Making the Grade

I will never forget my freshman year of college when I walked into the first day of a political science class, took my seat and waited eagerly for my professor. As I inched forward in anticipation, he smugly told each of us to turn to our right and then to our left. He went on to declare that two of the three of us would fail his class. I felt like the wind had been knocked out of me. The odds of passing what I had expected to be an exciting class were slim — 33 percent, to be exact.

Providers today must feel a lot like I felt that spring. Between the looming second round of competitive bidding and a raft of ferocious audits, providers are clamoring for anything to stay alive. Round 1 providers are starting to feel the crunch of squeezed profit margins on top of the need for dedicated resources to man the onslaught of audit requests.

It is almost daily that you hear of someone who has thrown in the towel, unable to make payroll or contend with the financial strain. With previous regulatory changes, modifications could be made to cope with the cuts, but this time the new rules are too severe to allow every business to continue. Although large HME providers are suffering, too, it is predominantly small companies that are closing their doors.

Simply put, this time it is for real: You will not survive unless you change the way you are doing business.

Round 1 ‘Winners’

After speaking with a number of Round 1 “winners,” it is clear that the 30-plus percent decrease in many allowables has definitely forced these companies to think twice about the products they purchase (albeit a CMS requirement to provide what the doctor orders within the product category). Moreover, many have had to lay off staff members, some long-standing and tenured employees. Some of the providers made their staffing cuts in anticipation of the reimbursement reductions, before implementation of competitive bidding on Jan. 1, 2011.

Words of wisdom offered by one bid winner were to stash as much cash as possible now because you would certainly need it later if you had to purchase additional vehicles, lease more space and add inventory.

Although some anticipated the drop in revenue, the timing couldn't have been worse. With the almost one-third drop in reimbursement and recoupments from audits of all kinds at the very same time as deductibles hit, cash has been extremely tight. As another provider told me, the first monthly financials after competitive bid implementation were “ugly.”