Beware of common ownership and subcontract arrangements
by Liz Carey
October 17, 2018

Home medical equipment industry champions say new PTAN billing numbers are creeping up—one of a few signals that the industry has hit bottom and things are finally getting better.

Much will change come January 1, 2019, with the 24 months beyond deemed the “gap period” that will precede another round of competitive bidding in January 2021. After December 31, 2018, competitive bidding will “go away,” and any willing provider will be able to jump into (or back into) the Medicare market.

“It’s the way it used to be before competitive bidding came into being, and it’s going to be this way for about two years,” said Jeff Baird, chairman of Brown & Fortunato’s health care practice, which has worked with the industry and on competitive bidding for years. Baird and other competitive bidding experts addressed providers during a five-part Medtrade conference track that began Monday.

Informal surveys (few, if any, hands raised in the room) showed that providers are not eager to get back into the Medicare fee-for-service business, particularly in certain product categories. Talking points, however, suggested that jumping back in might have some benefits. Of course the future is still uncertain. Are you surprised?

Many suppliers have been out of Medicare fee for service, or focusing on very little, for the past three or four years. A recent industry benchmarking report from The VGM Group shows the payer mix carved into more commercial payers, patient pay, Medicaid and Medicare Advantage, which is a departure from “the old days” when cash fluidly moved from Medicare.

Popular diversification strategies include retail, orthotics and pain management. Demand all around? No signs of waning. Capturing that attractive baby boomer market revolves around product selection, expertise, staff abilities to provide solutions for needs, customer experience and trusting relationships.

“If we’ve gotten to the point where we have eliminated our financial and emotional dependence on Medicare, then I would assert don’t go back into it,” Baird told a crowded house. “If we have already gone through the pain, suffering and trauma of Medicare, and focused our business model on other stuff, I would think long and hard about going back. Be careful.”

It may not even be that easy to re-enter the market with referral sources, after not participating. It’s established: Referral sources know not to send patients to those companies.

Say you've gotten out of the Medicare fee for service market for oxygen or diabetic testing supplies, for example. Baird said it is important to realize audit liability after the next round starts, in 2022 and 2023, for those who are not awarded a contract in the upcoming bidding round and opt out of the program. Also, patients that are in at the new rate on Dec. 31, 2020, may be grandfathered at the new (presumably higher) rate, Baird said.

Experts say the follow-up to the proposed rule, the final ESRD/DMEPOS rule, will come in November 2018. It is not expected to stray much from the proposed rule, Baird said, but the changes to competitive bidding are “huge,” turning competitive bidding into a true auction program.

As part of the comment process that follows proposed rules for federal policy, stakeholders requested that the payment level be the existing SPA (single payment amount), plus an inflation increase compounded for years 2013-2018. Baird said, “we’re hopeful.” Suppliers will reportedly be paid the SPA with an inflation increase (as presented by CMS, thought to be unsustainable, particularly in a new any willing provider environment).

Competitive bidding will not go away forever. It’s law. Cara Bachenheimer, counsel for AAHomecare and part of Brown & Fortunato’s governmental affairs practice, also noted that the final rule could reveal little details, but look for sub-regulatory guidance.

The five-part competitive bidding program track featured experts from Brown & Fortunato, AAHomecare and The VGM Group. Attendees had time to ask questions of the panel and share thoughts with all.

Competitive Bidding Track Points of Interest

Precondition. Toward the new program, stakeholders suggested that a supplier have a Medicaid provider number as a precondition to submitting a bid. Track record was a frequent theme of importance.

Definition of rural. A whole big chunk of the country is considered not rural enough, and these areas see lower SPAs, said Mark Higley of The VGM Group, during the first competitive bidding session Monday. The critical access hospital definition would be more fair to rural areas, he said, adding that states use different methods for defining rural. “We’re asking for almost a third of the country to get a 25 percent raise,” Higley said.

Active PTAN and accreditation. Letting your PTAN number go nonactive may be a problem as providers must be in good standing. The bidding process should come together quickly, beginning in spring 2019; aim to have your bid package ready also by spring/summer. The PTAN will be important, and not having a track record from Round 1 2017 will affect capacity.

Common ownership. Some DME suppliers have common ownership arrangements. How do common ownership arrangements work? Company A is awarded a competitive bid contract. Company B is not, but it wants to get access to A’s contract. One company can buy 5 percent of the other, making both commonly owned. How will competitive bidding affect the common ownership arrangement? Recommended: Dissolve before January 1, 2019. If A and B are operating under the same contract, undo that arrangement effective December 31, 2018, so that on that date A and B can go their separate ways. If a subcontract arrangement is in place, and there are several types of these Baird said, these are also recommended to be dissolved by December 31, 2018.

Taking assignment or taking limited assignment during the gap period. There is no good reason to be participating, Baird said, adding you can elect to be nonparticipating Nov. 15-Dec. 31. That means that during the two-year gap period, a supplier can get into the market on a non-assigned basis, meaning not required to accept everyone, but those clients accepted will have to pay cash upfront; a claim will be submitted for them; and Medicare reimburses the patient. That is a way to jump back in over the next two years without becoming dependent on the Medicare fee for service program. Avoid becoming dependent by taking assignment and racking up accounts receivables.

Ostomy and urologicals. Doubtful they will be added to competitive bidding any time soon.

Diabetic supplies during the gap. Payments expected to be SPA, plus an inflation increase for last 12 months, with an additional inflation increase for every 12 months thereafter, with a note about limiting non-mail-order diabetic supplies to the current SPA alone. Stakeholders want the inflation increase for non-mail-order also.

Educating providers. A group of industry leaders is working on a special website for industry education, that will be ready in spring or early summer 2019.