DALLAS Embassy Suites by Hilton October 7, 2015 · your Business in 2016 ... • ^To achieve...

DALLASEmbassy Suites by Hilton

October 7, 2015

My Contact Information:

• Mark Higley, Vice President - Regulatory [email protected] O: 888.224.1631 C: 319.504.9515

mailto:[email protected]

Today’s Schedule…• 8:30 am Registration opens

• 9:00 – 10:30 am Preparing for the Round 1 2017 Bid: Procedures, Checklists & Strategies!

• 10:30 – 10:40 am Break

• 10:45 – Noon Tips, Tools and Strategies to Optimize your Business in 2016

• Noon – 1:00 pm Lunch

• 1:15 – 2:30 pm Competing Forces Within: Balancing Sales with Successful Reimbursement

• 2:30 – 2:40 pm Break

• 2:45 – 4:00 pm The 2016 rural roll-out, bundling, acquiring contracts and the MPP Methodology.

Please download this entire program (PPT converted to PDF):

http://www.vgm.com/files/EmailPDF/FSS/DallasFSS-Sessions2016.pdf

http://www.vgm.com/files/EmailPDF/FSS/DallasFSS-Sessions2016.pdf

Session #1

•Preparing for the Round 1 2017 Bid: Procedures, Checklists & Strategies!

The Round Two Recompete in Texas: Quick predictions…

• “To achieve Medicare savings for DME, the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 required that CMS implement the CBP for certain DME. The first completed CBP round—the round 1 rebid—operated in nine competitive bidding areas.

• CMS reported total savings of more than $580 million at the end of the round 1 rebid’s 3-year term due to lower payments and decreased utilization.

What GAO Found

• GAO found that a similar percentage of bidding suppliers—between 30 and 43 percent—were awarded contracts in the round 1 rebid, round 1 recompete, and round 2.

• GAO found that the single payment amounts (SPA) for 28 high utilization Healthcare Common Procedure Coding System (HCPCS) codes common to the round 1 rebid, round 1 recompete, and round 2 generally decreased through all CBP rounds as compared to the average Medicare 2010 fee-for-service payment for the same codes

Factors:1. Respiratory Equipment and Related Supplies and

Accessories (includes oxygen, oxygen equipment, and supplies; continuous positive airway pressure (CPAP) devices and respiratory assist devices (RADs) and related supplies and accessories)

2. Standard Mobility Equipment and Related Accessories (includes walkers, standard power and manual wheelchairs, scooters, and related accessories)

3. General Home Equipment and Related Supplies and Accessories (includes hospital beds and related accessories, group 1 and 2 support surfaces, commode chairs, patient lifts, and seat lifts)

• For many Round 2 recompete bidding companies, these product categories combine products not typically furnished by the supplier in the today’s marketplace.

• For example, HMEs furnishing oxygen and oxygen equipment do not necessarily furnish CPAP devices and RADs.

• The combining of product categories (e.g., oxygen and CPAP) might result in a reduction in the amount of out-of-area bidders, who, in previous rounds, bid CPAP in virtually all areas of the country.

• Delivery of CPAP supplies have seen, arguably, an increase in drop-shipments. Now that the bidding supplier must also offer oxygen and oxygen equipment in the same CBAs (requiring comparably more in-home service), I anticipate a decrease in the number of out-of-area contracts offered (with a resulting increase in reimbursement/single payment amounts).

• There are also about 17% less “traditional HME” supplier locations in the marketplace. Note this FOIA report:

(Source: PDAC)

Supplier

Type

Code

Supplier Type Code Description

Count of Suppliers

with Active Med ID

(11/01/2010)

Count of Suppliers

with Active Med ID

(11/01/2011)

Count of Suppliers

with Active Med ID

(11/01/2012)

Count of Suppliers

with Active Med ID

(11/01/2013)

Count of Suppliers

with Active Med ID

(11/01/2014)

54 MED SUPPLY COMPANY 9,438 9,503 8,880 8,222 7,881

A6 MEDICAL SUPPLY COMPANY WITH RESPIRATORY THERAPIST 2,109 1,972 1,941 1,876 1,793

53 MEDICAL SUPPLY COMPANY WITH ORTHOTIC-PROSTHETIC 701 698 704 679 764

51 MEDICAL SUPPLY COMPANY WITH ORTHOTIC PERSONNEL 416 403 391 361 358

52 MEDICAL SUPPLY COMPANY WITH PROSTHETIC PERSONNEL 313 287 269 248 242

B3 MEDICAL SUPPLY COMPANY WITH PEDORTHIC PERSONNEL 61 74 99 113 104

B1 OXYGEN & EQUIPMENT 66 81 96 93 93

58 MEDICAL SUPPLY COMPANY WITH REGISTERED PHARMACIST 59 70 74 87 91

TOTAL 13,163 13,088 12,454 11,679 11,326

The timeline…• Until we somehow stop this madness by legislation,

CMS is required by law to recompete contracts under the DMEPOS Competitive Bidding Program at least once every three years.

• The Round 1 Recompete contract period expires on December 31, 2016. On April 21, 2015, CMS announced plans to recompete the contracts for the Round 1 Recompete, which will go into effect January 1, 2017

Round 1 2017 includes the following categories of items and services:

• Enteral Nutrients, Equipment and Supplies

• General Home Equipment and Related Supplies and Accessories (includes hospital beds and related accessories, group 1 and 2 support surfaces, commode chairs, patient lifts, and seat lifts)

• Nebulizers and Related Supplies

• Negative Pressure Wound Therapy (NPWT) Pumps and Related Supplies and Accessories

• Non-invasive Pressure Support Ventilators* - Removed from Round 1 2017 on 6/4/15

• Respiratory Equipment and Related Supplies and Accessories (includes oxygen, oxygen equipment, and supplies; continuous positive airway pressure (CPAP) devices and respiratory assist devices (RADs) and related supplies and accessories)

• Standard Mobility Equipment and Related Accessories (includes walkers, standard power and manual wheelchairs, scooters, and related accessories)

• Transcutaneous Electrical Nerve Stimulation (TENS) Devices and Supplies

A New Registration System - EIDM (CMS’ Enterprise Identity Management)

• I presume most of you have already registered, but, if not, here are some basics:

• Before you can access the on-line DMEPOS Bidding System (DBidS), you will need to register in EIDM to receive an EIDM User ID and establish a password. You will then need to add the DBidS application to your EIDM profile.

• An authorized official (AO) in the Medicare Provider Enrollment, Chain and Ownership System (PECOS) should register ONE time in EIDM with ONE active Provider Transaction Access Number (PTAN) in DBidS (*).

• Go to the EIDM Reference Guide at http://www.dmecompetitivebid.com/Palmetto/Cbicrd12017.Nsf/files/14_R12017_EIDM_Reference_Guide.pdf/$File/14_R12017_EIDM_Reference_Guide.pdf

(*) Unless your organization has separate entities, such as subsidiaries, that are bidding in a separate CBA and product category competition(s). If one of these two exceptions apply, you should then register a different PTAN for each type of bid.

http://www.dmecompetitivebid.com/Palmetto/Cbicrd12017.Nsf/files/14_R12017_EIDM_Reference_Guide.pdf/$File/14_R12017_EIDM_Reference_Guide.pdf

What’s new in “DBidS this round…• Location information will be pre-populated with your enrollment

data (address, National Provider Identifier (NPI), Taxpayer Identification Number (TIN), etc.) from PECOS.

• You can easily add locations that have the same TIN or different TINs that are associated with your business organization since this information will also be pre-populated with data from PECOS. You will not have to enter location information other than the toll-free number on your bid(s).

• You can sort and/or filter many of the tables in DBidS.

• You will be able to copy your expansion plan (if applicable) and manufacturer information from one bid to another.

• You will be able to select manufacturer, model name, and model number from pre-populated drop-down lists in most instances.

• The status page will alert you to important information such as your total number of bids and the current status of your bid, whether it is complete and if not complete, what is missing. You should check this page often to confirm the status of your bid (s).

• If you have an incomplete or pending Form A or Form B, you will be sent an e-mail alert during the last week of bidding to remind you to complete and approve your Form A and complete and certify Form B.

You will be receiving a “Preliminary Bid Evaluation” this round

• After bidding closes, you will receive an e-mail from the CBIC that the preliminary review of your bid(s) has been completed and a notification of the findings is posted in DBidS.

