ATLANTA — Round 1 rebid winners reported a mixed bag of results Friday, the end of the program's first week, but they were united on at least one issue: The worst is yet to come.
While some contract providers reported smooth transitions and an uptick in business, one said the CMS project was hitting small HME businesses that won single contracts very hard.
"It's a dark day for small businesses that didn't receive five or more contracts," said Barry Johnson, president of Texas Home Medical in Duncanville, Texas, who won a contract for oxygen. "Competitive bidding does not work. It's going to take a month or two to come down really hard. And when it does, it's going to really hurt. We're just seeing the tip of the iceberg."
Johnson, who is also the president of the Texas Alliance for Home Care Services, said it was patently apparent in the Dallas-Ft. Worth competitive bidding area that referral sources — once they learned of the program — were not contacting providers who held only a few contracts.
"Basically, what we've seen is that the people who won less than the five top product categories — oxygen, hospital beds, standard and complex wheelchairs and CPAPs — are not getting called. The small businesses are really taking a hit," he said.
"It doesn't do you any good [to have won one contract]. It's not doing you any favors; you might as well not have bid," Johnson added. "No one is calling."
The long-time provider said he did not ramp up to accommodate competitive bidding and he's glad he didn't. There's been no flood of new business, and the calls that are coming in are generally from Medicare beneficiaries trying desperately to find someone to serve their needs.
In one instance, a beneficiary called who had switched from a Medicare Advantage plan to straight Medicare and was having difficulty finding a provider for his liquid oxygen. Even providers that had won oxygen contracts were refusing to provide the liquid oxygen because Medicare doesn't pay enough, Johnson said.
"We have problems with patients switching from Advantage plans to straight Medicare finding someone to take them," he said. He's also been receiving calls from people wanting diabetic supplies who apparently were turned down by contract winners, Johnson said.
At Diamond Respiratory in Riverside, Calif., the news was brighter. "It's been running pretty smoothly here," said Chris Rice, whose company won seven contracts. "We did a lot of work educating our staff, our patients and the community (referral sources) about the program before it began. For the most part, they knew what to expect."
Rice said the company has received more than the usual number of calls. "We've been getting a lot of phone calls from beneficiaries directly as a result of CMS mailers," he said. "We're experiencing a 40 to 50 percent increase in daily order volume."
The company has been able to accommodate the influx, he said, even though its ramp-up was "more measured" than the first time around in 2008. "That was due in part to having implemented a lot of infrastructure back in '08 [with] technology, vehicles, etc.," Rice said. "This time we were able to scale up very quickly. Further, the manufacturers have been doing a great job of providing inventory quickly. Most deliver the next day."
It helps, he said, that Diamond Respiratory is 20 minutes from two major manufacturers' distribution centers.
Rice said he believes it will take some time — as long as the entire first quarter, perhaps — to see the impacts of competitive bidding clearly.
"There are lots of unanswered questions as to what will happen to order volumes, how subcontractor relations will play out, etc.," he said. "With Obamacare being vilified in the media, I expect that the talk of a repeal may provide hope of a vehicle similar to H.R. 3790 (last year's bill that would have eliminated competitive bidding)."
But that's not a shoo-in, he cautioned, noting that if the Congressional Budget Office's calculation of $20 billion in savings over 10 years stands, it's a hurdle the industry would have to overcome.
New Braunfels, Texas-based The Scooter Store, which won multiple contracts in every CBA, also found the transition to be a smooth one. Calls appeared to be at normal levels for this time of year, according to Mark Leita, senior director, government relations. Leita said the company's preparations — including the addition of more than 50 new store locations last year and broadening its product offerings from mobility to encompass all the product categories — were paying off.
"So far, things are going OK," Leita said. "All of our preparations over the last 24 months have positioned us to serve beneficiaries successfully under the new program. It is very early in the transition to this new business world. As a result, medical professionals who traditionally provide DME referrals to beneficiaries in competitive bidding areas are not very familiar with all the changes."
Leita said it was too early to tell if the company had ramped up enough. "So far, we are handling the current levels of demand and we are ready to scale up as needed," he said.
While there have been no particular challenges as yet, Leita said, the company does anticipate some in the future. "We expect there will be some learning [curves] we as move deeper into the program rollout and gain more experience under the new regulations and guidelines and form new referral relationships," he said.
"This is not a traditional bid program, as commented on by the bidding program experts," said Leita, referring to the 167 economists who have warned the program's design will cause it to fail. "Because no one has implemented a bidding program like this before, no one really knows how it will ultimately play out.
"Regardless," he continued, "this is a major transition for CMS and our industry, and with any major transition, it's natural that there may be some business-related bumps along the way. We do expect that there will be a dramatic and painful consolidation of the industry as non-contract providers are forced out of business."
It's already beginning in Dallas-Ft. Worth, Johnson said, and not just to non-contract providers. National companies are looking to buy up small contract winners, thus consolidating the market, and many small businesses have already closed their doors or are preparing to, he said.
"The market is flooded with equipment from people leaving," Johnson said. "I don't think it's a bright future up here for anybody."
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