*Update on 02/07 corrects a typographical error regarding the number of payments made to contracted suppliers for transitioning beneficiaries with previously rented equipment.
Competitive Bid Prices are officially real and the cuts are deep. With the announcement of Single Payment Amounts (SPAs) on January 30, the supplier community was stunned. If you sell diabetic supplies anywhere in the country, or if you are in any of the Round 2 MSAs, you have big questions that need to be answered. We outline below several considerations that each of you will need to contemplate in some form or other…
Contract Offers: The first round of contract offers started to arrive on February 1 and gave business owners two weeks to determine what the next three and a half years will hold for the future of the business. Acceptance is not an easy decision and should not be made lightly.
With hard, fast numbers in hand, you will want to ensure that you can be profitable with the margins you’ll be getting. Consider variable costs that can wreak havoc on those margins such as wages, overhead expenses, and fuel prices to service what will equate to a much larger area. Give consideration to the Medicare weight assigned to the HCPCs at the time of bid submission. Weight was assigned by CMS to HCPCs based on Medicare historic utilization data (which is not always consistent with the most expensive item in a product category). For example in the CPAP product category there were 23 HCPCs up for bid, Disposable filters was the top product with an overall weight of 35.5% of your bid submission. The CPAP ranked #11 with an overall weight of 2%. This should guide you with where Medicare highlights the relative market importance.
Consider what contracts you are being offered. Where will the referrals come from: Hospitals? Nursing homes? Private Practices? Sleep Labs? Wound Care Clinics? Your product mix offerings will play a large role in whether or not you can expect any increases in new referrals. If you expect to get your referrals from local hospitals, do you have enough contracts to make it worth the discharge planner’s referral? If you won hospital beds and a competitor won beds, walkers, wheelchairs, and oxygen, chances are they will not split the referral to send you a bed when the patient needs multiple items.
What will life look like after the bid starts? Do you have the resources to pull through the initial wave of new patients? Many of the products like oxygen and CPAP setups for example will be documentation heavy. Heavy documentation requirements will directly impact your DSO. Remember, you’ll have to get your own supporting documentation for new customers that are switching from a non-contracted supplier (CMNs, orders, chart notes, compliance documentation, etc.). Can you float the new inventory needs to accomplish these setups while you track down doctors for old documentation and wait 30-60-90 days for orders to get confirmed and reach a billable status?
Switching to a contracted supplier will be treated just like a traditional change in supplier today. There will be no free passes, and you shouldn’t expect much cooperation from your former competitors that are losing their patients. Keep in mind however, for every patient that switches from an existing DME capped rental product, you are entitled to start a new capped rental cycle as a newly contracted supplier (regardless of how many rental payments were made previously). If the patient is an existing oxygen customer that switches from a non-contracted supplier, you are entitled to at least 10 months of rental payments (unless they have more than 10 payments left on their CMN for payment).
But on the flip side, contracted providers are not exempt from audit activity. In fact, audit activity is traditionally based on increases in volume and billing concentrations… so expect to have a portion of your funds and resources tied up in pre-pay reviews.
Diabetic Suppliers: With the SPA announcement we also learned that 15 suppliers would be offered a contract to handle the entire nation’s home delivery of diabetic supply needs. Rates were cut by 72% in this category, and that really stings. What is worse is that this newly contracted rate will be EVERYONE’s new fee schedule for diabetic supplies beginning July 1, 2013 thanks to the American Taxpayer Relief Act (ATRA). ATRA is the same legislation that prevented the rest of the nation from falling off the infamous “fiscal cliff”. A sleeper provision in this bill will force all retail operations to accept this new lower rate when they sell diabetic supplies to Medicare beneficiaries directly. Another provision in ATRA will help you to slide into this cut by forcing an approximate 14% reduction on diabetic testing supplies sold after April 1, 2013. The fee schedule updates apply to diabetic testing supplies like strips, lancets, control solution, etc. They do not affect the glucose monitor purchase price.
Grandfathering: Let’s face it. If 18,000 suppliers put their name into the round 2 hat and 867 got contracts, there will be more suppliers contemplating what life looks like without a contract. Suppliers included in this multitude will be contemplating the grandfathering provision that applies to rented equipment. For traditional capped rental items, like beds, CPAPs and manual wheelchairs, grandfathering will allow you to finish up the rental cycle for any setup that began prior to 7/1/2013. You’ll still be paid at the rate you started out with (not the newly published SPA amounts). You will not be allowed to setup any new customers after 7/1/2013… those patients will have to seek out service from a contracted supplier. Additionally, if the item you are billing requires supplies (e.g. CPAP equipment), then you can bill the accessories for as long as the item is actively billing rental. After 13 payments are made and the item caps the patient must get their supplies from a contracted supplier. You will also retain the liability for capped equipment to ensure it is free from defect for the remainder of the useful lifetime of the equipment (5 years from the initial date).
These changes force suppliers to make tough decisions and while we cannot make the final decision for you, MiraVista will partner with you in asking the right questions and contemplating the unforeseen. As you have questions, MiraVista will help direct you to the answers that make the difference between just surviving and thriving. Arrange to speak with Reimbursement Consultant Andrea Stark or Operations and Analytical Expert Derrick Stark to discuss your concerns at (803) 462-9959 ext. 246.