Home Health & Hospice Week

Credit histories count, too, feds say.

If you're trying for a Medicare competitive bidding contract, be sure your firm's on solid financial ground or you could be spinning your wheels.

On May 25, the Centers for Medicare & Medicaid Services released the financial measures it will use to evaluate suppliers for the Medicare Durable Medical Equipment, Prosthetics, Orthotics and Supplies (DMEPOS) Competitive Bidding Program.

Be on the lookout: The feds also pledge to check on all bidders' fiscal states, assures Miriam Lieber of Lieber Consulting in Sherman Oaks, CA

Fitness quotient: CMS and Competitive Bidding Implementation Contractor Palmetto GBA will calculate each bidder's financial ratios using the financial information submitted as part of the bid.

Then they will "evaluate each bidder's financial documentation to determine whether the supplier will be able to participate in the program and maintain viability for the duration of the contract period," CMS stated in a release announcing the measures.

The financial measures are:

• Current ratio = current assets/current liabilities
• Collection period = (accounts receivables/sales) x 360
• Accounts payable to sales = account payable/net sales
• Quick ratio = (cash + accounts receivable)/current liabilities
• Current liabilities to net worth = current liabilities/net worth
• Return on sales = net sales/inventory
• Sales to inventory
• Working capital = current assets - current liabilities
• Quality of earnings = cash flow from operations (net income + depreciation)
• Operating cash flow to sales = cash flow from operations (revenue - adjustment to revenue).

Credit histories are also fair game in evaluating suppliers' fiscal health, CMS says.