Considering Bid Evaluation

Now that the competitive bidding final rule is out, providers located in the 10 metropolitan statistical areas where bidding will begin are forced to make key decisions about their companies.

Of course, this fact is not news. Everyone knew it was coming. The questions is, what did you do during the anxious wait before the final rule was released?

To prepare for your bid decision, I hope you were focused on creating operational efficiencies with the objective of eliminating extraneous and superfluous expenses. As we all know, the more efficiently you operate, the more attractive your bid.

However, because of the many financial requirements imposed by Medicare, whether your business is large or small, preparing a bid can make you feel as if you are playing a risky game of chance.

SUPPLIER CAPACITY

At press time, Medicare had yet to release its data on beneficiary capacity/demand. Although this information should be available by the time you read this article, you should have started planning, at a minimum, for the geographic demands of the competitive bidding area and your own utilization history.

This means that you should be generating and analyzing your management reports of HCPCS by revenue, utilization and zip code.

In the final rule, Medicare stated that it does not want any one supplier to have more than 20 percent of the suppliers' total capacity. That is, if a supplier estimates that it can furnish more than 20 percent of the expected beneficiary demand for a specific product category in a CBA, Medicare will lower that capacity to 20 percent. This means there will be a minimum of five suppliers per product category to “provide beneficiaries with more variety and choice.”

So you must be wondering what CMS will do if the number of suppliers submitting bids is less than five. The answer is that there must be multiple contracts awarded (at least two) and, therefore, if there are fewer than five winning bidders, CMS will issue no less than two contracts.

Further, the final rule also explains that mail-order suppliers should be able to more easily expand to “meet large demands” and, therefore, the number of winning bidders might not need to be five. CMS states that if at least five suppliers are required, that would “dilute [our] savings.”

With these facts, how should you plan for growth or, at a minimum, how should you plan to meet the capacity demands?