Unfortunately, there will be HME suppliers that will submit an application for a competitive bid contract, but will not be awarded a contract. If this happens, you need to take aggressive, proactive, and innovative steps to face this challenge.

CONTINUE THROUGH GRANDFATHERING

There will be 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 items furnished on a rental basis. Only suppliers that began furnishing one of these grandfathered items prior to the implementation of competitive bidding may be eligible to participate as a grandfathered supplier.

Beneficiaries may choose to continue renting the item from the grandfathered supplier, provided the grandfathered supplier is willing to continue furnishing the item under the same terms as the contract supplier (the same price as the contract supplier). The beneficiary may choose to switch from a grandfathered supplier to a contract supplier at any time.

If a supplier chooses to be a grandfathered supplier, then it must do so for all beneficiaries who request the services. For items requiring frequent and substantial servicing and oxygen equipment, the supplier will be paid the bid payment amount. For capped rental items and inexpensive or routinely purchased items, the supplier will be paid the lower of the actual charge, or rental fee schedule amount. Grandfathering is also applicable to suppliers that lose their contract status in a subsequent competitive bidding period.

SUBCONTRACT WITH A CONTRACT SUPPLIER

Contract suppliers may need subcontractors. For example, a contract supplier may not be able to service the entire competitive bid area (CBA). Some suppliers may choose to be subcontractors, rather than submit bids. Those suppliers will need to execute letters of intent (to enter into a subcontract agreement) with bidding suppliers, and have those documents submitted by the bidding suppliers during bidding. Some suppliers may choose to be subcontractors after "losing" the bidding process.

PROVIDE PRODUCTS AND SERVICES NOT SUBJECT TO COMPETITIVE BIDDING

The competitive bidding program covers only defined product categories, featuring enumerated items. Suppliers may sell products and services not covered in the competitive bidding program's product categories—without going through the bidding process.

• Retail: Most suppliers significantly undervalue retail sales. There is virtually no delay in reimbursement for retail sales—unlike the delays associated with claims submissions.

There are some limits on retail sales. Medicare suppliers are required to submit claims on the beneficiary's behalf, when authorized to do so by the beneficiary. Medicare beneficiaries are required to authorize suppliers to submit claims on their behalf. However, if a beneficiary fails to do so, a supplier may not submit the claim.

Some suppliers have Medicare beneficiaries sign forms indicating that the beneficiary specifically does not authorize the supplier to submit a claim, therefore allowing the beneficiary to pay cash for the item and eliminating the supplier's obligation to submit claims. However, a beneficiary who signs such a statement may still come back later and request that the claim be submitted.

Medicare limits pricing of retail items because suppliers are prohibited from billing Medicare any amount that is "substantially in excess" of the supplier's "usual price."

Jeffrey S. Baird

The Office of Inspector General says that "substantially in excess" means the amount billed to Medicare is more than 20% greater than the supplier's retail price. In other words, the amount billed to Medicare for a particular item should not exceed the average reimbursement from all nongovernmental sources by more than 20%, unless the supplier can document cost savings (resulting from not having to bill Medicare) in excess of 20%. This restriction is not limited to a single tax ID number, but would apply to any affiliated companies or entities that have common ownership with a Medicare-enrolled supplier.

LONG-TERM CARE FACILITIES

Most residents in long-term care facilities may receive DME reimbursed by Medicare Part B as if those patients were residents of their own homes. For those long-term care facilities that are not paid a per diem rate for the patient's care, DME suppliers may bill Medicare directly for provision of the equipment, or, in some cases, facilities may choose to contract with DME suppliers to provide the equipment directly to the facility. The facility will then provide it as a benefit to its residents.

HOSPICES

The hospice benefit paid to the provider includes the equipment and products used to service the beneficiary. DME suppliers are not entitled to receive reimbursement from Medicare for equipment provided to hospice patients. Hospices, however, may purchase this equipment directly from DME suppliers. The DME supplier should approach hospice providers in its market to inquire about their source of medical equipment, and to determine if the hospice is a potential purchaser of equipment or supplies.

VA HOSPITALS AND FACILITIES

The Department of Veterans Affairs (VA) is a large purchaser of DME and routinely sends out requests for proposals asking that DME suppliers submit a bid to different VA regions or facilities that service patients. An overview of the VA bid process is available online at www.va.gov/osdbu/library/factsheet/smoothprocess. More detailed information on the claim submission process and the regions involved is available at www1.va.gov/oamm/index.htm.

STATE PRISON SYSTEMS

Many state prison systems require DME or pharmaceuticals for prisoners. Many states have moved toward having specific prison facilities designated as "medical detention centers." DME suppliers interested in determining whether the department of corrections in their state contracts independently with DME companies for this service should visit www.corrections.com/links/viewlinks.asp?cat=30 for links to specific state boards of correction or prison systems—and collect information regarding the appropriate contact person at the state level.

RESORT HOTELS AND CASINOS

Many large resort hotels have begun providing wheelchairs, scooters, and other medical equipment to their guests as a way of making them feel more at home. DME suppliers who live in a marketplace with large hotels and casinos should contact them directly to determine if there is a contracting process and how companies may participate.

AIRPORT OPPORTUNITIES

Airports are frequent purchasers of wheelchairs and other medical equipment for use by travelers. Many of these pieces of equipment are provided by local medical equipment companies. Companies wishing to obtain more information should contact the airport facilities manager to discuss the contracting process.

THE NON-MEDICARE POPULATION

The supplier can focus on serving customers younger than 65. For example, obstructive sleep apnea (OSA) affects individuals of all ages. The supplier can provide CPAP equipment and supplies, facilitate home OSA testing, or have an ownership interest in a sleep laboratory. The supplier can also focus on serving the pediatric market.

EXPANDING INTO AREAS NOT COVERED BY COMPETITIVE BIDDING

The supplier can expand his geographical reach into rural areas, and into nonrural areas, that do not fall within the boundaries of a CBA.

Jeffrey S. Baird, JD, is chairman of the Health Care Group at Brown & Fortunato PC, Amarillo, Tex. He represents pharmacies, infusion companies, HME companies, and other health care providers throughout the United States. Baird can be reached via e-mail: .

To access a podcast series on competitive bidding and listen via mp3 audio file to Jeff Baird and others, go to the Podcast series page. Additional articles by Jeff Baird can be found in the free online archives section of our Web site.