• This notification will inform you if your bid(s) is eligible for further consideration and, if not, what enrollment requirement(s) (active PTAN, accredited, licensed, commonly owned or commonly controlled) was not met by the close of the bid window.

• This notification will give you the opportunity, if applicable, to verify that your location(s) met the identified enrollment requirement(s) by the closing of the bid window.

• This preliminary evaluation does not include the review of your required financial documents, which is a separate notification process. For more information, see the Preliminary Bid Evaluation fact sheet at http://www.dmecompetitivebid.com/Palmetto/Cbicrd12017.Nsf/files/14_Fact_Sheet_Preliminary_Bid_Evaluation.pdf/$File/14_Fact_Sheet_Preliminary_Bid_Evaluation.pdf

http://www.dmecompetitivebid.com/Palmetto/Cbicrd12017.Nsf/files/14_Fact_Sheet_Preliminary_Bid_Evaluation.pdf/$File/14_Fact_Sheet_Preliminary_Bid_Evaluation.pdf

NO more multiple state CBAs…

http://www.dmecompetitivebid.com/Palmetto/Cbicrd12017.Nsf/files/14_R2017_ZIP_Codes.pdf/$File/14_R2017_ZIP_Codes.pdf

http://www.dmecompetitivebid.com/Palmetto/Cbicrd12017.Nsf/files/14_R2017_ZIP_Codes.pdf/$File/14_R2017_ZIP_Codes.pdf

Best advice? Read the RFB Instructions!

http://www.dmecompetitivebid.com/Palmetto/Cbicrd12017.Nsf/files/14_R12017_RFB.pdf/$File/14_R12017_RFB.pdf

http://www.dmecompetitivebid.com/Palmetto/Cbicrd12017.Nsf/files/14_R12017_RFB.pdf/$File/14_R12017_RFB.pdf

Registration errors seen so far:• Registering more than one PTAN. The exception is if your organization has separate

entities – such as subsidiaries or commonly owned and/or commonly controlled organizations – that are bidding in a separate CBA and product category combination. If this exception applies you should then register a different PTAN for each type of bid.

• Bidding against yourself. Remember, commonly owned or controlled bidders cannot bid for the same product category in the same CBA.

• The AO’s name does not match exactly with PECOS enrollment records.

• The BAO and EU(s) attempting to register before the AO has completed his/her registration.

• Using an incorrect user ID and/or password to log into DBidS.

• Changing your contact information (e-mail, phone number, etc.) and not updating your records in PECOS

• PROBLEMS WITH REGISTRATION? CALL THE CBIC AT 877-577-5331. (They are MUCH more helpful this time around…)

Remember…• You can add locations or remove locations from your contract at any

time during the contract period!

• To add or remove locations, use “Location Update Form” on the CBIC website (www.dmecompetitivebid.com)

• Each location (PTAN) identified on your bid must meet the applicable state licensing requirements to furnish the items in the product category in the CBA. You must have a current copy of the applicable state license(s) on file with the NSC and in PECOS by the close of the bid window.

• There is a licensure directory at http://www.palmettogba.com/palmetto/providers.nsf/DocsCat/Providers~National%20Supplier%20Clearinghouse~Resources~Licensure%20Information~7GLS4M6340?open&navmenu=||

http://www.dmecompetitivebid.com/http://www.palmettogba.com/palmetto/providers.nsf/DocsCat/Providers~National Supplier Clearinghouse~Resources~Licensure Information~7GLS4M6340?open&navmenu=||

Change of Ownership (CHOW)

• If a CHOW occurs before the bid window closes and you have already entered information in DBidS, you must update your information in DBidS to reflect the CHOW by the close of the bid window.

• If you have already submitted your hardcopy documents, you must resubmit them by the close of the bid window to reflect the CHOW transaction. You must also notify the NSC of the CHOW in accordance with the supplier standards.

• If a CHOW occurs after the close of the bid window but before contracts are awarded, your bid will be evaluated based on the information you provided in DBidS and in your package of hardcopy documents as of the close of the bid window.

• Information submitted about a new owner after the bid window closes will not be used to evaluate your bid.

• If you are considering or involved in a CHOW during bidding, I recommend that you contact the CBIC with any questions and/or concerns regarding your individual situation.

What’s “commonly owned/controlled”?

• Two or more suppliers are considered commonly owned if one or more of them has an ownership interest totaling at least 5 percent in the other(s).

• An ownership interest is the possession of equity in the capital, stock, or profits of another supplier. Commonly controlled suppliers are those where either one or more of the supplier’s owners are also an officer, director, or partner in another supplier.

• You may not bid against yourself for the same product category in the same CBA. Therefore, if you are a commonly owned or commonly controlled supplier, you must submit one bid that includes all commonly owned or commonly controlled locations (identified by PTAN) that would furnish competitively bid items in the same product category in the same CBA.

What if I have a location OUTSIDE the bidding CBA?

• IF the commonly owned locations located outside of the CBA will also furnish items in the product category to beneficiaries in the CBA in which you are bidding, THEN you must also be included on the bid.

• This information should be completed in Form A under the location-specific section.

• This issue can be complicated! I would recommend reading closely the Common Ownership or Common Control fact sheet here: http://www.dmecompetitivebid.com/palmetto/Cbicrd12017.Nsf/files/14_Fact_Sheet_Common_Ownership_Common_Control.pdf/$File/14_Fact_Sheet_Common_Ownership_Common_Control.pdf

http://www.dmecompetitivebid.com/palmetto/Cbicrd12017.Nsf/files/14_Fact_Sheet_Common_Ownership_Common_Control.pdf/$File/14_Fact_Sheet_Common_Ownership_Common_Control.pdf

Placing your bid – the basics…

• You will be asked to select all CBA and product category combination(s) for which your business organization will be bidding.

Form B is the Bidding Form…• Form B includes the bidding forms for each CBA and product category.

• You will complete a separate Form B for each CBA and product category for which you bid.

• You will be required to provide historic information about your experience in the CBA and product category. (This may be estimated!!)

• You will also provide the number of “units” for the high use HCPCS codes in each product category that you furnished to all customers, Medicare and non-Medicare, in the CBA during the past calendar year.

• You will also be required to identify the manufacturer and model (at lest one) of the products you plan to make available to beneficiaries in the CBA.

• If you are awarded a contract, this information will be available to the public on the Medicare website, www.medicare.gov/supplier.

• The bid form is prepopulated with item descriptions, bid types, item utilization “weights” (which are NOT necessarily representative of the importance of the particular HCPC item to the overall category; we will discuss this shortly) and the CURRENT MEDICARE FEE SCHEDULE amounts (versus any current “single payment amounts” from a previous round!!) that serve as the bid limits.

• “Total Estimated Capacity” is number of units per HCPCS code that you estimate you will (versus “can”) furnish throughout the entire CBA for one year.

• Again, we will discuss this “capacity”; it is no guarantee that you will be reimbursed for this amount nor is it a “cap” of when you may cease offering the item to beneficiaries.

Common mistakes I’ve seen when completing a bid:

• #1 (by far!): Bidders submitting bid amounts that do not meet the definition of a “bidding unit”. Only oxygen is bid in “rental months”.

• I recognize that hospital beds (for example) are furnished as a monthly rental item. However, the definition of a bidding unit for a hospital bed is the “purchase of one (1) new unit.”

• Bidders incorrectly enter a “rental” amount instead of a “purchase” amount for the hospital bed in DBidS…and are disqualified as the bid is not bona-fide (too low)!!

• I will demonstrate a “formula” to equate the purchase to a rental later on…

• #2: Commonly owned and/or commonly controlled suppliers bidding against each other in the same CBA and product category. (See my link for Commonly Owned and Commonly Controlled Suppliers.)

• #3: Bidders not carefully reviewing their bid amounts for accuracy (e.g., ensuring no keying error(s) when entering bid amounts). The VGM Bid Prep worksheets (next topic) will help mitigate this risk!

• #4: Bidding “too low” for one or more (and frequently low utilization/low impact) HCPC codes and being challenged by a bona-fide bid letter. Again the VGM worksheets can help!

• #5: Not taking advantage of the “covered document review” deadline and being disqualified as the result of missing hardcopy documents.

• #6: Errors in “tying” the various financial documents together.

• #7: Improper credit score submission.

