Bidding Countdown

As the clock ticks towards the deadline for submitting bids in the 10 competitive bidding areas, it is critical for providers to prioritize activities to understand how to submit the best possible bid. Make sure you check the Competitive Bidding Implementation Contractor Web site (www.dmecompetitivebid.com), which posts new information on a daily basis.

The following checklist and frequently asked questions should also help.

Bidding Checklist

• Review all necessary information and documentation directly from the CMS and CBIC Web sites to ensure that you and your staff are educated on the process and requirements.
• Obtain accreditation by Aug. 31, 2007.
• Develop an accurate and efficient methodology for understanding your current cost structure, including acquisition and operational costs, and total costs of doing business in each DMEPOS category that you choose to bid on.
• Understand and analyze your total costs by category, or item, to ensure a high level of beneficiary care, service and satisfaction prior to calculating your bid price.
• Review current financial standards required to participate in the bidding process, including (but not limited to) tax returns, credit history, insurance documentation, business capacity and line of credit.
• Review compliance with the documented supplier quality standards.
• Obtain model number, MSRP, unit of measure and current costs from your key manufacturer in each participating category.
• Support the Tanner-Hobson bill (H.R. 1845) by writing to your local representative. Information regarding the bill and how to support it is available on many industry sites.
• Support the Rehab Carve-Out bill that would exempt complex rehab from the bid due to the complex nature of the beneficiary, of the product required and the level of expertise required by a provider to assess, measure, fit, adjust, program and service these complex products adequately.
• Act now on both of these pieces of legislation by asking your representative to sign on as a cosponsor.

Bidding FAQs

Q. What is the timeline for competitive bidding implementation in the first 10 areas?

A. Once CMS has issued the Request for Bids, bids will be due 60 days later (at press time, estimated to be the end of June). CMS plans to announce the winning suppliers in December, with contract prices taking effect on April 1, 2008, in the initial 10 competitive bidding MSAs.

Q. If I do not wish to competitively bid, do I still need to adhere to the new quality standards and accreditation?

A. Yes. All DME suppliers who participate in Medicare — even if not in a competitive bidding area — must be accredited by either a state agency or a nationally recognized accreditation body. This new accreditation requirement will be incorporated as a supplier standard and the supplier will be required to obtain a DME supplier number from the National Supplier Clearinghouse. CMS has not yet set a date by which all DME suppliers must be accredited.

Q. Can I bid if I am not accredited?

A. CMS will only accept bids from suppliers who are accredited or pending accreditation. In order to be a contract supplier in one of the first 10 MSAs, you must be accredited by Aug. 31.

Q. If a non-contract supplier agrees to accept the single-payment amount, can the non-contract supplier provide Medicare-reimbursed DME in a competitive bidding area?

A. No. All non-contract suppliers would be prohibited from serving beneficiaries in a competitive bidding area even if they agreed to honor the winning bid price. The only exceptions are “grandfathered” suppliers, suppliers who act as subcontractors to contract suppliers, or suppliers who provide items not subjected to competitive bidding in a CBA.

Q. Who does CMS consider a small supplier?

A. CMS defines a “small supplier” as having total gross revenues of less than $3.5 million.

Q. How many suppliers will be chosen per MSA? How will CMS know how many suppliers are needed?

A. CMS will select only as many suppliers as are needed to ensure that capacity is fulfilled. CMS will award at least five contracts for each DME product category, if there are five qualified suppliers. If there are not five qualified suppliers, CMS will contract with a minimum of two suppliers. The “pivotal bid” will determine how many suppliers receive contracts for a particular product.

Starting with the lowest composite price, CMS will add the estimated capacity of each successive bidder until total capacity meets or exceeds peak estimated market demand. In determining a supplier’s individual capacity, the Request for Bid (RFB) forms will ask each supplier to report the number of units they are willing to supply and at what price. For purposes of calculating the number of suppliers to include as contract suppliers, suppliers will get “credit” for no more than 20 percent of their current capacity.

Q. How will existing capped-rental payments be paid to contract suppliers?

A. Contract suppliers will receive all 13-month rental payments, regardless of how many rental payments Medicare has previously made.

Q. Who do contract suppliers submit claims to?

A. While the CBIC will name the winning bidders and establish the single payment amount, contract suppliers will submit claims to the Durable Medical Equipment Medicare Administrative Contractor (DME MAC) for their region.

Q. What about pre-existing oxygen agreements taken over by contract suppliers which are paid on a 36-month rental basis?

A. At a minimum, contract suppliers will be guaranteed at least 10 rental payments for providing oxygen services. If, however, a contract supplier begins furnishing oxygen to a beneficiary in months 2 through 26, Medicare will make the payments for the rest of the 36-month rental period.

Q. How are payments made for maintenance and service, repair and replacement of beneficiary-owned DME?

A. Any supplier can perform maintenance and service or repair beneficiary-owned DME that was competitively bid. CMS will pay the supplier the bid payment amount for the part (assuming it’s a competitively bid item) and any reasonable and necessary charges for labor. If the beneficiary needs to obtain a replacement DME, they must use a contract supplier if they reside in a CBA.

Q. What is a “composite” bid?

A. CMS will award contracts for product categories, not for individual items covered by Medicare. To allow for comparisons among bidders, the CBIC will establish the “composite bid” for each supplier. The composite bid will be based on the sum of each item’s bid amount times its weight for the entire category. The weight of an item is based on volume (utilization levels) compared to other items within the product category.

Q. What is a “pivotal” bid?

A. The “pivotal” bid is the cut-off point for CMS to award contracts. CMS will start with the lowest bid, and then include the 2nd-lowest, etc. until the cumulative supply capacity of such bidders is sufficient to satisfy the expected demand for the items being bid upon. Any eligible suppliers with bids below the pivotal bid will be awarded a contract, and this will always include at least two suppliers.

Q. How many suppliers will be chosen per MSA area? How will CMS know how many suppliers are needed?

A. CMS will select only as many suppliers as are needed to ensure that capacity is fulfilled. CMS will award at least five contracts for each DME product category, if there are five qualified suppliers. If there are not five qualified suppliers, CMS will contract with a minimum of two suppliers. The “pivotal bid” will determine how many suppliers receive contracts for a particular product.

Starting with the lowest composite price, CMS will add the estimated capacity of each successive bidder until total capacity meets or exceeds peak estimated market demand. In determining a supplier’s individual capacity, the Request for Bid (RFB) forms will ask each supplier to report the number of units they are willing to supply and at what price. For purposes of calculating the number of suppliers to include as contract suppliers, suppliers will get “credit” for no more than 20 percent of their current capacity.

Q. What type of financial information must be submitted with the bid?

A. All suppliers must submit a Compiled Balance Sheet, a Cash Flow Statement and a Statement of Operations. Suppliers that file individual returns that include business taxes are required to submit their Schedule C from their Form 1040 for the past three years. Limited partnerships must submit their Schedule L from their Form 1065 from the past three years along with the financial documentation that suppliers who file individual returns must disclose. Suppliers that file corporate returns are required to provide their Schedule L for the past three years along with the other documentation required by other suppliers. Publicly traded suppliers must submit their 10-K Filing Reports for the past three years. If the supplier is a wholly-owned subsidiary of a publicly-traded company, must submit the parent company’s 10-K reports. If a supplier does not have financial documentation for one or more of the three years prior to the bid, the supplier must provide projected financial statements that are based on key financial assumptions of the present and must include a description of these assumptions. For supplier networks, the legal entity that submits the bid, must submit the financial information on behalf of each network member.