Opportunities for the competitive bid contract “loser”
by Jeffrey S. Baird
April 12, 2013

Assume that despite its best efforts, an HME provider is not awarded a competitive bid contract. This may be a blessing in disguise, presenting the following potential opportunities:

Expanding into geographical areas outside CBAs—A supplier can open locations outside a CBA and/or expand into other areas utilizing the “hub and spoke” model.

Products and services not subject to competitive bidding—With 78 million Baby Boomers, there is a huge market for products and services not covered by Medicare. Examples include installing vehicle lift systems and remodeling the home for accessibility.

Cash sales—When moving into the cash market, the supplier is prohibited from charging Medicare substantially in excess of the company’s usual charges, unless there is good cause. The government has tried (and failed) to define exactly what this means. The best guidance is a proposed rule (later withdrawn) that states that the supplier’s usual charge should not be less than 83 percent of the Medicare fee schedule amount (i.e., up to a 17 percent discount from the Medicare fee schedule). Under this withdrawn rule, there would be an exception for good cause, which would allow a supplier’s usual charges to be less than 83 percent of the Medicare fee schedule, if the supplier can show increased costs of serving Medicare beneficiaries.

TRICARE—The health care program for uniformed service members, their families and survivors is a large HME purchaser offering contract and noncontract opportunities.

Workers’ Compensation—Those injured on the job have access to this insurance at both the federal and state levels.

Veterans Administration—The VA operates a nationwide system of hospitals and clinics that require a broad spectrum of DME goods and services.

Hospices—The benefit paid to the facility includes the equipment and products used to service the beneficiary and may be purchased directly from HME suppliers.

Nursing homes/skilled nursing facilities—Residents in skilled nursing facilities (SNF) may receive HME reimbursed by Medicare Part B.

Subcontract with a contract “winner”—At the end of the day, a subcontract agreement cannot violate the Medicare anti-kickback statute. An example of a subcontractor arrangement is where a supplier that was not awarded a CB contract and wants to preserve its relationship with referral sources seeks to become a subcontractor for the contract “winner.” The subcontractor will arrange for the referral of Medicare beneficiaries to the contract supplier who will pay compensation to the subcontractor for services other than referring patients. What the subcontract agreement cannot provide is percentage compensation. Note also that a contract supplier cannot subcontract intake, assessment and coordination of care. Services such as delivery, setup and education may be subcontracted, however.

Continue as a “grandfathered” supplier—There is a “grandfathering” process for oxygen equipment and supplies; inexpensive or routinely-purchased items furnished on a rental basis; items requiring frequent and substantial servicing and capped rental items furnished on a rental basis by suppliers that began furnishing these items prior to CB implementation.

Medicaid programs—Medicaid programs generally require enrollment, and many Medicaid programs restrict enrollment to in-state or border-state entities. Despite that restriction, many Medicaid programs have waiver programs that allow the state to cover a range of items and services.

Internet cash sales—Having a strong Internet presence allows a supplier to reach customers or a national business, but check state licensure requirements.

Medicare Advantage plans—Competitive bidding applies to Medicare fee-for-service patients; it does not apply to Medicare Advantage plans. The supplier should endeavor to be added to as many plans as possible.

Managed care contracts—The supplier should take aggressive steps to become a provider under managed care contracts.

Use of ABNs—By using an Advanced Beneficiary Notice of Noncoverage (ABN), which notifies the beneficiary in writing of Medicare’s likely denial, a supplier may in certain circumstances furnish a beneficiary an upgrade item and collect money from the beneficiary if and when the claim is denied.