'Providers will be less conservative' in Round 2

YARMOUTH, Maine - A new rule that allows HME providers to carve up their competitive bidding contracts could make for more aggressive bidding in the Round 2 re-compete, industry attorneys say.

CMS has lifted “the prohibition against subdividing a contract that would allow a contract supplier to sell a distinct company that furnishes a specific product category or (serves) a specific competitive bidding area.”

“I think providers will be less cautious, conservative and fearful about biting off more than they can chew,” said Neil Caesar, president of the Health Law Center in Greenville, S.C.

The 63-day bid window for the Round 2 re-compete opened on Jan. 22.

Providers will be more likely to bid in more geographies and for more product categories, knowing the new rule gives them some flexibility to exit certain lines of business if they need to, Caesar says.

“If they find themselves in a position where they've bid on geographies or categories that are not profitable to pursue—it's not a perfect way out, but it's more flexibility than they had the first time around,” he said.

To best take advantage of the new rule, providers will want to form several “commonly owned” legal entities and include those entities in their bids, says industry attorney Jeff Baird.

“If ABC is awarded a contract, then Commonly Owned Entity #1 can handle one product category/CBA combination, Commonly Owned Entity #2 can handle a different product category/CBA combination, and so on and so forth,” said Baird, chairman of the Health Care Group at Brown & Fortunato in Amarillo, Texas. “Then ABC can spin off the commonly owned entities, along with that portion of the contract associated with each entity's product category/CBA.”

Providers can form the “commonly owned” legal entities before or after they submit bids, Baird says.

“ABC may want to wait to form commonly owned legal entities until after ABC is awarded the bid contract,” he said. “ABC can ask the CBIC to add the commonly owned legal entities to ABC's bid contract.”