Developing a Bid You Can Live With

“A bid you can live with” means that it will be competitive — and profitable. A noncompetitive but profitable bid doesn't win a contract. A competitive but unprofitable bid doesn't allow survival.

One provider recently asked the question, “How can you not win a bid?” Of course he was suggesting that he would make a very low bid, but, if others do the same, the competition is on again.

Winning bids is nothing without profit, and if bidders proceed without regard to a balance of competitiveness and profit, the spoils will ultimately go to those who didn't win a contract.

It seems prudent for any company to be well-positioned prior to the bid rather than racing against the clock, and those providers in the 10 MSAs whose bid window will close in a few weeks are certainly feeling the urgency. However, providers serving MSAs slated for bidding in 2009 or later may have more relaxed opinions about developing a bid — but they shouldn't. It can take months to position a company to submit a bid that is both competitive and profitable.

First Things First

Developing a bid you can live with assumes you have determined that your company must make the effort to win a Medicare contract, having done so after answering essential questions like: How important is it to win the bid? Is the company capable of competing effectively? What will the consequences of winning a bid — or of not winning a bid — be?

The first action that a provider must take is to register as a bidder on the Competitive Bidding Implementation Contractor Web site at www.dmecompetitivebid.com. The request for bid will not be sent just because you hold a Medicare provider number. Registration is a relatively simple process, and the earlier it is accomplished, the less likely it is that you will be left out of any communications regarding bidding.

Second, put a regularly scheduled visit to the CBIC Web site on your calendar at least weekly until the contracts are let.

The next and most important action is to establish a target net profit margin (net income divided by revenue). Achieving this target should be regarded as mandatory, and exceeding it is good.

The target margin relates to the company and all of its product-payer combinations. When we look more closely at most companies that are achieving their target margins, it is common to find that some of their product-payer combinations yield greater than the target margin and others lower than the target, but, collectively, the result is acceptable.