Rock On

In Washington last month for AAHomecare’s Legislative Conference, I was struck by the cataclysmic divide between providers who are moving forward with strong business plans and those who said they will “wait and see what happens with competitive bidding.”

I guess my question is, what is there to wait on? Consultants have been warning for several years now that the coming scenario is not pretty, particularly for small providers.

So, just in case you have been living under a rock, let’s go over this one more time. Per the final rule, you will not be able to provide bid items to Medicare beneficiaries if you do not win a contract, although there are subcontracting and grandfathering options. If you are serving Medicare patients, you will be working with reimbursement amounts for bid items that are set based on the winning bids, which means they will be lower than the current allowables.

These are the facts, and unless CMS tweaks the program, they will apply next April if you are in one of the first 10 competitive bidding areas, in 2009 when another 70 are added to the list, and after that to any other locations the agency chooses.

On a hopeful note, the HomeCare staff has talked with an impressive number of small-company owners who began putting subcontracting arrangements in place after reading the final rule, whether they are located in one of those initial CBAs or not. Some say they started moving away from Medicare as soon as the ink was dry on the Medicare Modernization Act of 2003. And we are hearing all sorts of intriguing survival strategies from enterprising providers in those first CBAs.

But others we’ve interviewed say the prospect of losing their Medicare revenue is daunting and they’re not sure what they will do. These comments remind me of a provider I met years ago who closed her doors after the Balanced Budget Act of 1997. She decided she just couldn’t make it. The flip side of that story, of course, is that there were plenty of providers who prospered under the same conditions.

During AAHomecare’s lobbying event, I had a chance to sit down with former Chairman Tim Pontius, who works in M&A. (You can read more about HME sales activity or, actually, the lack of it, on page 18.) Providers really need two plans, he said: “Plan A is you win the bid at a reasonable price and you continue operating, not necessarily business as usual but certainly by creating some efficiencies and learning to cope. Plan B means figuring out what you are going to do if you don’t win the bid.”

The industry is pushing hard for relief with the Tanner-Hobson and Hatch-Conrad bills, H.R. 1845 and S. 1428, respectively (and hats off to the providers who took time out to travel to Washington and help). But no matter which way this legislation goes, “the wait-and-see approach is dangerous because it puts your business in a very tenuous position,” Pontius said. “Providers have a responsibility to the patients they serve and to the employees working for them to knuckle down and manage the business.”

If you are committed to this industry, then come up with a way to stay in it. The consultants say they are out there. If you have a respect for profit, then find a way to create it. The experts say it’s possible. Even if you decide to opt out, you can do it with an exit plan that preserves value, the merger-and-acquisition specialists note.

Should you give up the fight against competitive bidding? No way. But if you don’t have a plan to survive under its provisions, “you’re not going to dodge that train,” Pontius said. “You’re standing on the track, and it’s going to hit you.”