How long did it take Noah to build the ark? Although biblical scholars say there is no definitive answer, most people believe it took around 100 years. Unfortunately, for HME providers in the 70 MSAs named in the second round of Medicare's DMEPOS competitive bidding program, the length of time to prepare for this flood is much shorter.

Providers who wish to participate in round two must be accredited or have applied for accreditation by May 14, and although it had not been set at press time, most believe the deadline for bid submission will be sometime this summer.

For those who have not begun preparing, time is of the essence.

Chris Yule, president and CEO of Travis Medical in Austin, Texas, says he began getting ready for competitive bidding two years ago. Yule saw what happened during CMS' competitive bidding demonstration project in San Antonio — and saw the need to make changes immediately. He assigned a company team to focus on the process and the preparations.

“Everybody is involved in it from the top to the bottom of the organization,” Yule says.

Lambert's Health Care, Knoxville, Tenn., also got a hint of how the process might work when BlueCross BlueShield of Tennessee sent out a request for proposals to all of the state's HME providers asking for proposals and pricing for its commercial insurance plans and its TennCare plan, a managed care program for Medicaid beneficiaries.

“The RFP asked for information on our quality improvement policies, statistical data about our operation, our claims collection and denial history and a long list of answers to questions about our finances and individual product group capabilities,” says Randy Wolfe, the company's president and CEO. “Like Medicare, it is going to drastically reduce the size of its HME network and lower its prices.”

According to Wolfe, Lambert's had only six weeks to provide the information.

“This whole process was very much like a 100-yard dash for everyone who participated in it in Tennessee. My company had to quickly review over 1,600 individual SKUs in our computer system to first make sure our cost information was correct, select which items we would then use to bid on and then determine by product group what our estimated operational variable costs were per unit of service,” explains Wolfe.

“After it was all completed, we realized that our work to prepare for the Medicare bid could not begin soon enough, and we began working on it that very week.”

Some providers already have experience with the bidding process. Wright & Filippis in Rochester Hills, Mich., has a national mail order diabetes supplies business, so it took part in round one. The company also has a location in Ohio, so it placed a bid in the Cleveland CBA as well.

John Wright, vice president of the 60-year-old company, acknowledges there were system-based issues that occurred in the first round and hopes those will be addressed for round two.

Robert Brown, vice president of operations for Andrew Brown's Home Health Care Center in Scranton, Pa., plans to bid in round two and has already taken steps to determine how he will bid.

“I am looking at my own historical data as it relates to the competitive bidding items to ensure that I have the data on hand — or access to it — when CMS starts looking for it as part of the bid process, specifically units to Medicare and non-Medicare patients, my service area and my costs,” he says.

Brown says the numbers released from round one will give him an indication of the impact these would have on his business, and he will then determine whether he can “effectively bid” before committing to a price and service area.

Robert Steedley, president and COO, Barnes Healthcare Services/Optioncare, Valdosta, Ga., says preparations for bidding at his company also are underway.

“As the round two locations were just recently announced, we have slowly begun the process by engaging some of our partners … including various manufacturers that have dedicated staff to the legislative issues facing our industry,” says Steedley.

“Some of the tools include weekly conference calls, instruction and support staff for problematic areas and frequent discussions with close associates who were involved in round one.”

Preparing to Bid

The preparation and evaluation process for competitive bidding is multi-faceted. Yule says there are a number of steps that must occur before a company can be prepared to submit a bid.

“First of all, you become accredited, and second of all, you look at your cost structure associated with activity-based costing,” says Yule. “Third, you evaluate all of your manufacturer relationships and determine if you're going to do business with them.”

He adds you must also obtain patient feedback and inform physicians and referral sources about the different products that may be affordable under the new pricing structure.

Accreditation, the first step, is mandatory, and one that faces many providers.

Madhavi Manduru-Rao, owner of Raleigh, N.C.-based Advanced Seating and Mobility, says it is her primary focus at the moment.

“We started the accreditation process in the middle of last year and submitted the application in January,” she says.

The company is now awaiting its audit and is confident it will pass, although the process has been both painful and expensive, according to Manduru-Rao.

“In addition to the cost of the application, you've got to add in the expenses for doing the improvements that are required by accreditation, and that is quite a bit of money,” she says. “You've got to get your shop up to tune, buy all the required materials to get up to speed, have all the training for your office staff and do tons of paperwork. It's a lot of background work to get to the point of being accredited.”

For years, many providers have moved toward becoming more efficient and creating streamlined operations. This direction is even more important for providers who want to succeed in competitive bidding.

“We've worked very hard from a systems perspective to try to be more efficient. We are in the process of working with an outside consultant and putting some project teams together within the company to look at ways we can be more creative to gain efficiencies … Obviously, that's going to be something that we have to look at more and more in the future,” says Wright.

He adds it is important to determine how to increase efficiency without jeopardizing patient care, which may be a likely fallout of the process if reimbursements — severely decreased in round one — follow the same pattern in round two.

“This is important to us, but I don't want to minimize the fact that patient care will be impacted if the pricing gets too low,” says Wright.

Being efficient can come with a cost, though, cautions Wolfe.

“At this point, each department is trying to be open to any and all operational adjustments we can design or copy from others to make us more efficient and improve our productivity. The key, however, is not to lose our individual marketability in the process of driving cost out of our company,” he says.

“We have to find ways to drive out cost without driving away customers. Anyone can find the bottom level of service to make a profit; the key is to design your company in a way that does not reduce your competitive advantage while you lean up your operation.”