With the competitive bidding final rule out, time is ticking for you to digest the rule, educate yourself, analyze your business, and produce a winning bid. There is a decision tree, which has many branches, but you must make the right choices to bear fruit. Part of the process involves determining whether or not to get onboard with a networking group. But such questions don't have to be resolved alone because buying groups have answers.

TO NETWORK OR NOT TO NETWORK

When the competitive bidding draft regulation was released, the networking option gave small providers the "strength in numbers" hope, the "we can be in this together" feeling. The networking provision was made to help the smaller provider compete. "When the draft regulation came out, the networks were offered as an avenue for smaller suppliers to be able to come together and participate in the bid," says Don Clayback, senior vice president—networks, The MED Group. "There were two things they were sensitive to—quality of product and care, and small providers being protected."

The networking function still has its place in the final rule, but don't breathe a sigh of relief just yet—the rules have changed, making the networking decision a tough call for providers.

According to Clayback, the basic networking rules under competitive bidding are as follows: 1) each member of the network must be able to supply all the products in the product category that the network bids on; 2) individually, each member's gross annual revenue must be $3.5 million or less in annual receipts; 3) networking groups collectively cannot have more than 20% of the Medicare market; 4) there cannot be more than 20 members in an individual network; and 5) individual members have to certify that they are not able to cover the complete geographic region for the product category in that competitive bidding area.

The most significant change in the final regulation deals with the second rule listed above. In the draft regulation, the revenue figure was set at $6.5 million. Now, with the reduced level of $3.5 million, far fewer providers qualify to enlist in a network. "In the draft regulation, CMS had defined a small business as about $6 million in annual revenue based on information from the Small Business Administration," Clayback explained. "Now the final regulation comes out and they've created a brand new definition that by coincidence reduces the eligible suppliers by dropping it from $6.5 million to $3.5. If you are looking at protecting small businesses and enabling those companies to still participate in this new program, dropping the number by 50% is not the way to make that happen."

Besides the limitations presented by the rule, there are other factors to be taken into consideration before entering a network. Providers have to beware of network members who could potentially run into problems of fraud or abuse. "CMS has not said that they would definitely terminate the contract if there were a problem with one of the members, but they have certainly said that is an option," Clayback said. "You may be part of a network and running your business by the book, but if one of your fellow network members is not, that potentially could get you tossed out of the program."

Accreditation is also an issue. If you are not accredited yet, you will not be able to participate. For small providers, accreditation is a big expense to absorb. "As a percentage, it is a more significant cost for a smaller company than a larger one," Clayback said. "For a smaller provider, they are going to look and see if the pros outweigh the cons when contemplating putting a bid in."

Don Clayback

HOW BUYING GROUPS CAN HELP

While buying groups have the infrastructure and membership that could help form a network, the rigid definition of network in the final rule has significantly limited the number of providers that are able to participate. But that does not mean that the networking opportunity is no longer an option. Buying groups can help providers form networks by examining the competitive bidding area (CBA) geography, identifying the members that are in those areas, and putting together the legal and operating structure so that providers can assemble the bid; and once the bid is awarded, they can operate under those regulations. Buying groups can also offer efficiencies in terms of helping members process claims and bringing data and information together to help them efficiently operate a network.

Though buying groups have this potential, ultimately, they have a limited scope of influence due to the strict mandates that have limited the number of providers who qualify for participation. If there are not at least a couple of members who meet the criteria within a CBA, a network cannot be formed. When other CBAs are introduced—or if the network criteria were altered to be more inclusive—buying groups could play a larger role in facilitating networks.

John Burks

Providers should ponder the following questions to help decide if a network is the right choice. Ask yourself:

• Do I want to bid?
• Which category do I want to bid on?
• Can I provide the products in that category?
• Can I cover the whole geography? (If you can't, consider bidding as a network. If you can, you cannot participate in a network.)
• Do I meet all of the network criteria?

COMPETITIVE PRICING: THE BUYING GROUP ADVANTAGE

The just-issued final rule on national competitive bidding contains few surprises but a number of troubling points for home oxygen providers, says Robert McCoy, RRT, owner and managing director of Valley Inspired Products and ValleyAire Respiratory Services, both in Apple Valley, Minn. "First, in the final rule, there are outliers for physical and occupational therapists, but not respiratory therapists," he says. "The latter are missing from this formulation because CMS does not consider respiratory therapists to be professionals engaged in the delivery of important clinical services. That would almost be humorous if it weren't so tragic. After all, the wheelchair provided with the help of a physical therapist is not a life-supportive intervention—whereas the oxygen therapy delivered by a respiratory therapist is life-supportive. If oxygen therapy is not performed properly, that has greater consequences to the patient than not having the wheelchair fitted correctly."

