A network of 35 companies in Tampa Bay, Fla, is preparing for competitive bidding, and their lessons may help similar efforts around the country.
The owners of 35 small HME dealerships in Tampa Bay, Fla, say they will be ready even before the gale-force winds of competitive bidding make landfall. Since last fall, they have been building a defensive shield in the form of a provider network called MED TRUST Tampa Bay that promises to put them on equal footing with the giant companies so much favored in CMS’ cost-savings scheme.
At the moment, network organizers are hastening to hammer out the final details of MED TRUST Tampa Bay’s structure and operation. Most recently, a delegation of leaders ventured south to Miami to meet with health care attorneys being considered for the role of legal counsel for the network. Ten people were present for the late January session, including Robert M. Arado, owner of CareMed Respiratory, Tampa Bay. “We came away with a good feel for the capabilities of the attorneys, and they in return gained a good feel for what we’re looking for in the way of representation,” says Arado, who spearheaded creation of the network and is serving as its first president.
One of the issues raised by Arado and his colleagues at that meeting was the question of how much liability insurance each member of the network should be obliged to carry. “The thinking was a minimum of $1 million in liability coverage, but that the amount could ultimately be higher depending on how the numbers add up at the end of our setup process,” he says. “Among other things, insurance is necessary to protect the network’s members collectively in the event any member goes bankrupt or can’t come up with the funds to repay an overpayment discovered by audit.”
THE TO-DO LIST
Tools and Tactics
- If you join a network, get enough liability insurance (around $1 million) to protect the network in case a member goes bankrupt or can’t repay an overpayment.
- While secrecy is not a must, don’t publicize your network to local big-chain competitors.
- Remember that CMS limits the size of any network to 20% of the market.
- If you want your network to thrive, view fellow competitors as team members, not adversaries.
- Start the accreditation process before the agencies get backlogged.
- Plan as if legislative efforts to stop competitive bidding will fail—prepare for the worst.
Arado and the others left the meeting with a to-do list that included encouraging network members to quickly establish lines of credit that can as necessary be tapped into by the network to help convince Medicare decision-makers of MED TRUST Tampa Bay’s worthiness to receive contracts.
Also still to be done is exploration of a possible relationship with a group purchasing organization (GPO), such as VGM or MED Group. “Several of our members independently belong already to GPOs,” says Arado. “We’re scheduled to meet soon with VGM to talk about the kind of support they could offer us and what we could provide for them to make a win-win situation.”
Arado says he is unsure as to how much interest the GPOs will have in partnering with MED TRUST Tampa Bay; those entities have themselves kicked around the idea of forming provider networks. “The GPOs haven’t gone much beyond the planning-on-paper phase because of CMS being slow in releasing its final rules for how national competitive bidding will be conducted. We think that CMS’ slowness is a result of the complexities of the issues they're having to deal with in order to have a functioning national competitive bidding system. But, with everything up in the air, the GPOs want to wait before moving forward with their network plans.”
Speaking of waiting—that is precisely what MED TRUST Tampa Bay organizers wanted to do about making public their plans to form a network. They had been preparing for national competitive bidding when news of the network’s existence leaked nonetheless and became public. “We didn’t want to become public yet,” says Arado. “When people started finding out, we were forced to issue a press release detailing the broad outlines of our efforts to prevent rumors from distorting the truth of what we were doing.”
For the most part, MED TRUST Tampa Bay members are well-established enterprises (an average of 14 years in business) and are somewhat more muscular than the typical mom-and-pop shop. “Our smallest companies handle maybe 250 Medicare patients,” says Arado. “I don’t know what kind of revenues that represents because we don’t yet have in place the means to pull together member company information in a central database.”
The Origins of an Idea
MED TRUST Tampa Bay is modeled after a network born 2 years ago in the Miami area—MED TRUST South Florida. Although they have the MED TRUST moniker in common, the South Florida and Tampa Bay networks are legally independent of one another, reports Javier Talamo, JD, a DME-specialized attorney with the Hialeah, Fla, law firm of Kravitz & Talamo LLP.