• #8: Submitting documents in “an improper manner”

====================================================

• So let’s review and discuss some “financial documents” issues! First of all – the next slides are “visuals” of what you’ll need (depending on business type); and don't worry the links in this presentation are “live” and will take you to the original pages.

After bidding opens for Round 1 2017 (it is October 15, 2015) all bidders must submit the required financial documents listed below

• Tax return extract for the most current year filed (must be either a 2013 or 2014 tax return)

• Financial statements that correspond with the tax return extract:

• Income statement

• Balance sheet

• Statement of cash flows

• Current credit report with a credit score (report must contain name and date)

• Note!: Bidders whose financial documents are received on or before the covered document review date (CDRD), November 16, 2015, will be notified if any of the required financial documents below are missing.

Financial submission mistakes to avoid!

• Mismatches between financial statements. For instance, the net income on the income statement and the net income on the statement of cash flows do not match.

• Ending cash balance on the statement of cash flows and the ending cash balance on the balance sheet do not match. These two fields must match.

• Balance sheet not balancing. Total assets must equal the sum of total liabilities and owner’s equity. Tax return extract for a different time period than financial statements. For instance, submitting a 2013 tax return with 2014 financial statements.

• Financial statements and tax return extracts are at different organizational levels. For instance, the submitted financial statements are for the subsidiary while the submitted tax return extract is for the parent company. Please see RFB for more information on parent/subsidiaries.

• Credit report without a name and/or a preparation date.

• Statement of cash flows that do not specify whether cash flows are from operating activities, financing activities or investing activities.

• Statement of cash flows that do not contain a cash reconciliation, which contains a beginning cash balance, ending cash balance, and a net increase/decrease in cash.

Hardcopy Document Package Checklist

FAQ #1: Can I use my personal credit report?

• Maybe. If your organization’s credit report is not available, a personal credit report with a numeric score and the name of the principal business owner is acceptable as long as it is prepared by an acceptable credit reporting agency no earlier than 90 days prior to the opening of the bid window.

• However, a personal credit report with score is not acceptable from bidders filing a regular ‘C’ corporation tax return (Form 1120), except in cases of newly formed corporations.

FAQ #2: What type of company report do I need?

• Credit reports must include your company’s name and a date along with a numerical score. The only exception is an alpha score from Standard & Poor’s. Any other forms of gauging credit other than a numerical score (such as arrows indicating relative value of credit or the number of days beyond term) are not acceptable.

• In addition, a credit summary does not qualify as an acceptable credit report.

• See me if you have questions as to “what level” of report (and by $$) is acceptable.

FAQ #3:) My credit score/financials are less than optimal. (I think I am not alone in this industry…) Any suggestions?

• I agree with your observation. In general, the financials of many bidders that I have met with are (arguably) “unimpressive”.

• This can be due to a number of a factors, one of which is that it is hard for suppliers to generate a profit from the low Medicare reimbursements.

Mitigating “Poor Financials”: 1 Strategy

• A financial statement must be tied to the bidder’s most recently filed tax return.

• Most of the bidders in the Round 1 2017 will submit their 2014 financials.

• If the bidder’s 2014 financials are substandard (and many are due to the current bid programs, audits, and other reimbursement pressures), then there is a risk that the bid will be disqualified because of poor financials.

• Let’s say that in 2014 the bidder was hit with some out-of-the-ordinary events that caused its financials to look bad.

• Because of the electronic bid format, as a general rule, the bidder cannot submit 2015 financials and projected 2016 financials that will help the bidder “cure” the 2014 financials.

• Having said this, there is potentially a method to “back door” the actual 2015 and 2016 projected 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.” (*)

(*) Important Note: This applicable ONLY to suppliers with relatively substantial financial documentation/credit score concerns. Generally I dissuade use of the “expansion plan” option unless the supplier is bidding our of area or into a new product category. I will comment on this later.

• 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.

• Excerpt from RFB Instructions:• 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.

Again – take advantage of the “CDRD”!!• Suppliers whose financial documents are received by the covered

document review date (CDRD) are notified if any individual financial documents are missing and have an opportunity to submit the missing documents. This process is only to determine if individual financial documents are missing and is not a review of the accuracy or completeness of individual documents

• For Round 1 2017, the CDRD in November 16.

• Bidders whose financial documents are received by the CDRD will be notified of which, if any, financial documents are missing within 90 days after the CDRD. The notification will alert you only of what is missing – NOT whether the financial documents are accurate, acceptable, or in accordance with the RFB instructions. The notification will provide you with the date by which the CBIC must receive the MISSING financial document(s).

Before we (finally) get to “bidding strategy” – some house keeping a la submitting your bid…

• After the Bid Window Closes bids will be evaluated based on the information provided on Form A and Form B in DBidS and in the package of hardcopy documents. The CBIC must have all of the following on or before bidding closes for your bid to be evaluated and considered for a contract:

1. A completed and approved Form A,

2. A completed and certified Form B, and

3. A complete package of required hardcopy documents.

• Once the bid window closes, all bids are considered final and cannot be amended. You may continue to view your DBidS status page after the bid window closes to verify whether your bid is complete, approved, and certified by the AO or BAO. However, no changes can be made to the bid after the bid window has closed except to the extent permitted by the covered document review date process (see the Covered Document Review Date fact sheet on the CBIC website for more information).

• Acknowledgement in DBidS of a complete bid does not mean that the bid is accurate or otherwise meets CMS’ criteria. The DBidS status page indicates whether your hardcopy document package was received on time by the CBIC. If your document was received after the bid window closes, DBidS will not acknowledge receipt of the document(s), and the “Hardcopy Document Receipt” indicator will remain “NO.”

• AOs and BAOs will receive an e-mail from the CBIC when this review is complete. You will then be able to log into DBidS to view your results.

• This preliminary evaluation does not include the review of your required financial documents, which is a separate notification.

• CMS reserves the right to seek clarification or corrections from a bidder, if necessary.

The VGM Bid Preparation Worksheets!

• Download the worksheets: http://www.vgm.com/files/EmailPDF/FSS/VGM-BidPreparationAndImpactAnalysisRound1-2017.xls

• Download the instructions: http://www.vgm.com/files/EmailPDF/FSS/VGM-CompetitiveBiddingBidRound1-2017ImpactAnalysisWorksheet.docx

http://www.vgm.com/files/EmailPDF/FSS/VGM-BidPreparationAndImpactAnalysisRound1-2017.xlshttp://www.vgm.com/files/EmailPDF/FSS/VGM-CompetitiveBiddingBidRound1-2017ImpactAnalysisWorksheet.docx

Note: There are official CBIC “Bid Preparation Worksheets” available…

• Not yet released for Round 2 Recompete – watch for email updates from me,

• How is the composite bid is determined?

• Why do just a few HCPC codes affect the overall composite bid?

Go to www.dmecompetitivebid.com

How to Use the Worksheets • The worksheets are divided into columns. Each item is

identified by its Healthcare Common Procedure Coding System (HCPCS) code and followed by a description of that code.

• The HCPCS code is listed in the first column and a description of that code is provided in the next column.

• Review the code description column to determine the specific number of products in a unit.

• In most cases, a unit is described as a single product; however, in a few cases, a unit may be more than one product, such as for diabetic test strips. In this case, a unit is 50 strips.

The column labeled Definition of a “Bidding Unit”…

• …indicates whether to submit a bid on a rental or purchase basis for the item.

• In order to ensure you submit your bid correctly, you will need to look at both the description of the code and the definition of a bidding unit.

• For example, for enteral nutrients HCPCS code B4150, the code descriptor indicates that 1 unit = 100 calories of enteral formula, and the bidding unit indicates that the bid is on a purchase basis. Therefore, you are submitting a purchase bid for one unit consisting of 100 calories of enteral formula.

• The column labeled Weight provides, according to CMS, “the relative market importance of that item to other items in the product category. Items with a high number have a greater market importance than items with a low number.”

• I will debate that interpretation shortly…

• The worksheets provide reference data that shows historic utilization information.

• We anticipate a “2014 Beneficiary Count column” to show the number of beneficiaries in the bidding area who received the item in 2014, and the 2014 Allowed Units column shows the number of units that Medicare paid for in 2014 in the bidding area.

• Remember: This information detailing the allowed units and beneficiary count is background information provided as a courtesy for those bidders that want recent information about the number of items paid for by Medicare in the area and the number of beneficiaries in the area who have received these items. This background data is provided for informational purposes only.

