Business Solutions

Round Two Reality Check

Bidding starts this month. How ready are providers, and what preparations do they need to make to stay above water?

• By David Kopf
• Feb 01, 2012

Round Two of the Center for Medicare & Medicaid Services’ national competitive bidding program is officially taking bids, and providers in the 91 affected competitive bidding areas might not fully realize it, but a flood of challenges is coming their way. The program will see bidders from across the nation placing bids on any category in nearly any MSA they choose. Whatever sanity remained in the industry, the bidding of Round Two could see a massive, nationwide reordering of the home medical equipment sector and the patients it serves.

If there’s any doubt of that, simply take a moment to recall the headlinegrabbing drama that ensued in the wake of Round One’s implementation. Tens of thousand of “inquiries” (as CMS described them) from patients and other affected stakeholders; bid losers without CMS contracts trying to re-engineer their business plans for mere survival; and some contract holders finding themselves in the precarious position of not being able to serve newly gained markets — all with the added burden of an average cut of 32 percent across the program’s bidding categories.

Now imagine the same tumult applied to essentially the rest of the country. That is the prospect of Round Two, and bidding starts the first of this month, just as this issue hits your in-box. The big question is, just how prepared are providers as the industry is on the eve of Round Two bidding to make a viable bid?

“I think a lot of providers are going into it tentatively and more resigned to the fact that this is happening,” says Andrea Stark, DME consultant and reimbursement expert with industry consulting firm MiraVista LLC. “With 91cities it’s hitting close to home, so we’re seeing a lot more activity, but I fear that there are providers that are waiting until the last minute.

“By and large, the individuals I am working with are re-acclimating themselves, because they might not have paid as close attention to Round One and the Round One re-bid,” she continues. “A lot more providers are re-immersing themselves into what needs to happen.”

It Starts with Registration

For any providers that might not have been preparing for Round Two bidding as early as they might have liked to, the process starts with ensuring they are registered — and they should do it fast. The registration window closes Feb. 9.

“The first step is getting the authorized official linked up, making sure they’re in the system and loaded up by the deadline,” Stark explains. “If there’s any problem after that, you’re not going to have any time to resolve those issues.

“I think people are holding off on registration thinking they have to understand all the way through the bid process, and ‘what am I going to propose,’ and ‘do I have my inventory?’” Stark continues. “…The registration part is simply getting access to the system, and then you’ll have another 60 days to be able to formulate an actual bid.”

Also, providers must make sure to register a backup authorized official into the system. If anything happens to the authorized official that takes him or her out of the process, the backup must be in place. And again, the deadline is mere days away, Stark warns.

Once registered, providers need to formulate their bidding. This starts with having all the necessary documentation in place. Credit scores, financial documents, and all the necessary preparatory paperwork should be in order and ready to submit to CMS.

Then the bidding begins. Obviously the concern is that providers might enter into the “suicide bidding” that generated the aforementioned 32 percent average reimbursement cut for Round One. However, the industry has probably learned its lesson in that regard, and wants to steer clear of a repeat.

“I think there has been a lot more education and real world experience,” Stark says. “The problem is that the providers going in with an educated mindset are not the ones throwing out the uneducated bids. So, I think we cannot eliminate the risk that there are going to be people things throwing things out left and right. But by and large, I think this time people are a bit more knowledgeable.”

Providers must remember that only mark that they have to meet is that they must bid below the current fee schedule amount for a category. “That’s the only thing carved in stone,” Stark says. “It’s not to benchmark against Round One rates. It’s not a 17 percent minimum cut. It is ‘bid reasonable.’ Keep in mind that you are locked into this for three years.”

Stark says Round Two bidders should remember the lesson of Round One providers that suddenly encountered skyrocketing gasoline costs that added a tremendous cost layer to their already high overhead, and how that impacted margins already heavily narrowed by Round One.

“You have to look at the long term, and you have to build a cushion,” she advises. “You’re not guaranteed any increase in volume. There are no guarantees, period.”

From there, providers need to start thinking about efficiencies. The goal isn’t the satisfied with adequate performance level, and to have all the pieces of the business in place, but to truly start driving costs out of the business.

“You have to have already mastered effectiveness,” Stark explains. “You need to be in the stage of shaving seconds off the clock. You need to be working on efficiency.”

So Round Two providers must strive to drive costs out of every element of their businesses, inventory, operations, delivery, human resources, and any cost center impacting the bottom line. The leaner and meaner, the better. If they do that, there is still time to bid smart — if they move fast. The next 60 days are critical.

