Competitive bidding networks

To network or not to network? That is the question for home medical equipment companies.

The competitive bidding guidance that CMS first issued in August 2006 finally offered specific rules for taking part effectively in the competitive bidding process. These standards clearly open the door for home care companies to participate in competitive bidding by collaboration through the mechanism of a contracting network.

How can companies forge effective network collaborations for competitive bidding? What financial, operational and legal guidelines should home care businesses follow? Let's explore the nuts and bolts, as well as the bows and ribbons, of competitive bidding networks.

In a survey HomeCare magazine conducted last fall, 60 percent of the providers responding indicated that they planned to participate in competitive bidding. And 61 percent of those indicated an intent to bid individually.

But almost a third (32.1 percent) of those who plan to bid said they are considering the network model. “Being small,” wrote one provider, “[a network] is our only option.”

In its comments on the proposed competitive bidding rules, CMS stated: “We propose allowing suppliers the option to form networks for bidding purposes. Networks are several companies joining together via some type of legal contractual relationship to submit bids for a product category under competitive bidding. This option will allow suppliers to band together to lower bidding costs, expand service options, or attain more favorable purchasing terms.”

CMS elaborated by offering these additional details:

• Formal Legal Entity

  A competitive bidding network must be a formal legal entity. Home care companies may not simply collaborate informally, nor may they team up in an unstructured mechanism such as a general partnership.

  CMS suggested that the entity be “a joint venture, limited partnership, or contractor/subcontractor relationship which would act as the applicant and submit the bid.” To some extent, a network's legal structure will be driven by its operational model.

  Any network proposing a bid must be fully and formally in place prior to the bid submission. This requires all relevant legal documents to be in place among the network members.