Moving the HME Industry Forward

Legislative/Advocacy

This is Beyond Unfair

November 25, 2013

AMARILLO, TX – I know how to do one thing to make a living: practice law. I spent seven years in college (and thousands of dollars) to earn my law degree. I have spent years working 12 hours a day trying to be successful. In other words, I have a lot of time, money, and energy tied up in my law practice.

Now, what if Congress passed a law that said that every three years, every attorney in the U.S. must submit a bid to the attorney’s state bar association requesting that the attorney’s law license be renewed for another three years? And, by the way, the attorney does not know how the state bar association decides which law licenses will be renewed—and which will be taken away.

My law firm, Brown & Fortunato, has 23 attorneys. What bank would want to lend working capital to B & F when the bank knows that in three years, half of the B & F attorneys will no longer have a law license, and will have to earn a living selling Big Gulps at 7-Eleven?

There are all kinds of problems with competitive bidding, but in my mind a fatal flaw is that the DME supplier has no assurance that its business model will not be taken away in three years. It is naive for a person to say: “Well, if ABC Medical Equipment Inc is not awarded a competitive bid contract, it can always sell to non-Medicare patients—or it can always sell products, not covered by competitive bidding, to Medicare patients.”

Such reasoning shows a lack of understanding regarding how the real world works. The bottom line is that the DME industry serves the elderly, and the elderly are covered by Medicare. When an elderly person’s body breaks down, he needs a product from a DME supplier. As a general rule, a 45-year-old man has no reason to set foot into a DME store.

Unless ABC wants to start selling cruise line tickets, it simply has very few products (not covered by competitive bidding) that a Medicare patient wants. And unless ABC starts selling iPads and running shoes, it has very few products that a non-Medicare patient wants.

In short, a DME supplier is pretty much dependent on selling competitive bid items to Medicare patients. When the supplier runs the risk of having its business taken away every three years, it is impossible to prepare an intermediate or long term business plan. The supplier simply cannot plan ahead.

This is a snowball effect. Most small businesses, including DME suppliers, need a working capital line of credit from their local bank. But what bank in its right mind would lend money to a DME supplier if the bank knows that the supplier might be forced to close its doors in three years?

Now, I can see a person saying: “C’mon, you are like the little boy crying wolf. If ABC has good financials and submits a low bid, then the chances are good that it will be awarded a competitive bid contract.” While that sounds good, it is not reality.  

I am seeing bids submitted by good, financially sound companies (that have been in existence for years) be disqualified by the CBIC. The common reason is that the supplier’s financials “do not meet financial standards.” And yet, no one outside CMS and the CBIC know what those standards are.

I have clients who were awarded a competitive bid contract for round two, and that submitted essentially the same financials for the round one recompete, be disqualified because their round one recompete financials “do not meet financial standards.” This defies logic.

As I mentioned in the introductory paragraph of this editorial, I spent a bunch of years, and a bunch of money, to earn my law degree and build up a law practice. Well, ABC Medical Equipment Inc has done the same thing. It has spent hundreds of thousands of dollars building up a business model to serve Medicare patients with certain product lines.

ABC is good at what it does. And now the government is saying to ABC: “Notwithstanding your long-standing commitment to your community, and notwithstanding the effort you have expended in building up your skill set to take care of Medicare patients, you have to submit a bid every three years in an attempt to stay in business.”

This is beyond unfair.

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, infusion companies, 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 and can be reached at (806) 345-6320 or jbaird@bf-law.com.