Home Health & Hospice Week

Tight time frame has suppliers juggling deadlines.

The feds are touting the "small provider protections" in the new competitive bidding final rule, but small businesses--faced with stiff competition from larger players--are squarely in the cross hairs, say some industry insiders.

Big risk: The odds are against small providers. Under the Centers for Medicare & Medicaid Services' own definition, small firms account for about 85 percent of Medicare-certified suppliers of durable medical equipment, prosthetics, orthotics and supplies.

Yet the agency set a target of just 30 percent for participation by small suppliers in Medicare's new competitive bidding program.

The 30 percent target is low, especially given the mom-and-pop nature of the industry, says attorney Jeffrey Baird, chairman of the Health Care Group at Brown & Fortunato in Amarillo, TX.

"With the exception of a small number of national and regional players, home medical equipment firms are small businesses," says Baird. "The target for participation should be 50 percent, if not higher."

Background: Under the bidding rule, a "small supplier" is one that generates gross revenue of $3.5 million or less including Medicare and Medicaid revenue. CMS worked closely with the Small Business Administration to establish the definition.

"The use of this new definition ... will enhance the ability of small suppliers to participate in the competitive bidding program," said CMS in announcing the final rule April 2.

Added pressure: The feds' timing hurts small businesses' chances for success, says Eric Sokol of the Power Mobility Coalition. In addition to gaining ac-creditation in the coming months--and finishing the bidding process within the next 60 days--small HME providers must find strength in numbers by firming up networks that will help them compete.

Read the Fine Print

The final rule includes two main provisions that CMS presents as "protections:"

1. Establishing a methodology to set a target number for small supplier participation. To determine how many small suppliers should be included in each competitive bidding area (CBA) for each product, CMS will calculate 30 percent of the number of qualified suppliers whose composite bids are at or are lower than the pivotal bid.

How it works: If too few small suppliers submit composite bids that are at or below the pivotal bid, CMS will give the small supplier who comes closest to that amount the opportunity to accept a contract to furnish the product category at the single payment amount. The agency will continue this process until 30 percent of the suppliers with contracts meet the small supplier definition, or until the agency offers contract opportunities to all bidders.

2. Allowing small suppliers to form networks if they cannot service the entire CBA independently.

Exclusions: Suppliers that do not meet the definition of a small supplier or small suppliers that can service the entire CBA independently may not form networks, CMS notes.

Other rules also apply to networks:

• Networks must comply with all applicable laws, including the federal antitrust laws.

• At the time of bidding, the small suppliers in the network must have market shares that when totaled do not exceed 20 percent of the expected beneficiary demand for the product category.

• No more than 20 small suppliers may participate in a network.

• A small supplier may join more than one network but cannot submit an individual bid to furnish the same product category in the same CBA as any network in which it is a member.

• A small supplier may not be a member of more than one network if those networks submit bids for the same product category in the same CBA.