Impact on Oxygen

Will competitive bidding implode along with the 36-month cap?

Robert McCoy

McCoy also is alarmed at the scant attention paid in the final rule to clinical standards. "Standards are necessary to ensure that patients receive care, not just a piece of equipment dropped off on their doorstep," he says. "There does not appear to be anything in the final rule to prevent unscrupulous dealers from bidding one thing while doing something completely different with what they deliver. In other words, you can win the competitive bid, then choose to ignore the standards for patient care because there really aren't any enforcement agencies that will monitor the patient care and safety. It comes down to a question of how this is going to be policed. If no one is policing, it doesn't matter what the standards are. I saw nothing in the final rule that covered that. It more or less deferred that to the accrediting agencies."

In general, McCoy finds the national competitive bidding program geared to encourage abandonment of service. "Winning bids are likely to be lowball bids, and there is usually little or no service associated with bids of that sort."

McCoy says he would love to see a scientific study showing the number of oxygen patients forced to go to the hospital because of lack of service from low-bid providers.

The resultant poor quality of care from winning bidders may someday enrage consumers to the point of forcing government—exhausted by holding the line against angry complaints—to sooner rather than later raise the white flag. "I think the national competitive bidding program will implode, the same as seems the fate of CMS' 36-month oxygen rental cap."

—Rich Smith

Digesting the 401-page competitive bidding rule in 90 days is no small task. Providers are going to need all of the information, tips, and guidance that they can get. Buying groups can help you understand the bidding process, your business operating costs, the profit margin you need to operate within this new segment, and the process of selecting competitively priced products.

It's this last point—selecting a competitively priced product—where buying groups can be especially supportive. "We've been talking with our manufacturing partners about the product categories and the requirements our members would have relative to products," Clayback explains. "Now that we have the product categories, we are going through step-by-step matching, looking at what codes are being bid on, and what products we offer from the various manufacturers that meet those codes and what kind of value package pricing or other types of benefits our members will be able to take advantage of."

Not only can buying groups help providers get a competitive price on products, they can also help with the bidding process. Competitive bidding analysis, teleconferences, and workshops are some of the avenues by which buying groups are helping their members. "We have 66 locations and 37 companies affected in the 10 MSAs. We are inviting two representatives from each one of those companies to attend a workshop where we will detail our analysis of the final rule, and walk them through the bidding documents they need to prepare," says John Burks, senior vice president—business development, The MED Group. "We've also hired an industry expert to help them with understanding the financial analysis they will need to craft a bid." But he adds, "It's important for our members to understand that we are not telling them what to put on the bid, but we are certainly laying out the options of what they could put on the bid and how they can arrive at what they believe would be the best business decision to put on the bid."

Pricing is one key consideration of the bidding process, but providers also may decide that not bidding is the best option. In making the decision to bid or not, it is important to know the percentage of your business that Medicare beneficiaries occupy, and if the competitive bidding environment is appropriate for you.

If providers choose not to bid, buying groups can help with a new business strategy. Buying group programs, services, and contracts can help providers diversify into other markets. "Certainly there are market segments out there—managed care, Medicaid, private pay, and retail," Clayback said. "If our members decide not to bid, those are the areas they will be focused in on and we will be there to help them in that process."

BUYING GROUP BACKING: BEYOND THE BID

Making your way through the competitive bidding maze is not going to be easy. Understanding how to place a bid is one part of the challenge; winning the bid is another. After the bidding process is all said and done, you will need to be able to adapt your business to fit the structure of the competitive bidding environment. Tough choices will have to be made to maintain a good profit. For your current and future choices, buying groups can prove to be a substantive support group. "If the train has left the station, let's make sure our members are on board," Burks said. "We think we've created a constructive and positive group environment as it relates to critical analysis of the rule, considerations about their bidding options, practical help in understanding the forms and submitting the bid, support in determining the optimal products and operating costs, and other factors that they would use in deciding whether to bid or not to bid. After the fact, we are going to be there to help them maintain the winning business operations under the conditions of the won bid. After they've won it, we will be there to help maintain their business."

Franklin A. Holman is news editor for  HME Today.