• The Bid Limit column shows the current fee schedule amount for the item.

• Bids must be at or below the fee schedule amount.

• Once more!! – the bid limit reverts to the 2015 fee schedule; HME providers should NOT be confused with the current Round 2 (or Round 1 recompete) “single payment amounts”

Key Dynamics of the Bidding Process

Strategies & Tactics for Calculating Bid Rates

• It is critical for HME providers contemplating entering a bid for the Round 1 2017 to understand:• the key dynamics of the bidding process, and;

• develop a strategy for calculating bid rates.

• This section will explain the statistical methodology that CMS uses to evaluate the bids.

The Root of the Problem• We learned from the flawed bidding approaches of

providers who participated in the failed first round, the re-bid and Round 2.

• These companies may have known their costs before they bid -- but many never completely understood HOW to bid.

• The great majority of these HMEs were not awarded contracts, and not only because “they bid too high”. Many were excluded due to preventable miscalculations, omissions, and, in my opinion…just stupid mistakes.

• Let’s get started!

•Unless the auction methodology changes or there is a delay by Congress, the (flawed) “Bid Evaluation Process” for your recompete is the same as Round One Re-bid!

• CMS calculates expected beneficiary demand in the CBA for the items in the category using past utilization statistics.

• CMS calculates total supplier capacity that would meet the expected demand in CBA• Supplier-estimated input of capacity (subject to verification/edit)

is used to determine this

• CMS establishes a “composite bid” for each supplier that submits bid for product category

What is a “Composite Bid?”• Here is how the RFB describes it!: “To allow comparisons

among bidders, CMS will establish a composite bid for each supplier for each product category”

• “Composite bid is based on the sum of each item’s bid amount times its weight for the entire product category”

• “Weight of an item is based on volume, which is utilization of the individual item compared to other items within the product category”

The Composite BidHow it’s calculated, and how it should drive your

bidding strategy….

The Bid Evaluation Process

• CMS rationale for the use of a Composite Bid:• “Composite bids allow CMS to compare all suppliers bids

submitted for the entire product category This allows Medicare to select the suppliers with the lowest expected cost for the entire product category.”

• Array composite bids from low to high

• Calculate “pivotal” bid for category

Again…The CBIC offers “Bid Preparation Worksheets” that looks something like this…

•But let’s simplify (and enlarge) the worksheet a bit to demonstrate how the composite bid is determined.

•We will demo CPAP from a previous round.

HCPCS Code Bid Weight Bid Limit Bid Amount Weighted Bid% of Composite

BidCumulative % of Composite Bid

A7038 0.3341535099 $4.80

E0472 0.0000093538 $5,811.60

A7035 0.1155849542 $32.36

A7034 0.1070640535 $106.46

A7032 0.0623698474 $36.68

A7033 0.0496539111 $25.71

A7039 0.0458239180 $11.79

A7030 0.0418602648 $170.72

E0562 0.0303565011 $272.60

E0601 0.0296715848 $1,011.00

A7031 0.0219373840 $63.14

A7046 0.0175893653 $17.66

A7036 0.0122401256 $14.00

E0470 0.0054363772 $2,322.20

A4604 0.0011388196 $60.46

E0471 0.0009553137 $5,811.60

E0561 0.0004612878 $96.84

A7045 0.0003492889 $17.62

A7044 0.0001718137 $109.42

A7037 0.1231723257 $35.73

CMS Will Provide This Information on the Bid Information

Sheet



A7038 0.3341535099 $4.80 $3.84

E0472 0.0000093538 $5,811.60 $4,649.28

A7035 0.1155849542 $32.36 $25.89

A7034 0.1070640535 $106.46 $85.17

A7032 0.0623698474 $36.68 $29.34

A7033 0.0496539111 $25.71 $20.57

A7039 0.0458239180 $11.79 $9.43

A7030 0.0418602648 $170.72 $136.58

E0562 0.0303565011 $272.60 $218.08

E0601 0.0296715848 $1,011.00 $808.80

A7031 0.0219373840 $63.14 $50.51

A7046 0.0175893653 $17.66 $14.13

A7036 0.0122401256 $14.00 $11.20

E0470 0.0054363772 $2,322.20 $1,857.76

A4604 0.0011388196 $60.46 $48.37

E0471 0.0009553137 $5,811.60 $4,649.28

E0561 0.0004612878 $96.84 $77.47

A7045 0.0003492889 $17.62 $14.10

A7044 0.0001718137 $109.42 $87.54

A7037 0.1231723257 $35.73 $28.58

You Will Provide

CMS/CBIC With This

Information

For this example, we

“bid” 20% below Bid

Limit for all codes



A7038 0.3341535099 $4.80 $3.84 $1.28

E0472 0.0000093538 $5,811.60 $4,649.28 $0.04

A7035 0.1155849542 $32.36 $25.89 $2.99

A7034 0.1070640535 $106.46 $85.17 $9.12

A7032 0.0623698474 $36.68 $29.34 $1.83

A7033 0.0496539111 $25.71 $20.57 $1.02

A7039 0.0458239180 $11.79 $9.43 $0.43

A7030 0.0418602648 $170.72 $136.58 $5.72

E0562 0.0303565011 $272.60 $218.08 $6.62

E0601 0.0296715848 $1,011.00 $808.80 $24.00

A7031 0.0219373840 $63.14 $50.51 $1.11

A7046 0.0175893653 $17.66 $14.13 $0.25

A7036 0.0122401256 $14.00 $11.20 $0.14

E0470 0.0054363772 $2,322.20 $1,857.76 $10.10

A4604 0.0011388196 $60.46 $48.37 $0.06

E0471 0.0009553137 $5,811.60 $4,649.28 $4.44

E0561 0.0004612878 $96.84 $77.47 $0.04

A7045 0.0003492889 $17.62 $14.10 $0.00

A7044 0.0001718137 $109.42 $87.54 $0.02

A7037 0.1231723257 $35.73 $28.58 $3.52

CMS Will Calculate Weighted

Bids Based on Your Bid Amount



A7038 0.3341535099 $4.80 $3.84 $1.28

E0472 0.0000093538 $5,811.60 $4,649.28 $0.04

A7035 0.1155849542 $32.36 $25.89 $2.99

A7034 0.1070640535 $106.46 $85.17 $9.12

A7032 0.0623698474 $36.68 $29.34 $1.83

A7033 0.0496539111 $25.71 $20.57 $1.02

A7039 0.0458239180 $11.79 $9.43 $0.43

A7030 0.0418602648 $170.72 $136.58 $5.72

E0562 0.0303565011 $272.60 $218.08 $6.62

E0601 0.0296715848 $1,011.00 $808.80 $24.00

A7031 0.0219373840 $63.14 $50.51 $1.11

A7046 0.0175893653 $17.66 $14.13 $0.25

A7036 0.0122401256 $14.00 $11.20 $0.14

E0470 0.0054363772 $2,322.20 $1,857.76 $10.10

A4604 0.0011388196 $60.46 $48.37 $0.06

E0471 0.0009553137 $5,811.60 $4,649.28 $4.44

E0561 0.0004612878 $96.84 $77.47 $0.04

A7045 0.0003492889 $17.62 $14.10 $0.00

A7044 0.0001718137 $109.42 $87.54 $0.02

A7037 0.1231723257 $35.73 $28.58 $3.52

Weighted Bid=

Bid Weight

X Bid

Amount



A7038 0.3341535099 $4.80 $3.84 $1.28

E0472 0.0000093538 $5,811.60 $4,649.28 $0.04

A7035 0.1155849542 $32.36 $25.89 $2.99

A7034 0.1070640535 $106.46 $85.17 $9.12

A7032 0.0623698474 $36.68 $29.34 $1.83

A7033 0.0496539111 $25.71 $20.57 $1.02

A7039 0.0458239180 $11.79 $9.43 $0.43

A7030 0.0418602648 $170.72 $136.58 $5.72

E0562 0.0303565011 $272.60 $218.08 $6.62

E0601 0.0296715848 $1,011.00 $808.80 $24.00

A7031 0.0219373840 $63.14 $50.51 $1.11

A7046 0.0175893653 $17.66 $14.13 $0.25

A7036 0.0122401256 $14.00 $11.20 $0.14

E0470 0.0054363772 $2,322.20 $1,857.76 $10.10

A4604 0.0011388196 $60.46 $48.37 $0.06

E0471 0.0009553137 $5,811.60 $4,649.28 $4.44

E0561 0.0004612878 $96.84 $77.47 $0.04

A7045 0.0003492889 $17.62 $14.10 $0.00

A7044 0.0001718137 $109.42 $87.54 $0.02

A7037 0.1231723257 $35.73 $28.58 $3.52

Composite Bid: $72.72

CMS Totals Weighted

Bids to Calculate

Composite Bid

Once eligibility is determined, this Composite Bid is the ONLY thing

used to determine who

is offered a contract!

