Subcontracting exacerbates problems with bid program

YARMOUTH, Maine - Subcontracting may be black and white on paper, but in the real world, it can be gray, even now that competitive bidding has been the law of the land in major cities for years.

By law, contract suppliers are responsible for coordinating care between referral sources and Medicare beneficiaries, for example, but subcontractors say that's not always the case.

“It's kind of like the dirty, little secret in the industry,” said a subcontractor for oxygen equipment and services. “They have virtually no contact with physicians—that's left to the local providers like us.”

By law, contract suppliers must also furnish items and bill Medicare. The job of the subcontractors: deliver, instruct and repair.

Subcontractors are, in a way, enablers. They want to remain in contact with referral sources, because they still want their business for other product lines and other payers.

“We want to save face with referral sources,” said one subcontractor. “(The contract suppliers) are so bad at processing claims, because they're so risk-averse, that we just do what needs to be done.”

One subcontractor says that one contract supplier has a policy of automatically canceling orders after three attempts to get documentation.

“We've started working with referral sources a little more closely, just calling them ahead of time to give them a heads up,” said the subcontractor, “to appease them and maintain the relationship.”

Adding insult to injury: While slow payments from contract suppliers haven't been an issue for all subcontractors, one subcontractor has invoices into one contract supplier that are over 120 days old.

“We're reconsidering subcontracting going forward,” the subcontractor said. “Referrals are becoming more comfortable with the fact that some HME companies can do some insurances but not others. We're also hoping, even though Medicare is a loss-leader, that we'll win more bids in the next round.”

Aeroflow, which has continually sought to increase its base of subcontractors to help grow its business, says it has 10 people dedicated to handling processing and payments for that side of its business. But the company acknowledges that the system can be slow.

“We find our largest challenge is receiving proof of delivery in a timely manner,” said Ryan Bullock, CIO. “This often leads to delays in subcontractor payment.”

At the end of the day, subcontrators say they're the glue, not contract suppliers, that's keeping the bid program together, for better or worse.

“This is why competitive bidding has succeeded in the eyes of Medicare, because the local providers are always stepping in,” said one subcontractor. “We're just starting to say no. You can't give away services for free.”