the risk of creating patient access issues to items not selected in the bidding process.” Concern about both his patients and his business prompted one survey respondent to question why “all of a sudden we have to provide something we may not be good at?” Another HME exec explained something else he wanted CMS to understand. Because in the HME business you make money on some products and lose money on others, “maybe not all of the items in a category will have a reasonable profit margin, and we will be stuck with a huge amount of orders for something that just does not pay to do.” And the final word on product categories from one reader: “This is not a bid for nuclear reactor construction. These are health care products … the restrictions are disproportionate to the type of business this is. “Forcing providers to carry all items within a product category makes this bidding program an obvious scheme to eliminate small providers and cater to a handful of large national or large regional companies. This is not appropriate for this type of community- and patient-oriented health care business.”
• How winning bidders will be selected, and how payment amounts will be set. It’s all “smoke and mirrors,” one provider penned. “There’s no way to even guess at the reasonableness of your proposal. If you miss by pennies, you [could be] out of business.” Past that, another criticized, “Taking the median of the winning bids as the final payment amount is not logical. Companies are asked to submit minimum bids, and when they are selected as winning providers, they may be reimbursed at a rate below their minimums. Companies may also enter unreasonable bids, influence the rates, and then withdraw.” So instead of the upheaval that competitive bidding will cause home care companies and their customers — and the millions it will cost to administer — “why don’t they just lower the fee schedule to what they want to pay,” one practical respondent suggested. “This would cost way, way less in our tax dollars.”
• Rebates. This comment from one provider pretty much sums up how most said they felt about this particular proposal — “They are kidding, right???” ‘Nuff said.

In or Out?

Some providers who told us they don’t plan to enter the bid also told us they’ve got plenty of plans to replace lost Medicare revenues, ranging from expanding retail sales to garnering more managed care accounts and increasing service areas.

Others weren’t so upbeat. “The loss of our Medicare business would devastate us and would most likely result in [our] going out of business,” read a typical comment. “Years of work and investment down the tubes.”

In fact, more than a quarter (27 percent) of providers said they would have to sell or close their companies if they are not selected as bid winners. Thirty-eight percent said they would have to lay off employees. Fifty-six percent said they would have to change their business model.

But overall, 80 percent of the providers answering our survey said that in spite of competitive bidding’s rigors, they still plan to be in business after the program is fully implemented. “I’m not quitting now,” said one determined provider, who noted his company was established in 1936.

Interestingly, some providers mentioned they were still hopeful that Congress/CMS would realize NCB just won’t work. “CMS will gain knowledge of what it will take to maintain quality service to our patients … and that there are [simpler] ways to get rid of fraud and abuse in this industry in a way that patients and honest providers do not have to suffer.”

Concluded another, “I don’t think they have a prayer of implementing the program successfully.”

Survey Fast Stats

• Six in 10 providers responding to this survey plan to participate in Medicare DMEPOS competitive bidding. 61% of these say they will bid on their own, not as part of a network.
• Providers are fairly evenly split over whether or not building a supplier network to bid is a workable concept, with 49% saying it is, and 43% saying it isn’t.
• One in five providers (19%) is not familiar with CMS’ Notice of Proposed Rulemaking on competitive bidding, while 41% have read either the entire proposal or a summary of it.
• A majority of providers we asked said they are concerned about the following portions of the proposed competitive bidding rule:
  • Absence of small supplier protections (71%)
  • How winning bidders will be selected (65%)
  • The “rebate” provision (59%)
  • How payment amount will be set (58%)
  • How bidding areas (MSAs) will be selected (55%)
  • Requirement to bid on all items within a product category (54%)
  • How products will be selected (53%)
  • Quality standards (51%)

• Just over half of respondent companies reported that they are accredited (52%).
• More than half of the unaccredited companies (54%) say they are waiting to begin the process until CMS decides which accrediting organizations will be approved.
• A majority of responding providers (59%) believe it will take between six months and a year to earn accreditation.
• Two-thirds (67%) think that quality standards/accreditation should be implemented before competitive bidding begins.
• Medicare accounts for an average 39% of revenue for respondent HME companies. However, 30% report that Medicare represents more than half of their business.
• Less than one-third of the providers surveyed (31%) indicate they use activity-based cost management.
• Nearly three-fourths of these providers (73%) feel that their companies are not prepared for competitive bidding.
• Just over one-fourth (28%) report that they don’t know how much it will cost their company to prepare and submit a bid.
• More than half of the respondents (56%) say that if they are not selected as a bid winner, they will change their business model. More than one-third (38%) say they will have to lay-off employees, and 27% say they will sell or close the company.
• However, 80% of the responding providers believe their companies will still be in business in 2010.

‘It Will Make Their Lives Miserable’

While providers have significant issues with how their businesses will deal with NCB, those pale in comparison to how most believe the mandated bid will affect their patients. More than 200 providers gave us their individual thoughts about the subject, the majority lambasting the bidding proposal because they feel it will strip beneficiaries of choice, service and quality equipment by focusing on price alone. The irony, say many, is that CMS may not save any money. “Patient care will suffer, and hospitalizations will increase,” one provider observed. Here’s a litany of representative comments we received about the impact competitive bidding will have on HME patients:

• “Competitive bidding will do one thing for patients — reduce the quality of care. Reducing budgets always reduces services.”
• “It will make their lives miserable. They will have to deal with multiple suppliers for simple things. I see no benefit to patients.”
• “It’s going to rock their world. I don’t see how the current level of service (that we provide, anyway) can continue, and that’s a great loss to patients. It’s going to be a ‘numbers to stay alive’ game, and the beneficiaries will lose.”
• “It will confuse them. It will cause them to be powerless in selecting companies to take care of their needs. It will take away many of the types of products that work well for them. It will cause increased hospitalizations and force some into nursing homes, as they will find their providers are no longer interested in helping them with service calls that are not specifically required in the bid but were previously taken care of at no cost by their previous provider.”
• “Once again, the patient will be the ultimate loser with minimal choices and inferior equipment.”
• “It will reduce access. There will be fewer providers, no incentive for new providers and reduced access to a competitive market. When the game is fixed up front, there [will be] less incentive to work hard on taking great care of the patient and the referral source because there will be such a [restricted] list of providers.”
• “It will reduce service to the least common denominator. Companies will use cheap products and provide little value-added service.”
• “Studies have shown that contact between patients and providers [makes] a difference in response to treatment. An unknown face, a voice (or a recorded call) on the phone does not have positive impact on a patient’s health, and this alone will be more costly in the long run. Competitive bidding may prove to be penny-wise and pound-foolish as the cost-shifting figures come in.”
• “Patients will be underserved, period.”

About the Survey: HomeCare conducted its Competitive Bidding Survey via e-mail June 20-28. Percentages are based on responses from 237 companies. Not all respondents answered every question, and some totals may add to more than 100 percent due to multiple responses. For a complete copy of the survey, visit www.homecaremag.com.