Talamo, who founded MED TRUST South Florida, first began thinking about creating such an entity almost a decade ago when CMS conducted one of its earliest national competitive bidding experiments in not-too-
distant Polk County, Florida. “I saw the handwriting on the wall,” says Talamo. “Here in South Florida, we have the greatest number of HME providers per capita, so it only stood to reason that if there was anyplace Medicare would want to begin implementing bidding procedures, it would be right here. And it seemed to me that the best way for small players to survive in such an environment would be if they banded together, pooled their resources, and acted in sync. A network arrangement therefore would be the ideal way for them to go about doing all of that.”
Talamo was motivated to develop a network out of concern that national competitive bidding would crush and eradicate most, if not all, of the companies making up his roster of clients. Talamo asserts that some aspects of setting up a network are relatively easy. Others, though, are much tougher. “The hardest part is getting the members to stop thinking of one another as rivals but instead as partners with whom they’ll be sharing financial and proprietary information,” he says. “But look. A storm is approaching and these providers have two choices. Either they can stay where they are, or they can seek higher ground. If they stay where they are, the storm waters will wash them away. If they move up to the higher ground, they'll survive—even though that means they have to share their shelter with others.”
Which points to a challenge the network faces and must overcome if it is to fulfill its mission, and that is the requirement for members to embrace operational transparency. “Sharing proprietary information about themselves has been a huge hurdle to jump because many of our members are conditioned to viewing one another as competitors,” says Arado. “But, now, to stay in business, they have to learn to work as a team. That means they have to learn to trust one another with shared information.”
Arado expresses confidence that the team mentality will prevail. “There seems to be a lot of camaraderie among the members of the network,” he says. “Everybody seems to want to work as a cohesive group, rather than a loosely connected assortment of individual companies.”
NOT A BIG TENT
Looking ahead, it is possible that membership in MED TRUST Tampa Bay may expand beyond the 35 companies already signed up, but not by much since participation in this type of network is limited by CMS to 20% of the market. “That’s not a problem for us,” says Arado. “We don’t need to bring in many more members to have a viable network. In fact, we’ve already turned away a number of hopefuls because they did not meet our criteria for membership.”
At present, the most coveted membership applicants are those whose business is focused on product groups currently underrepresented within the network. “We want as members those companies that can help us provide the county-by-county coverage Medicare tells us is needed in this Metropolitan Statistical Area,” says Arado. “As an example, let’s take a hypothetical situation involving oxygen. If we reach a point where we don’t need any more oxygen providers to join the network, those companies can still become members as long as they also offer other types of products that we still have need of.”
There also is a MED TRUST rule barring existing members from growing their share of a product category by acquiring nonmembers without first obtaining permission from the other MED TRUST providers. Yet another rule allows members to be acquired by larger entities from outside the network, but no deal can be consummated without the purchased company surrendering its membership. “This is intended to prevent outside influences from gaining access to our network and weakening it,” Arado explains.
A source of nervousness within the network is the number of members who have not yet completed CMS-mandated accreditation. “More than half our members already are accredited and have been for years, but some of the remainder have not yet even submitted applications to undergo accreditation,” says Arado. “I think the reason they are delaying is they have hope that the Hobson-Tanner bill will go through at the last minute. Personally, I don’t see that happening. In this new Congress, the votes for passage of Hobson-Tanner aren’t there.
“There just isn’t going to be any stopping national competitive bidding. The only way it will go away is if it fails, but CMS cannot afford to let that happen,” Arado adds. “As such, they’re going to do everything in their power to make sure national competitive bidding succeeds. We have to accept that reality. We have to be in a position of strength to deal with that reality. That is why we are putting our trust in this network concept.”
Rich Smith is a contributing writer for HME Today.
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