Being a contract supplier: Has it been worth it?

Editor's note: This is the first of two stories examining the impact of competitive bidding in Round 2 areas. Next week: “Closings abound.”

YARMOUTH, Maine - With the bid window for the Round 2 re-compete drawing to a close later this month, those who accepted contracts in Round 2 are reflecting on whether or not it has been worth it.

It hasn't been easy ever since reimbursement rates were reduced, on average, 45%, on July 1, 2013, they say.

“We've had to figure out a way to save on operational costs to be able to continue to provide our services and stay in the HME business,” said Laura Williard, senior director of regulatory affairs, compliance and contracting for Greensboro, N.C.-based Advanced Home Care, which accessed contracts in all product categories except negative pressure wound therapy and enteral supplies through an acquisition.

Despite the low reimbursement associated with the contracts, providers feel obligated to take care of patients, they say.

“If you're dealing with a referral source that you've built a longstanding relationship with, they trust you to take care of their patients,” said James Chung, president of JC Home Medical in Jacksonville, Fla. “And if you can't take care of them, the patients aren't being taken care of at all.”

Chung, who accepted a contract for negative pressure wound therapy, planned to submit a bid for the same amount in the Round 2 re-compete.

“If I don't win it, I'll be fine,” he said. “There's got to be a profit margin for you to have a profitable business.”

For others, like Dave Anderson, owner of Anderson's Medical Products in Terre Haute, Ind., being a contract supplier hasn't been worth the time or the effort.

“We're not going to enter a bid this go-round,” he said. “We won two bids—a bid for oxygen and one for support surfaces—and got a grand total of two oxygen patients in the year-and-a-half since then.”

While provider Judy Bunn says being a contract supplier gives providers a fighting chance, they also need to be prepared with other revenue streams.

“There's definitely an advantage to offering a broader spectrum of products and servicing a bigger geographic footprint,” said Bunn, the compliance manager at Cleveland-based Medical Service Company, which accepted Round 2 contracts in most categories. “I think that's one thing that competitive bidding taught many providers—having all your eggs in the Medicare basket is probably not the best thing.”