HCPCS Code Bid Weight Bid LimitFinal Bid Amount

Weighted Bid% of Composite


A7038 0.3341535099 $4.80 $3.84 $1.28 1.76%

E0472 0.0000093538 $5,811.60 $4,649.28 $0.04 0.06%

A7035 0.1155849542 $32.36 $25.89 $2.99 4.11%

A7034 0.1070640535 $106.46 $85.17 $9.12 12.54%

A7032 0.0623698474 $36.68 $29.34 $1.83 2.52%

A7033 0.0496539111 $25.71 $20.57 $1.02 1.40%

A7039 0.0458239180 $11.79 $9.43 $0.43 0.59%

A7030 0.0418602648 $170.72 $136.58 $5.72 7.86%

E0562 0.0303565011 $272.60 $218.08 $6.62 9.10%

E0601 0.0296715848 $1,011.00 $808.80 $24.00 33.00%

A7031 0.0219373840 $63.14 $50.51 $1.11 1.52%

A7046 0.0175893653 $17.66 $14.13 $0.25 0.34%

A7036 0.0122401256 $14.00 $11.20 $0.14 0.19%

E0470 0.0054363772 $2,322.20 $1,857.76 $10.10 13.89%

A4604 0.0011388196 $60.46 $48.37 $0.06 0.08%

E0471 0.0009553137 $5,811.60 $4,649.28 $4.44 6.11%

E0561 0.0004612878 $96.84 $77.47 $0.04 0.05%

A7045 0.0003492889 $17.62 $14.10 $0.00 0.01%

A7044 0.0001718137 $109.42 $87.54 $0.02 0.02%

A7037 0.1231723257 $35.73 $28.58 $3.52 4.84%


CMS Does Not Show You

This!!!




A7038 0.3341535099 $4.80 $3.84 $1.28 1.76%

E0472 0.0000093538 $5,811.60 $4,649.28 $0.04 0.06%

A7035 0.1155849542 $32.36 $25.89 $2.99 4.11%

A7034 0.1070640535 $106.46 $85.17 $9.12 12.54%

A7032 0.0623698474 $36.68 $29.34 $1.83 2.52%

A7033 0.0496539111 $25.71 $20.57 $1.02 1.40%

A7039 0.0458239180 $11.79 $9.43 $0.43 0.59%

A7030 0.0418602648 $170.72 $136.58 $5.72 7.86%

E0562 0.0303565011 $272.60 $218.08 $6.62 9.10%

E0601 0.0296715848 $1,011.00 $808.80 $24.00 33.00%

A7031 0.0219373840 $63.14 $50.51 $1.11 1.52%

A7046 0.0175893653 $17.66 $14.13 $0.25 0.34%

A7036 0.0122401256 $14.00 $11.20 $0.14 0.19%

E0470 0.0054363772 $2,322.20 $1,857.76 $10.10 13.89%

A4604 0.0011388196 $60.46 $48.37 $0.06 0.08%

E0471 0.0009553137 $5,811.60 $4,649.28 $4.44 6.11%

E0561 0.0004612878 $96.84 $77.47 $0.04 0.05%

A7045 0.0003492889 $17.62 $14.10 $0.00 0.01%

A7044 0.0001718137 $109.42 $87.54 $0.02 0.02%

A7037 0.1231723257 $35.73 $28.58 $3.52 4.84%


Certain Codes Represent The

Bulk of Your Chances of

Being “Awarded” a

Contract




E0601 0.0296715848 $1,011.00 $808.80 $24.00 33.00% 33.00%

E0470 0.0054363772 $2,322.20 $1,857.76 $10.10 13.89% 46.89%

A7034 0.1070640535 $106.46 $85.17 $9.12 12.54% 59.43%

E0562 0.0303565011 $272.60 $218.08 $6.62 9.10% 68.53%

A7030 0.0418602648 $170.72 $136.58 $5.72 7.86% 76.39%

E0471 0.0009553137 $5,811.60 $4,649.28 $4.44 6.11% 82.50%

A7037 0.1231723257 $35.73 $28.58 $3.52 4.84% 87.34%

A7035 0.1155849542 $32.36 $25.89 $2.99 4.11% 91.45%

A7032 0.0623698474 $36.68 $29.34 $1.83 2.52% 93.97%

A7038 0.3341535099 $4.80 $3.84 $1.28 1.76% 95.74%

A7031 0.0219373840 $63.14 $50.51 $1.11 1.52% 97.26%

A7033 0.0496539111 $25.71 $20.57 $1.02 1.40% 98.66%

A7039 0.0458239180 $11.79 $9.43 $0.43 0.59% 99.26%

A7046 0.0175893653 $17.66 $14.13 $0.25 0.34% 99.60%

A7036 0.0122401256 $14.00 $11.20 $0.14 0.19% 99.79%

A4604 0.0011388196 $60.46 $48.37 $0.06 0.08% 99.86%

E0472 0.0000093538 $5,811.60 $4,649.28 $0.04 0.06% 99.92%

E0561 0.0004612878 $96.84 $77.47 $0.04 0.05% 99.97%

A7044 0.0001718137 $109.42 $87.54 $0.02 0.02% 99.99%

A7045 0.0003492889 $17.62 $14.10 $0.00 0.01% 100.00%


When placed in order of

importance, you can see that > 90% of your chances of

winning rest on less than ½ of the codes




E0601 0.0296715848 $1,011.00 $808.80 $24.00 33.00% 33.00%

E0470 0.0054363772 $2,322.20 $1,857.76 $10.10 13.89% 46.89%

A7034 0.1070640535 $106.46 $85.17 $9.12 12.54% 59.43%

E0562 0.0303565011 $272.60 $218.08 $6.62 9.10% 68.53%

A7030 0.0418602648 $170.72 $136.58 $5.72 7.86% 76.39%

E0471 0.0009553137 $5,811.60 $4,649.28 $4.44 6.11% 82.50%

A7037 0.1231723257 $35.73 $28.58 $3.52 4.84% 87.34%

A7035 0.1155849542 $32.36 $25.89 $2.99 4.11% 91.45%

A7032 0.0623698474 $36.68 $29.34 $1.83 2.52% 93.97%

A7038 0.3341535099 $4.80 $3.84 $1.28 1.76% 95.74%

A7031 0.0219373840 $63.14 $50.51 $1.11 1.52% 97.26%

A7033 0.0496539111 $25.71 $20.57 $1.02 1.40% 98.66%

A7039 0.0458239180 $11.79 $9.43 $0.43 0.59% 99.26%

A7046 0.0175893653 $17.66 $14.13 $0.25 0.34% 99.60%

A7036 0.0122401256 $14.00 $11.20 $0.14 0.19% 99.79%

A4604 0.0011388196 $60.46 $48.37 $0.06 0.08% 99.86%

E0472 0.0000093538 $5,811.60 $4,649.28 $0.04 0.06% 99.92%

E0561 0.0004612878 $96.84 $77.47 $0.04 0.05% 99.97%

A7044 0.0001718137 $109.42 $87.54 $0.02 0.02% 99.99%

A7045 0.0003492889 $17.62 $14.10 $0.00 0.01% 100.00%


Notice that the most impactful

codes aren’t necessarily those with the highest “Bid Weight” or

“Bid Limit”. It’s the correlation

between the two that’s most important.