“We definitely can’t be dragging feet,” Stark says. “At this stage in the game we have to be giving this its due focus. Once the bid window is closed there is no thinking about it. There is no reconsideration.”

Remember Accreditation?

That said, provider’s Round Two reality check includes a wake up call that might startle some: have they considered accreditation? A key consideration that providers in Round Two might not yet have considered as part of their competitive bidding strategy is ensuring accreditation across all bidding categories.

“Our feedback here, from the providers, is that a lot of them are deciding to bid on every category,” says Sandra Canally, president of accrediting organization The Compliance Team. “So they’re going from maybe being accredited for two product categories to nine.”

That presents a problem for them, she says. “Just because you’re accredited and skilled, and you have policies and patients and all the rest of that to back up the ability to bill Medicare for two or three items, that doesn’t necessarily mean that you then have what you need to back up all the rest of them,” Canally explains.

And, that means that those providers can’t bill Medicare for these new categories. Moreover, they can’t even bid for it. “I’ve talked to [providers] one on one, and they’ve said, ‘we’re just going to put in the bid for all of it and it we don’t get it all, then our competitor is going to put a bid in for it, and we can partner or subcontract after the fact,’ Canally says. “You can’t put in a bid for a category unless you’re accredited for it, right out of the gate. Certainly we have a lot of providers out there that are very smart business people, but they certainly need to understand that bidding is directly connected to accreditation in every way.”

So with the bidding window ending at the end of March, can providers get accredited that quick in order to bid on categories before the opportunity closes? As many providers might recall, the accreditation process back when accreditation was first implemented during 2008 and 2009, the process was painstaking and time-consuming.

That said, in a fashion similar to the eleventh hour work accrediting organizations (see “Accrediting Organizations”) and their provider customers were doing to ensure accreditation, accrediting organizations might be able to rapidly respond to providers that are only realizing now that accreditation must be part of their Round Two game plan.

Bearing that in mind, it might be worth it to review the basic steps providers take in order to get accredited:

• The provider decides to get accredited.
• It reviews the accrediting bodies and picks one that best fits its business in terms of product categories.
• It gets the standards for that organization.
• The provider reviews those standards and ensures it has what it needs to adapt to those standards.
• It decides whether it needs to contract the services of a consultant to help organize and implement the policies and procedures involved in accreditation.
• It decides whether or not it needs to adopt a policies and procedures manual as part of the process.
• It adapts that template to its business.
• A timeline and team is developed to organize the process and work toward implementation.
• When the provider believes it has implemented the policies and procedures it slates a site survey.
• Assuming the provider passes its site survey and achieves accreditation, it might be required to engage in subsequent follow-up meetings.
• At the least, it will need to renew its accreditation every three years, so it must maintain its policies and procedures at all times.

So where does a provider start when it comes to getting accredited for categories it wants to bid on in order to add them to their businesses? How do they start the process?

“They need to contact their accreditor to let them know, ‘I’m planning on bidding in these MSAs for these products,’” Canally says. “Then it’s up to the accrediting organization to say, ‘This is what you need to do in order to add product.’ Certainly every AO across the board has some type of process to deal with that.”

Turnaround Time

Reviewing the process, it’s not hard to wonder if providers have enough time to get accredited in any new categories before the bidding window closes at the end of March. That question is hard to answer, Canally says. The speed at which providers will get accredited for new categories depends a great deal on for what they’re trying to get accredited.

For some, they might or might not have some of the essential elements for these categories in place already. When adding a product, the accrediting organization will review the provider to see if it already has patients that are using the equipment in question. In these cases the provider must have the right documentation; appropriate policies for conducting processes, such as setting up a patient in a power wheelchair, for example; and they must have all the processes in place for billing and claims for the DME being added.

If the provider has many of the assets in place, it could just come down to file review, Canally says, adding that isn’t necessarily a given. In fact, it might not be all that likely. “Even that, with thousands of customers, you have to question if everyone in the process is looking at what they’re doing,” she says. And staff is definitely a key element. Outside of the polices, processes and documentation procedures, the provider must have all the training in place to ensure all staff are versed in the responsibilities and procedures for the new category. Moreover, for even more complex types of HME services, such as respiratory therapy, there could be additional needs to have credentialed staff on-board in order to meet accreditation requirements.

Providers need to review all the associated staffing requirements, “whether it be licensure for the state or the MSA, credentialed staff related to the MSA, or credentialed staff related to the product that they’re adding,” Canally explains. Obviously, having the necessarily staff resources in place could impact the time it takes to get accredited, as well.

