Bidders Have Jitters over Round 1 Rates

ATLANTA — Nerves were on edge Wednesday among home medical
equipment providers anxiously awaiting the Centers for Medicare and
Medicaid Services’ big reveal — the new DMEPOS competitive bidding
reimbursement rates, expected
to be released on Friday.

“I don’t feel very good about it,” said Tim Binkley of
Valentine’s Medical Supply in Roswell, Ga. Binkley, whose company
specializes in diabetic supplies, said he feared “suicidal” bids
would result in crippling rate reductions.

In 2008’s aborted Round 1, he recalled, rates for diabetic
supplies “were very suicidal. The winning bid in California was 43
percent [less than the prevailing reimbursement level] …
There’s no way to provide product at a 43 percent cut.”

Binkley said his company bid in several of the nine competitive
bidding areas in the Round 1 rebid.

“We bid what we felt like we can live with and provide the
products that we think are acceptable. There are cheaper products
out there — foreign-made products — and they are not
very well supported and they are not accepted, not only by
professionals and referral sources but also [beneficiaries],” he
said.

However, he noted, “trying to provide similar services to what
we have always provided may be difficult if we win. Sometimes, the
best contracts are the ones you don’t get.”

Binkley said he expected the cuts this time around would be in
the high 20th percentile.

“It has the potential to be very ugly,” he said. “There are
going to be a lot of people that are going out of business.”

That sense of pessimism prevailed at Blackburn’s Pharmacy in
Tarantum, Pa., as well.

“I have only worries,” said Georgie Blackburn, vice president of
government relations. “I know what we did. I don’t know what anyone
else did. The concern is the level of angst CMS has put on our
industry and what that might have caused providers to do. I am
personally very concerned that suicide bidding will be a
reality.”

She pointed out that the 9.5 percent across-the-board cut the
industry took to “pay for” the delay of competitive bidding doesn’t
allow for HME companies to bid a lot lower.

“What they are asking us to do is unsustainable, but unless we
do it, we cannot even stay in the ball game,” she said.

‘These Are Patients’

Blackburn said she is concerned as well “about the lack of
transparency as to how CMS looks at financial standards.

“The fact that they only asked for one year of financial
standards was one of the most alarming things to me,” she said,
adding that it appears it would be possible for a company that had
gone bankrupt, then came back and had one good year, to be given a
contract.

If companies cannot sustain the quality of equipment and the
level of service, it is the beneficiaries who will suffer, she
said.

“These are patients. This isn’t sending out widgets. And if we
try to do it that way, try to cut corners, believe me, you hear
from your patients.”

Still, both Binkley and Blackburn are hopeful that despite the
announcement of the bid rates, competitive bidding might still be
stopped. Both noted the continuing successful push for cosponsors
for H.R. 3790, the bill that would derail the program. As of
Wednesday afternoon, the number stood at 251.

“I hope all this unravels,” Blackburn said about competitive
bidding. “And I pray that we are able to stop this. I think H.R.
3790 is a good vehicle and we have to see what [legislation] we can
attach it to.

“I feel more positive about where our industry is than I did two
years ago,” she added. “We are on Congress’ radar, and not in a bad
way.”

Michael Reinemer, vice president, communications and policy, for
the American Association for Homecare, agreed.

“In many respects, I think the home care sector is better
prepared than in 2008,” he said. “We have been through this once
already. We have many good arguments and allies. We have had a lot
more time to work with members of Congress to explain why this bid
program is not good health care policy, and we have an alternative
to the bidding program that has a great deal of support in
Congress. The challenge now is to keep up the momentum and try to
get H.R. 3790 passed and enacted into law.”

Seth Johnson, vice president of government affairs for Exeter,
Pa.-based Pride Mobility Products, said the bid rates could
actually give the industry’s legislative efforts a boost.

“The additional cosponsors on H.R. 3790 are certainly positive
in that they continue to show a growing level of support for
repealing the competitive bidding program,” he said. “I hope the
release of the bid rates will help bolster the industry’s efforts
to secure a lead sponsor on a Senate companion bill to H.R.
3790.”

Inside Track

Meanwhile, other issues related to competitive bidding have
cropped up.

Apparently concerned about the possibility that beneficiaries
could run into problems with competitive bidding, CMS is hosting
conference calls and “partnership” meetings to “develop local
coalitions that will serve as safety nets to ensure no disruption
of services to the Medicare beneficiaries under the competitive
bidding program,” according to the Accredited Medical Equipment
Providers of America. The next conference call is July 11, the
organization said.

Hoping to build their stables of providers in the competitive
bidding areas, Diabetic Experts of America, an affiliate of
Lincare, the Clearwater, Fla.-based respiratory giant, and Liberty
Medical of Port St. Lucie, Fla., have been courting HME suppliers.
AMEPA reported some of its members had received a letter from
Diabetic Experts indicating an interest in acquiring “your diabetic
patient base.”

“As you know, the national competitive bidding process will
dictate the number of companies allowed to service Medicare
beneficiaries,” the letter read. “In the first round of bidding,
the reimbursement was on average 40 [percent] lower than today’s
Medicare reimbursement rates. The re-start goes into effect on Jan.
1, 2011.”

It continued, “Diabetic Experts of America provides qualified
business owners with a swift financial transaction and we will
consider blocks of business from 50 to 50,000 patients and more. We
acquire businesses via cash transactions. Once a letter of intent
is signed, we typically close the transaction in 30 days or
less.”

That didn’t surprise Binkley.  

“They are fast-growing companies and they have more money than
everybody. And they know that if this comes down, they are going to
need these companies that have those contracts,” he said. “But I
think they are like the rest of us — anxious to see what [the
rates] look like.”

It isn’t only industry insiders watching competitive bidding
unfold. Wall Street is looking, too. HomeCare has received
inquiries from investors and others wanting to know if anyone on
the staff had an inside track and could tell them what the
reimbursement rates would be prior to CMS’ announcement. Street
analysts seem to be pegging the rates at 10 to 18 percent below
current reimbursement levels.

Blackburn said she had gotten a call from an investor during the
first competitive bidding go-round.

“He wanted to know if this could be a good investment,” she
recalled.

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