The Big 10

Competitive Bidding Round Two

• By David Kopf
• Jan 01, 2012

As we ring in the New Year, say goodbye to Old Man 2011 and say hello to Round Two of CMS’s competitive bidding program. If you thought the run up to Round One was manic, you can expect even more craziness from Round Two. No other trend in the Big 10 will influence the course of the HME industry more than how Round Two plays out. Just remember that Round One’s implementation generated more than 40,000 of what CMS’s referred to as “inquiries” — while industry hotlines and website collected complaints about the program.

Last year ended with CMS announcing the Round Two timetable. Registration began on Dec. 5 , and bidding begins on Jan. 30, and last for 60 days. In Fall, CMS will unveil the single payment amounts, and in Spring 2013 CMS will announce the contract suppliers. July 1, 2013 has been marked at the Round Two implementation date. Of course the key date is Jan. 30. Between then and March, providers must submit their bids. Are they ready?

About half of them according to our latest online poll, which was held last December. According to that 46 percent of providers responding said they were ready. That’s an surprisingly large or small portion depending on your perspective. Large if you think that given the outcomes of Round One, very few providers are probably as ready as they think they are. Small if you think that every provider should have its ducks in a row by now.

If Round One is any example, the lion’s share of providers probably doesn’t know what they are getting into, despite the program’s bad press. Even many of Round One’s winners have had a rough go of it. But there are lessons to be learned.

Round Two providers can take what they witness during Round One and use it to prepare for Round Two of competitive bidding. The first thing they should be doing is looking at the average 32 percent funding cut all categories as well as the funding cuts to specific categories that they want to bid on start working to see if they can outline a business model that can not only survive that, but grow under that kind of funding constraint.

The one thing providers in Round Two need to avoid is “suicide bidding.” The providers that did not bid within their means in Round One are in trouble. They might have won a contract, but they’ve driven down funding rates to an incredibly difficult — and for some impossible — level. Round Two providers will need to consider how they can bid realistically.

And they also need to consider what they would need to do if you lost? How would they change or expand their businesses to stay in the game despite losing a bid? The one thing they should know is that subcontracting is not an option. In the first several months of Round One’s implementation, the industry learned that subcontracting, if anything, simply delays the inevitable. There is not enough funding to be split between the bid winner and the subcontracting provider to make it a viable option.

Given the massive level of confusion among referral partners after Round One implementation, smart Round Two providers will also be working to educate their referral partners about the program, and how it could change their working relationship. Providers that value their referral relationships will not wait until after Round Two implementation, but will start now to inform their partners to ensure they understand the issues at hand.

No one wanted to see competitive bidding progress to Round Two, but here we are. This next installment of competitive bidding is poised to cover nearly the entire nation, and bidding starts soon. Smart providers will make this their top concern throughout 2012.

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