On the Monday morning following Martin Luther King Jr. Day, the phone rang and the caller identified himself as a provider. “We are looking at our options to prepare for competitive bidding,” he said. After a few minutes, the provider indicated he understood the options we discussed and then asked the question, “When would we need to start?” as if his company wasn't already late.
When I broke for lunch, news on TV was showing Caroline Kennedy and Sen. Ted Kennedy making their endorsement speeches for Sen. Obama's presidential campaign. Sen. Kennedy quoted Dr. King's words “the urgency of now.”
Because of the power of the statement, I wanted to see it in context. My research found that it was included in a speech titled “Beyond Vietnam” delivered at Riverside Church in New York on April 4, 1967. In its original context, the phrase is many times more powerful than in the quote of Sen. Kennedy and the many others who have used it in the last 40 years. It is as if Dr. King were addressing my recent caller and the others in our industry who are in similar positions.
A portion of the speech follows:
“We are now faced with the fact, my friends, that tomorrow is today. We are confronted with the fierce urgency of now. In this unfolding conundrum of life and history, there is such a thing as being too late. Procrastination is still the thief of time. Life often leaves us standing bare, naked and dejected with a lost opportunity. The tide in the affairs of men does not remain at flood — it ebbs.
“We may cry out desperately for time to pause in her passage, but time is adamant to every plea and rushes on. Over the bleached bones and jumbled residues of numerous civilizations are written the pathetic words, ‘Too late.’ There is an invisible book of life that faithfully records our vigilance or our neglect. Omar Khayyam is right: ‘The moving finger writes, and having writ moves on.’”
Rather than dwelling on the consequences of being “too late,” it would be helpful to consider the consequences of being early when preparing for competitive bidding. There are at least four.
- More options
When making adjustments to businesses it is sometimes prudent to change product mix, payer mix, geographic mix, technology and/or business process. Those who began preparing for competitive bidding early on have had a broad array of options available.
As time marches on, the options of changing payer mix and geographic mix are the first to diminish. Implementing these options typically requires more time, and often more capital, hence, potential success decreases when the schedule gets compressed. Changes to technology and business process require the least amount of time to implement, but when the other options are removed, the effectiveness of technology and business processes must increase.
- Extra profit
Most companies have a target net profit margin. (Those who don't should.) If the target net margin is 10 percent and the company is currently earning 11 percent, the owners are generally satisfied. If competitive bidding will reduce that margin to 9 percent, however, the odds of owners remaining satisfied are slim.
The best managers have already made these calculations and determined that if competitive bidding will reduce the net margin by 2 percent, they will find ways to improve it by 2 percent before a contract is let. So, the company cited above would find ways to earn 13 percent for now, knowing that it will ultimately return to 11 percent. In the meantime, they will enjoy the extra profit.
- Discounting ability
The ability of a provider to discount from the current fee schedule is determined by its profitability. The greater the profit, the greater the discounting ability. Since bidding for a Medicare contract is based on the ability to discount from the current schedule, those who increase their profit prior to the bid also increase their ability to discount in the bid.
- Sustainability
Suppose two companies don't win a contract. One commenced aggressive preparation for competitive bidding, and the other was like the caller I spoke with. The prepared provider has pocketed more profit that can be used for transition to business without a contract, while the unprepared company is unlikely to sustain itself through a transition period.
Wallace Weeks is founder and president of Weeks Group Inc., a Melbourne, Fla.-based strategy consulting firm. He can be reached at 321/752-4514 or by e-mail at wweeks@weeksgroup.com.
