The competitive bidding chronicles: Month 2

Monday, February 28, 2011

RxStat ready to 'jump in'

The time for wait-and-see at RxStat is over.

"Now's the time to jump in," said president Sam Jarczynski.

Last month, Jarczynski took an understandably cautious approach to marketing in the Orlando competitive bidding area (CBA), where RxStat is a contract supplier for sleep. He'd ramped up for the original Round 1, money he felt was "wasted" when it shut down.

But now Jarczynski's entering the fray, starting with becoming a subcontractor to a non-contract supplier who wants to maintain some semblance of a relationship with its Medicare patients.

"They contracted with other providers who are letting them down," said Jarczynski, who refused to say which provider he's partnering with. "Now they're looking for good (sub-contractors) to maintain the business they have."

Referral sources remain unclear about the program's particulars, Jarczynski said. At first, some physicians said they'd never heard of competitive bidding. Others are resisting the new layers of documentation that have arrived thanks to the confluence of competitive bidding and aggressive auditing. Case in point: Physician chart notes.

"If they didn't write it just right, (CMS) won't pay us," Jarczynski said. "It shouldn't be up to us to tell the doctor how to write his chart notes. The physicians push back, 'I've been doing this 20 years. I know how to chart.'"

Patients may not be complaining very loudly yet, but they're definitely being affected. Jarczynski is hearing of contract suppliers refusing to take oxygen patients without their 20% co-pay upfront. In the past, more than half of Medicare patients couldn't pay, he estimated, and providers would write it off. But now, discharges are being delayed or patients are going without.

"It's never been done this way," he said. "That's what competitive bidding is causing. If everything's not perfect, the companies aren't taking the patient."

Jarczynski still believes the sleep allowables under competitive bidding are "doable," but he's making changes. Top-of-the-line CPAP equipment is out. Basic download-compatible machines are in. Respiratory therapy visits are, said Jarczynski, "an absolute last resort."

In the coming month, Jarczynski will secure his sub-contract relationship then begin actively marketing in Orlando with direct mail and rep visits, still hoping the program fails.

"People are just now figuring out it's bad," he said, "and it will continue to get worse."

PRo2 considers 'unique expansions'

A month-plus into competitive bidding, things haven't been like John Reed expected.

"It's been less eventful than I thought," said Reed, COO of PRO2 Respiratory, a non-contract provider in the Cincinnati competitive bidding area (CBA). "Our referral stream remains solid. Like every Medicare provider, contracted or not, we'll feel the sting from lower bid rates, but our referral sources remain supportive."

Last month, PRO2 completed the sale of its Philadelphia location, something the company would not have done without the severe financial impact of competitive bidding in Cincinnati.

"There are other factors that led to the sale, but our need to align operations, tighten our geographic footprint, lower capital expenditure spending, control labor costs and increase liquidity in advance of the financial fallout was extremely important to our long-term strategies for success," said Reed.

Faced with what Reed predicts will be a 40% drop in revenues this year despite a growth in actual patients served, such moves have brought PRO2 more than halfway to its expense reduction goals.

"It's all related to the unsustainable cuts in the fee schedules," said Reed.

PRO2 has also begun transferring grandfathered oxygen patients who have reached their five-year anniversary to contract providers.

"These patients are typically the highest consumers of volume-driven systems and they are about to experience what a difference our service is compared to what contract suppliers will provide," Reed said.

Although PRO2 is not expecting to buy a contract provider just yet, Reed acknowledged they're "making strong decisions," including "evaluating some unique market sectors for revenue growth."

Speaking to HME News in early January, Reed boldly predicted the program would be repealed within one month. That hasn't happened, but Reed now expects a domino effect of problems. Lower reimbursement per Medicare claim combined with annual deductibles and higher patient hardship accounts will catch up to providers, bringing a "brutal" cash flow crunch in March. Ultimately, patients will be affected.

"That's been the hardest part," said Reed. "We're used to giving great patient care. When we hear about problems from former patients, physicians or referrals, it's hard not step in for their convenience."