Moving the HME Industry Forward


Round Two Recompete – Addressing Bad Financials

March 2, 2015

AMARILLO, TX – Round Two Recompete has the same challenges that prior rounds have had: (i) Do I submit a rational bid or do I submit a “suicide bid?”; (ii) If I want to bid in multiple CBAs, have I obtained the required state licensure?; and (iii) In particular, if I need to obtain a state license in a particular state, am I required to have a physical location there?

Round Two Recompete is also presenting a challenge that we have not seen, in a big way, in prior rounds. Simply stated, the financials of many bidders are unimpressive. This can be due to a number of factors, one of which is that it is hard for suppliers to generate a profit from the low Medicare reimbursements.

A financial statement must be tied to the bidder’s most recently filed tax return. Most of the bidders in the Round 2 Recompete will not have filed their 2014 tax returns…meaning that they will have to submit their 2013 financials. If the bidder’s 2013 financials are substandard, then there is a risk that the bid will be disqualified because of poor financials.

Because of the electronic bid format, as a general rule, the bidder cannot submit 2014 financials and projected 2015 financials that will help the bidder address the 2013 financials. Having said this, there is a way to “back door” the 2015 and 2015 financials into the bid packet. Form B, Section 2 is entitled “Expansion Plan.” It says, in part: “Can you increase your current capacity for this product category in the CBA? If yes, you must complete an expansion plan.” This section allows the bidder to include supplemental information for increased staffing, financing/funding levels, facilities (e.g., square footage), inventory (including method of tracking inventory), distribution methods (e.g., vehicles, mail order) and “additional information” regarding expanding capacity. The bidder can enter as much information as it would like to support its ability to increase capacity. If there is not enough space for the bidder to enter its information in this section on DBids, then the bidder is permitted to submit hard copies of the information to the CBIC, but the bidder must remember to title the documentation appropriately (“Supplemental Financial Plan information”) and to put the bidder number on every page.

An excerpt from the RFB instructions provides:
Submit ONLY the required documents. Do NOT include other documents such as bank references, personal statements of corporate stockholders, advertising materials, or bank statements. Only required documents will be evaluated, supplemental documents will be disregarded.

The instructions state that the only exception to prohibition against submitting supplemental documents is “additional information that explains the organization’s business structure or provides additional details about information reflected in your required financial documents.” This section enforces the point that any supplemental information submitted must be titled appropriately to avoid being discarded by the reviewers.

Let’s look at an important related issue. As DME suppliers are preparing their bid purchase, a question has arisen: What does “current’ mean when referencing the “prior 90 days” requirement for valid credit reports? For example, if a bidder has a credit report that was ordered and obtained on February 18, 2015, but the credit report agency’s financial information for the bidder was last updated in 2013, does this report meet the Round 2 Recompete requirements? In other words, is it the credit report purchase date or the “last updated information” date that needs to be within the prior 90 days from the close of the bid window? The CBIC provides the following guidance:

• There are a number of credit reports with varying formats across the five approved credit reporting agencies. Without restating the Round 2 Recompete RFB requirements, as long as a submitted credit report meets these requirements it will be acceptable.
• With the varying formats are different methods of presenting the date, such as “as of,” “date printed,” the date only on the face of the credit report, and others. Unless there is some reason within the report to conclude that an out-of-date report was simply reprinted, the date on the report within the 90 day window should be appropriate.
• An exception may be made for Standard & Poor’s Reports, which are less frequently prepared. If an S&P Report is submitted with a date outside of the 90 day window, the date of the report would be accepted as long as it was the last report that S&P issued for the supplier, which may be verified by the CBIC with S&P.

Jeffrey S. Baird, JD, is chairman of the Health Care Group at Brown & Fortunato PC, a law firm based in Amarillo, Tex. He represents pharmacies, HME companies, and other health care providers throughout the United States. Baird is Board Certified in Health Law by the Texas Board of Legal Specialization. He can be reached at (806) 345-6320 or