Another key in the turnaround for getting accreditation for any new categories on which providers want to bid is whether or not a site visit will be needed, which hopefully accrediting organizations are putting at the top of the stack, Canally says.

“Some things might involve a visit. If they’re doing higher end things, if they’re adding oxygen, or adding respiratory assist devices, we really can’t add those kinds of things without an on-site visit,” she explains. “Here at the Compliance Team, I have said to our scheduling department that bidders take top priority.

And, as an additional point, the accreditation issue gets even stickier when subcontracting is added to the mix. Let’s say a provider decides that it is going to bid on all Round Two categories. Moreover, the provider believes it has the staff, training, policies and procedures in place to be accredited for those categories. However, for one of the categories, it has decided that it wants to subcontract the services of another provider to handle that business, because that provider does a good job serving those patients.

“If the provider is subcontracting to another provider that might just handle fitting services, or delivery and instruction for DME, obviously those folks have to be accredited, as well,” Canally reminds. “Within two months.”

Floating a Life Raft

There is one more key to preparing for the Round Two flood: stopping national competitive bidding. This should remain a part of any provider’s business plan. The current industry effort to stop Rounds One and Two of the bid program is to put in place the industry’s Market Pricing Proposal. The MPP includes these elements:

• The size of market pricing areas would be reduced and be made more homogeneous.
• The capacity of providers would be limited to a provider’s historical utilization in a county.
• Services required for the proper use of medical equipment would be clearly defined so pricing is based on clear quality standards and requisite services are maintained.
• Provider qualifications must be clear and transparent and known to the public prior to the submission of a market price.
• ransparency would be required in the bidding process to ensure that the market pricing data are not subject to manipulation.
• A bid bond and a performance guarantee would be required to ensure the provider meets its obligations once it enters into a contract with Medicare.
• Grandfathering would be permitted for patient protection and a smooth transition to a new payment mechanism.
• The number of product categories would be limited to two categories per county.
• A provider who submits a market price at or below the “clearing price” would be required to accept a contract. All suppliers whose market prices are at or below the “clearing price” would be paid at the clearing price.
• Beneficiaries would have the right to purchase medical equipment privately and to file his or her claim directly to Medicare for reimbursement.
• The roll-out of the market-based pricing program would be on a similar timetable to CMS’ current schedule, in order to replicate current projected savings.

These are essentially a compilation of the recommendations made by the more than 200 economists and auction model experts led by University of Maryland Professor of Economics Peter Cramton, which were put into legislative language by the American Association for Homecare and other industry groups.

The MPP was formulated when it became clear that repeal was not going to work in a cost-conscious Congress. The industry is starting to catch on to the need to back the new proposal as the main weapon for bringing NCB to a halt, says Rob Brant, general manager and COO of City Medical Services. Brant is also an advisor to the Accredited Medical Equipment Providers of America (AMEPA).

“I’ve been going around to different state association meetings and talking about the MPP, and some that haven’t been that involved that are now worried about competitive bidding and forced to deal with competitive bidding are now thinking, ‘We have to stop this program,” Brant says, adding that this is especially true for providers located in states that don’t have state licensure, and thusly facing the prospect of having to bid against providers from all over the country.

“That’s sort of like what happened in on Round One,” he says. “We put our bids in and said, ‘We’ll make the best of it and see how this goes,’ and then 63 percent of the bids were disqualified.”

Seeing that lesson, the bidders in Round Two are starting to get aware that they must lobby even harder to get the program stopped and that the MPP looks to have the best shot at accomplishing that, because repeal is dead in the water. The votes to support repeal don’t exist at all in the Senate, and a Congress trying to save $1.2 trillion isn’t interested in adding the cost repeal would entail, according to Brant.

So, the MPP has become the industry’s main weapon. It solves many of the problems the NCB program has created, while giving Congress a budget-friendly fix. Such has been the sentiment that Brant has heard from lawmakers on the Hill.

“They have actually said, ‘We’re glad you’ve given up on repeal, because we want to help you, we don’t want this flawed program going forward,’” Brant says.

While the industry isn’t likely to be able to get the MPP attached to legislative language and put to a vote before Round Two bidding is completed, there’s a chance it could pull that off before Round Two is implemented. That’s the hope that will carry providers through what is shaping up to be HME’s 100-year flood.

This article originally appeared in the February 2012 issue of HME Business.