E0601 0.0296715848 $1,011.00 $1,000.00 $29.67 37.85% 37.85%

E0470 0.0054363772 $2,322.20 $1,857.76 $10.10 12.88% 50.73%

A7034 0.1070640535 $106.46 $85.17 $9.12 11.63% 62.36%

E0562 0.0303565011 $272.60 $218.08 $6.62 8.44% 70.81%

A7030 0.0418602648 $170.72 $136.58 $5.72 7.29% 78.10%

E0471 0.0009553137 $5,811.60 $4,649.28 $4.44 5.67% 83.76%

A7037 0.1231723257 $35.73 $28.58 $3.52 4.49% 88.26%

A7035 0.1155849542 $32.36 $25.89 $2.99 3.82% 92.07%

A7032 0.0623698474 $36.68 $29.34 $1.83 2.33% 94.41%

A7038 0.3341535099 $4.80 $3.84 $1.28 1.64% 96.04%

A7031 0.0219373840 $63.14 $50.51 $1.11 1.41% 97.46%

A7033 0.0496539111 $25.71 $20.57 $1.02 1.30% 98.76%

A7039 0.0458239180 $11.79 $9.43 $0.43 0.55% 99.31%

A7046 0.0175893653 $17.66 $14.13 $0.25 0.32% 99.63%

A7036 0.0122401256 $14.00 $11.20 $0.14 0.17% 99.80%

A4604 0.0011388196 $60.46 $48.37 $0.06 0.07% 99.87%

E0472 0.0000093538 $5,811.60 $4,649.28 $0.04 0.06% 99.93%

E0561 0.0004612878 $96.84 $77.47 $0.04 0.05% 99.97%

A7044 0.0001718137 $109.42 $87.54 $0.02 0.02% 99.99%

A7045 0.0003492889 $17.62 $14.10 $0.00 0.01% 100.00%


Notice what happens when

your bid for E0601 is

changed from $808.80 to $1,000.00

Composite Bid jumped from

$72.72 to $78.40




E0601 0.0296715848 $1,011.00 $808.80 $24.00 32.34% 32.34%

E0470 0.0054363772 $2,322.20 $1,857.76 $10.10 13.61% 45.95%

A7034 0.1070640535 $106.46 $85.17 $9.12 12.29% 58.24%

E0562 0.0303565011 $272.60 $218.08 $6.62 8.92% 67.17%

A7030 0.0418602648 $170.72 $136.58 $5.72 7.71% 74.87%

E0471 0.0009553137 $5,811.60 $4,649.28 $4.44 5.99% 80.86%

A7037 0.1231723257 $35.73 $28.58 $3.52 4.75% 85.60%

A7035 0.1155849542 $32.36 $25.89 $2.99 4.03% 89.63%

A7032 0.0623698474 $36.68 $36.31 $2.26 3.05% 92.69%

A7038 0.3341535099 $4.80 $4.75 $1.59 2.14% 94.83%

A7031 0.0219373840 $63.14 $62.51 $1.37 1.85% 96.68%

A7033 0.0496539111 $25.71 $25.45 $1.26 1.70% 98.38%

A7039 0.0458239180 $11.79 $11.67 $0.53 0.72% 99.10%

A7046 0.0175893653 $17.66 $17.48 $0.31 0.41% 99.51%

A7036 0.0122401256 $14.00 $13.86 $0.17 0.23% 99.74%

A4604 0.0011388196 $60.46 $59.86 $0.07 0.09% 99.83%

E0472 0.0000093538 $5,811.60 $5,753.48 $0.05 0.07% 99.91%

E0561 0.0004612878 $96.84 $95.87 $0.04 0.06% 99.97%

A7044 0.0001718137 $109.42 $108.33 $0.02 0.03% 99.99%

A7045 0.0003492889 $17.62 $17.44 $0.01 0.01% 100.00%

Composite Bid: 74.20

Instead, what if we simply raise the “irrelevant”

codes to 1% below Bid Limit

Composite Bid moved from

$72.72 to $74.20

The Conclusion from this Analysis…

• …is that your bid strategy should be focused on a small number of HCPCS codes within a given Product Category. The majority of included HCPCS codes have such a minimal impact on the bid determination as to be practically irrelevant.

• Discounting items with small Bid Values will not likely help you win a bid but will almost certainly hurt you when the winning bid rate (fee schedule) is determined for each of the HCPCS codes within the Product Category.

How Much Are Winning Bidders Paid?

• Once the winning bidder pool has been set, CMS can determine “Single Payment Amounts”

• By HCPC code, the Single Payment Amount is set at the median bid of all winning bidders

• You now have the links to “actual” bid worksheets AND our “what if” worksheet tool to allow you to note and evaluate the true weight of each code.

• The worksheet tool will include “warning” colors for codes with high weights and also for bids that may trigger a bona fide (e.g., too low) challenge and/or prevent typos.

• Again…here are links:http://www.vgm.com/files/EmailPDF/FSS/VGM-BidPreparationAndImpactAnalysisRound1-2017.xls

http://www.vgm.com/files/EmailPDF/FSS/VGM-CompetitiveBiddingBidRound1-2017ImpactAnalysisWorksheet.docx

http://www.vgm.com/files/EmailPDF/FSS/VGM-BidPreparationAndImpactAnalysisRound1-2017.xlshttp://www.vgm.com/files/EmailPDF/FSS/VGM-CompetitiveBiddingBidRound1-2017ImpactAnalysisWorksheet.docx

•So….what ARE the key codes by category?

• (They are highlighted in RED on your worksheets, but let’s a peek now…)

Enteral• The undiscounted composite bid for Dallas is

$1.40

• As an example, if you desires to discount the Enteral category 30%, you must have a discounted composite bid that is approximately equal to $.98.

• There are 17 codes of which you must bid.

• There are only 6 codes that “move” the composite bid by at least 5%:

General Home• The undiscounted composite bid for Dallas is

$637.66

• As an example, if you desires to discount the General Home category 30%, you must have a discounted composite bid that is approximately equal to $446.36.


• There are only 4 (!!) codes that “move” the composite bid by at least 5%:

Nebulizers• The undiscounted composite bid for Dallas is

$21.60

• As an example, if you desires to discount the Nebulizers category 30%, you must have a discounted composite bid that is approximately equal to $15.12


• There are only 3 (!!) codes that “move” the composite bid by at least 5%:

NPTW• The undiscounted composite bid for Dallas is

$7595.55

• As an example, if you desires to discount the NPTW category 30%, you must have a discounted composite bid that is approximately equal to $5316.89

• There are ONLY 3 codes of which you must bid.

• There is only 1 code that “counts at all”!!!!

Respiratory• The undiscounted composite bid for Dallas is

$91.54

• As an example, if you desires to discount the Respiratory category 30%, you must have a discounted composite bid that is approximately equal to $64.08

• There are 5 oxygen “Payment Classes” and 23 codes of which you must bid for a total of 28.

• There are only 2(!!) codes that “move” the composite bid by at least 5%:

Standard Mobility• The undiscounted composite bid for Dallas is

$273.84

• As an example, if you desires to discount the Standard Mobility category 30%, you must have a discounted composite bid that is approximately equal to $191.69

• There are a whopping 153 codes of which you must bid (and most don’t “count” at all!!!!)

• BUT…there are only 5 (!!) codes that “move” the composite bid by at least 5%:

TENS• The undiscounted composite bid for Dallas is

$95.30

• As an example, if you desires to discount the TENS category 30%, you must have a discounted composite bid that is approximately equal to $66.71

• There are only 5 codes of which you must bid.

• And, in TENS –only- most DO count! (4):


• Mark Higley, Vice President - Regulatory [email protected] O: 888.224.1631 C: 319.504.9515

mailto:[email protected]

Session #2

•Tips, Tools and Strategies to Optimize your Business in 2016!

Tips, Tools and Strategies to Optimize Your Business

in 2016

VGM Fall Seminar Series

2015

Tips, Tools and Strategies

1. Become much better at operations/Best practices

2. Market trends

3. Payer consolidation

4. Utilizing Data

5. Growth strategies

6. Population of opportunity

Your Market

HME Operations• Healthcare struggles with

operations• Focus on perfecting

processes within your core business

• Execute reliably and consistently

• Growth• Differentiation• Manage expenses

• Understand your market• Leverage all the best

ideas and resources of your team, your peers, competitors, vendors, experts and other industries

• Don’t be afraid to outsource where it is a better option

• Get control of your AR• Measure Results

OperationsUtilizing Data• We are in a world of big

data• You must be able to

measure the health metrics of the patient population in your core

• You should be utilizing data on the input side and the outcome side

• Know where your business is and where more can be found.

