Providers in transition

Some providers who didn't win contracts for Round 1 of national competitive bidding have been shopping their services around, hoping that subcontracting will help them hold on to their Medicare business. Other non-contract providers are “entertaining” subcontracting, but they're unsure about its financial feasibility and legality. Jim Davidson, a non-contract provider in the Riverside, Calif., competitive bidding area (CBA), says he has no choice but to go after subcontracts. As an independent provider, he doesn't have the size or geographical reach to pick up much private-pay business. As for retail, he doesn't have the showroom or the demographics to pull it off. That means Davidson's not ready to let go of Medicare, even if it means splitting significantly reduced reimbursement with contract providers. “We've been busier than heck trying to subcontract,” said Davidson, CEO of Foothill Oxygen Service in Colton, Calif. So far, Davidson, who relies on Medicare for 26% of his business, has one subcontracting agreement for oxygen with an out-of-state contract provider that he declined to name. He seeks other agreements for CPAP and hospital beds. Other non-contract providers like Lou Toscano feel too unsure about subcontracting to take the plunge, at least for now. “Are we even going to be able to make money with, say, 90% of reimbursement (and 10% to the contractor),” said Toscano, president of Medical Supply Depot in Delray Beach, Fla., part of the Miami CBA. “And when you figure that out, there are other questions. Things like, if Medicare requires contract providers to distribute equipment from their own stock, who buys the equipment?” Rob Brant, a non-contract provider in the Miami CBA, considers subcontracting “a possible avenue,” but until CMS can guarantee him and his lawyer that it's legal, he's “on hold.” His main concern: A Medicare contractor states on its Web site that subcontracting is illegal for essential services like oxygen. “CMS keeps saying we can subcontract, but no one knows for sure,” said Brant, general manager of City Medical Services in North Miami Beach, Fla. Due to all the confusion and the likely fallout from competitive bidding, Carl Wallman, a non-contract provider in the Miami CBA, says he's more and more at peace with losing some of his Medicare business. “We're not totally unhappy about our situation,” said Wallman, president of Galaxy Medical in Fort Lauderdale, Fla. “The way they have set this up, it's a disaster in the making. Beneficiaries form strong relationships with their providers and when they find out what's going on, there's going to be a tremendous backlash.”