Based on CMS' proposed rule for DME competitive bidding, it is time for all providers to expand the scope of information that is relevant to their businesses.
by Wallace Weeks
Thursday, June 1, 2006

Based on CMS' proposed rule for DME competitive bidding, it is time for all providers to expand the scope of information that is relevant to their businesses. For companies located outside the first 10 MSAs (whatever they will be), there is no less importance in doing this — and only slightly less urgency — for three reasons:

First, the proposed rule has revealed that some metropolitan statistical areas being considered for 2007 are not really large cities at all. CMS is considering more than population in its ranking and selection of MSAs. Second, CMS proposes to include 100 MSAs in competitive bidding by 2010, and the proposed method of selection could include MSAs that are significantly smaller than those ranked by population alone. Third, most of the information will facilitate better management decisions, regardless of the effects of competitive bidding.

  • Medicare Revenue and Services by HCPCS — This data should reside in every billing system, though how it is acquired may vary. The reason it is important is that it indicates the level of exposure a provider has to competitive bidding. It will also indicate opportunities you have to insulate the company from competitive bidding.

    The proposed rule indicates that CMS may not include every HCPCS under competitive bidding and that it is unlikely to include all in 2007. You can use the criteria for item selection from the proposed rule to figure out the likelihood of a product's being on the Request for Bid. Then you can adjust sales efforts to fit your tactics.

    Some billing software has limited query-building capability that will prevent extraction of the desired data, but don't assume the answer is unobtainable. Many applications will allow the billing data to be exported to a text file or to an electronic spreadsheet file. Once the data is in a spreadsheet, it can be searched, analyzed and manipulated in just about any way you desire.

  • Activity Costs by HCPCS — In order to submit a bid, you should at least know whether or not the price offered will produce a profit. It is even better to know how much profit the price will yield.

    Finding the total cost of providing equipment described in a HCPCS can only occur if the company has first performed activity-based costing. Once activity costs are known they can be applied to a HCPCS, which allows the provider to bid and manage appropriately. For those providers fortunate enough to serve beneficiaries outside the 10 initial MSAs for 2007, there is time to work on adjusting costs sufficiently to offer a competitive price and remain profitable — but only if the information is collected soon.

  • Demographic Information for the Entire MSA — CMS has proposed that contract suppliers be required to service the entire MSA for which they bid. In the smaller areas that may not be a problem. However, in large MSAs, it is not uncommon to find providers that only serve a portion of the area.

    If winning a bid means that a service area will be expanded, you should know in advance where the beneficiaries are likely to be located. Once that is known, you can then dedicate sales efforts in the new areas aimed at serving enough beneficiaries to justify the distant deliveries. This will take time.

  • Service and Repair Costs by Product — The proposal indicates that providers will be asked to include in their price an amount sufficient to cover all service and repair of the product. It is an ill-defined section of the proposal, so we don't know yet whether this means for the contract period or for the customer's lifetime. Collecting the cost on an annual basis is a good way to approach this. Asset-tracking software may provide some of the information but will generally be inadequate.

  • Physician Preferences in Brand and Mode of Delivery — CMS proposes to allow the prescribing physician to specify the product brand and mode of delivery. It is time now to begin to compile that information from physician interviews as sales calls are made. We can anticipate that many physicians will not have a preference, but that should be confirmed well in advance of submitting a bid. If new sources of equipment will be needed, you need to begin developing those relationships well in advance of the RFB.

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.