Round 1 re-compete: Overcome cuts with volume and diversification, says contract supplier

MATTHEWS, N.C. - As Carolina's Home Medical Equipment prepared for the Jan. 1 implementation of the Round 1 re-compete, President and CEO Frank Trammell took a few minutes to tell HME News what his company has done to remain viable in the competitive bidding market.

HME News: What did you learn from Round 1 that helped you in the re-compete? What worked and what didn't? How did you prepare for this round?

Frank Trammell: Understanding how each line item is weighted and how it impacts the composite bid is extremely important in the bid process. Companies like VGM went out and did a lot of education to make them more aware of how the math works in crafting a bid. And I wish that every single provider that bid had paid attention or had had that information given to them by someone. We did our homework. We were very, very, very careful how we crafted our bids. I mean, you have to. You put the best you've got on that task, because failure is just not an option.

HME: Reimbursement has dropped significantly due to competitive bidding. How have you changed your business model in response?

Trammell: We're adding some new items that we have never considered before. And that, coupled with more volume, is the only way you can overcome these cuts. More volume and more diversification. We won a contract for negative pressure wound therapy. We've not done that before, but the reimbursement is still pretty good on that. We're having to step out of our comfort zone—in some cases, way out of it.

HME: You're diversifying and adding volume. How else has competitive bidding affected your business?

Trammell: We're looking at growth next year that is going to be very challenging. We are hiring people as fast as we can. We're buying tons of inventory, more warehouses, more warehouse racks, more vans, more phone lines, more computers, more desks. I mean it is crazy busy here now, and we've only got a couple weeks before Jan. 1 kicks in. It's a challenge to get your infrastructure in shape to take such a big increase in business so soon without sacrificing quality. It presents a lot of stress for a company. And, the sad news is it's only good for three years. So whatever business plan you had in place is only good for three years.

HME: What are your thoughts on the future of the bidding program?

Trammell: My hope is we won't ever have to bid again. I think that Medicare will have achieved their goals before it's time to bid again. They will have rid the industry of the people they didn't want in the business, either through competitive bidding or through the excessive audits. They don't want to deal with every Tom, Dick and Harry that decides they want to be in this business. They want very good quality companies that understand documentation requirements and that do it right.