Measuring Results• Identify the key

performance metrics in the core business

• Relentlessly track results• Reach – most of the time

you can do dramatically better

OperationsGet Bigger• Most HMEs are too small• Scale in your core

presents many financial advantages

• Incremental dollars drive profit

Optimizing Technology• Technology is your friend

in optimizing the core• Some opportunities

include:• Playmaker CRM• Billing reimbursement and

audit prevention tools• Workflow management• Paperless office• Billing and operating

system• Fleet management

BenchmarkingReal Retail,

5%

HME Retail, 30%

None, 65%

Retail

Lincare’s Product Mix

Oxygen, 41%

CPAP, 17%

Enteral/Infusion, 7%

Specialty- PT/INR, NIV, NPWT, 27%

Other, 8%

2014

Average duration of an O2 patient

2000 22 months

2005 28 months

2014 34 months

Benchmarking

Medicare, 38%

Medicaid, 9%Medicare Advantage, 4%

Commercial, 40%

Patient Pay, 2%Other, 7%

2007

Medicare28%

Medicaid17%Medicare

Advantage10%

Commercial31%

Patient Pay8%

Other6%

2014

Lincare Payer Mix

Medicare, 52%

Medicaid, 11%

Commercial, 31%

Patient Pay, 6%

2014

Benchmarking

How Lincare Compares to you

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

11.0%

12.0%

13.0%

2009 12.3% 6.7% 5.0% 9.9%

2010 11.2% 6.5% 4.7% 8.9%

2011 10.3% 6.3% 4.7% 8.8%

2012 10.3% 5.8% 4.2% 9.1%

Sales, billing,

corpDel & Equip clinical

Brach ops,

CSRs

Benchmarking

Expenses and Profit as a % of Revenue

Personnel Costs - % of Rev

31.0%

29.5%

35.3%34.0%

27.0%

28.0%

29.0%

30.0%

31.0%

32.0%

33.0%

34.0%

35.0%

36.0%

Apria Lincare Hanger DME

DSO

0 10 20 30 40 50 60 70

Lincare

Apria

USPT

Hanger

Liquidity – Days Cash Need Available

0

10

20

30

40

50

60

70

80

Lincare Apria Rotech Hanger

Key Metrics• Personnel costs as a

percentage of revenue

• Branch operations costs as a percentage of revenue

• Cost of goods/products as a percentage of revenue

• Days to: bill, collect, deliver

• Per unit cost on key activities: Intake, Billing a claim, Delivery, Sales/business generation

• Key volume metrics, like masks per patient per year, percentage of orders filled, accessories as a percentage of base

• Revenue per patient• Lifetime value of a

patient equipment type• Length of stay

Market Trends• Do it yourself healthcare

• Consumers taking care of own care

• Balancing privacy and convenience• 5 million records compromised last year

• High cost patients spark cost saving innovations• 1 percent of patients generate 20 % of healthcare spend in the US

• Open everything to everyone• Data transparency

Market Trends• Getting to know the newly insured

• 10 million adults gained coverage due to ACA• State Medicaid expansion

• Redefining health and well being for millennials• Health system want to engage, attract and retain• By 2030 will make up 75% of US workforce• Born between 1982- 2004

• Partner to win• Collaborative efforts

Market Trends• Patient Pay- Collect Up Front!

• O&P

• Hospital or clinic based retail

• Pain Relief

• Specialty athletics

• Home Modifications

• Specialty Vehicles

• Home monitoring

• Accessories

• ecommerce

• Self-Health

Market Trends• The growth of deductibles

• 4% in 2005 to 55% in 2015

• Consumers are making more cost conscious choices

• “Shopping for care”

• Low cost alternatives- urgent care and retail clinics

• Patient Pay• Collect from patient up front

• Increase cash pay product mix

Can you match the service to the line in the chart?• Cardiac• Mom-Baby• PCP visit• Cancer• Convenient Care

Healthcare service line volumes over time – one health center

Can you match the service to the line in the chart?• Cardiac• Mom-Baby• PCP visit• Cancer• Convenient Care

Market Trends• Growth of ACO’s

• 626 in US as of May 2014 covering 20.5 million lives

• Expect more health system owned payer groups

• Intensity of rivalries• Fight over patients, physicians and payer contracts

• Reduced inpatient procedures• Generates 6-10 times higher revenues compared to outpatient

Market Trends• Shift from fee-for-service to population health

• 90% of payers, 81% of hospitals have agreements• 2/3 of payments by 2020

• Huge growth in IT spending• Largest capital investment• 4% revenues spent• Huge cost over the next several years

• Competition for physicians• Large demand, small supply• Rural area’s struggling• US physician shortage will be more than 130,600 by 2025• The need for trained specialists to care for aging with double by

2025

“New” is Necessary• Many core HME products are in mature portion of

lifecycle, or beyond

• New products have always been a key part of successful HME story

• New “customer” targets are also an opportunity• Orthotics and Prosthetics

• Infusion therapy

• Retail

• Home/Vehicle modification

• New HME products like NIV, chest compression

Payer Consolidation• Few control the many

• 60% of the health insurance market served by 10 plans

• In 40% of 388 US metros, 1 insurer controls 50% of commercial insurance market

The Big 5D

olla

rs in

Bill

ion

s

$130.5 $73.9 $58 $48.5 $34.9

Recent Mergers

• In 2015, two large mergers were announced:

Aetna/Humana• New company: 33M members and 2015 revenue of

$115B

• Louisville-based Humana began as a single nursing home in 1961, is now the 2nd largest player in Medicare Advantage• Medicare’s private managed-care option – enrollment 3x

in past decade• Will continue to grow with surge of baby boomers

entering Medicare • Deal gives Aetna access to tech and ancillary services

acquired/developed by Humana to manage cost/quality of care for chronically ill Medicare beneficiaries

Aetna/Humana• Humana is now the most widely available Medicare

Advantage option nationally

• The combined company would have 4.34M Advantage members with the addition of Humana’s 3.2M enrollees

Aetna

33 states as Medicaid MCO

28 Medicare Advantage Markets

Humana

44 states as Medicaid MCO

44 Medicare Advantage Markets

Anthem/Cigna• New company: 56M members and revenue of $115B

• At the heart of the merger is Anthem’s desire to expand their government business, particularly in the Medicare Advantage market

• The combined company would have 1.1M Advantage members (well behind Aetna/Humana’s 4.34M)

• Long term strategy to build its Medicare business through the biggest strength of Anthem and Cigna – their large employer-group business

• More than 80% of revenue will come from commercial contracts with employers across the country

• Anthem’s goal: retain their massive pool of workers and their families aging into Medicare

Health Insurer M&A• How do Health Insurer mergers affect you?

• Narrower provider networks• Response to rising costs

• Narrowing of physician network now, but same model applies to other networks• Home health, DME, custom rehab

• Narrowing of networks contributes to decrease in patient satisfaction

• Health Insurers looking to drive costs down• What does that do with your rates?

Health Insurer M&AMergers won’t stop:

• AHA is fighting Health Insurer mergers, but what are Health Systems doing themselves? • They’re following the same M&A trend as Health

Insurers

• ACA didn’t initiate this trend, but its policies have certainly ignited it

Utilizing Data as part of growth strategies

Why should you get my business?

• Patient Health Outcomes as sales/marketing tool

• Hospitals/Health Systems/Payers searching for ways to reduce costs and avoid readmissions• Bundled payments• HRRP – Hospital Readmission Reduction Program• Integrated provider networks

• HME’s can play a large role as transitional care providers

Metrics Hospitals Care About…• Targeted sales/marketing outreach to hospitals presenting

transitional care solutions:

• Compliance rates/programs for patients

• Timely delivery for discharges

• Length of stay by disease state

• Readmission rates

• Readmission data available on hospitals:• https://data.medicare.gov/Hospital-Compare/Hospital-

Readmission-Rates/92ps-fthr

https://data.medicare.gov/Hospital-Compare/Hospital-Readmission-Rates/92ps-fthr

Identifying growth opportunities with data

• Reimbursement pressures forcing HME’s to get bigger and more efficient

• Key targeting strategies:• Grow your core business – respiratory, rehab, sleep• Find new products to grow revenue and diversify your

business

• Data can help focus sales/marketing on key physician targets

• Are you reaching potential with your referral sources?

• Who should we target for our new product rollout?

Utilizing your EMR

• Tracking physicians you receive referrals from by product and volume• When was last referral

• When was last sales contact

• What is volume change year-over-year

• Other physicians in their office

• Triaged list of sales/marketing plans based on value to your business

Who is Diagnosing?

• COPD?

Internal Medicine 86,635 60,524 5,839,303 2,481,458 * 67.401 28.643

Family Practice 83,246 67,735 5,218,748 2,241,095 * 62.691 26.921

Pulmonary Disease 11,794 25,220 3,030,825 1,192,010 * 256.98 101.069

Emergency Medicine 32,469 12,548 1,410,036 1,008,300 * 43.427 31.054

Cardiology 20,843 17,519 882,729 581,792 * 42.351 27.913

PRIMARY SPECIALTY PRACTITIONERS FACILITIES CLAIMS PATIENTS PROCEDURESCLAIMS PER

PRACTITIONER

PATIENTS PER

PRACTITIONER

Who writes for CPAP?

BUCKET PRIMARY SPECIALTY PRACTITIONERS FACILITIES

PROCEDURES

PROCEDURES PER

PRAC

CPAP ANY 136,716 7,846 5,564,613 40.70

CPAP Pulmonary Disease 9,110 6,669 2,254,608 247.49

CPAP Family Practice 46,738 6,035 807,423 17.28

CPAP Internal Medicine 33,629 5,885 715,344 21.27

CPAP Neurology 3,530 4,709 579,448 164.15

CPAP Nurse Practitioner 10,544 4,373 301,068 28.55

CPAP Otolaryngology 4,271 3,096 162,679 38.09

CPAP Sleep Medicine 338 2,103 192,248 568.78

CPAP Physician Assistant 7,000 3,345 172,981 24.71

CPAP Cardiology 4,669 2,956 103,593 22.19

Targeting your sales force with claims data

• Are we reaching our potential with current referral sources?

Identifying Cross Selling Opportunities

• Are we offering all services to current referral sources?

Who are physicians in your market that work with your competitors?

How much does a sales call cost?

Increase the value of each call a Rep makes by targeting those physicians that provide the best opportunity for growth

Maximizing Sales Force Output

Cost of Sales Rep $100,000.00 (including benefits)Days worked/yr Avg 200Calls/workday 7

--------------Cost per touch $75.00 (not counting operating expenses)

Segmenting & Engaging Referral Source Prospects

• Segmenting Referral Source Prospects• Targeting groups of physicians based on potential value / relationship• Value, segment and assign sales opportunities• Create targeted sales/marketing plans for each segment to optimize

contacts with key prospects

• Targeted focus on key referral sources allows more resources to target account w/ multiple mediums

• Direct mail• Inside sales calls• In-person visits• Follow up calls

Fish where the fish are!

RETAIL IS AN OPTION • Hundreds of HME Suppliers are investing in Retail

Programs

• In the next 3-5 years there will be a regional HME Caretailer with more than 5 locations

• Boomers have more wealth than any other generation before it, they will pay for care, comfort and convenience

• Branding your business is more important than ever

Traditional Retail ScienceThe five core retail competencies:

• Store experience and design

• Product sourcing and merchandising

• Financial analysis and projections

• Operations and training

• Marketing and advertising

People will spend money on…• Holistic/ All Natural Products

• Quality products (better and best)

• Comfort Items

• Image items (aesthetics are big-time important)

• Tag along Accessories

• Athletic Performance Products

• Everyday Active and Recovery Products

• Safe at Home Senior Products

Boomers want an experience• With Consumers paying more for their own healthcare

we must focus on an experience where they want to spend their money with you!

• Our Product expertise will set us apart, we must know our products very well and match them expertly to the consumers needs

• We need to upgrade customer service so we can educate on a complete product packages to increase our average ticket sales

• We need to take advantage of the trusted relationship we already have with existing customers

• We are viewed as companies that only have products for the very sick, Boomers do not get sick or old….

Creating the Cash Model! • Most times the best person to run your Cash/Retail

is not your current employees and most likely not current ownership!

• Knowing that it requires a model that is an180 degrees different mindset from your current third party model

• To be a successful Caretailer requires an all in management team

• With the right people in place, many Caretailers can break even in 6-9 months

The Best Marketers Win• With cash becoming a prominent payer for healthcare,

we must focus on marketing direct to the consumer

• Website marketing and analysis should be a major focus and investment

• The #1 marketing target should be females between the age of 35-60

• We are seeing more HME with dedicated Retail Marketing Managers than ever before

• Think about being a marketing company that happens to provide HME

THINK DIFFERENTLY• Analysis Market Data and better collect data on our

activities

• Set Benchmarking goals for each department of your organization

• Explore a partnership type relationship with your targeted Health Care Systems

• Diversify your offerings to higher margin products and payers

• Develop a cash/ retail/ Caretailing program

• Market like never before

VGM CAN HELP!!!• Market Data focused on utilization where you do business!

• Caretailing , from market analysis and forecasting, showroom design and set up, product selection, in-store operations and marketing

• Government Relations and Regulatory Experts

• Homelink! VGM Fulfillment! Audit Expertise!

• Web Design, maintenance and WEB MARKETING Services

• Insurance and Surety Bonds Financing/Leasing

• Employee Education, Billing and Reimbursement

• Off the shelf Marketing, Fleet Management

• HEARTLAND CONFERENCE

Population of Opportunities


Ryan Ball Director, VGM Market Data

(866) 394-6868 / (319) [email protected]

www.vgmmarketdata.com

mailto:[email protected]://www.vgmmarketdata.com/

Session #3

•Competing Forces Within: Balancing Sales with Successful Reimbursement

Competing Forces Within: Balancing Sales with Successful Reimbursement

Learning Objectives Examine the different internal MOTIVATION

in deciding when a product is ready to be delivered

Identify the NON-NEGOTIABLE REQUIREMENTS for Medicare reimbursement

Illustrate the different OUTCOMES of these decision

Implement a protocol to ensure a SUCCESSFUL reimbursement outcome

Employee Motivation/Agenda/Measurable

Identify what motivates each employee (how each is evaluated)

Identify possible conflicting motivations

Understand how to address these for the best overall outcome for the company

DELIVER THE PRODUCT?

YESNO

Employee Motivation/Agenda/Measurable

Service the patient timely

Sales volumes - pressure from management for revenue

End of month sales quotas

Claims paid

Successful audits

Commission

Non-Negotiable Requirements

Aren’t all requirements……..requirements

How could some requirements be negotiable

Interpretation of requirements

Motivation (what makes that person look good)

What is best for the company as a whole (long term)


Why

Gray AREAs?

Wanting to see it a certain way due to motivation?


Medical necessity (coverage criteria met)

All least costly alternatives ruled out with objective measurements (manual muscle test, range of motion, saturation, pain scale, etc.)

Legible identifier (all documents)

Proof of receipt dates of the required documents (date stamp)

Face to face (chart note from ordering practitioner in the format of other entries)

Home assessment

Assignment of benefits (AOB)

Supplier standards (i.e. warranty information, etc.)

Delivery ticket (detailed)

Non-Negotiable Requirements - PMDs

LCMP evaluation signed, dated and co signed and dated with concurrence by ordering practitioner

ATP assessment signed and dates (no attestation must show work)

LCMP non financial attestation

Home assessment

Purchase option letter for base and capped rental accessories (even as a replacement)

7 Element order

Detailed Product Description (DPD)

Non-Negotiable Requirements – Respiratory

Properly completed CMN/DIF

Good test results (blood gas study, sleep study)

Patient and/or caregiver education provided

Capped Rental or Inexpensive Routinely Purchase Letter

Detailed Written Order (WOPD) (detailed)

Common Scenario

You know the patient qualifies for the item ordered BUT….

You obtain the documentation but something is something is missing/wrong?

You contact the clinician and let them know that based on the documentation provided the patient doesn't meet the coverage criteria for the item ordered and explain why.

They say, I'll write an addendum to address the missing or incomplete information.

Addendum / Amendment

How to best handle addendum/ amendments

AVOID them if possible!

Be Proactive!

• Invest in PROACTIVE education for physicians (other involved clinicians)

• Cheat sheets (condensed guides)• Live training (brief – ideally 1-2 hours but

anything is better than nothing)• NOT forms or templates or examples

What is the purpose of an addendum/amendment?

Correct an error

Add additional information (as a clarification referring back to original encounter)

Address something that was found to be either not clear or missing (as a clarification) from the examination / evaluation notes

Outcomes – Which Path Will You Choose?


Rush delivery

Denial

Appeal

Audit recoupment

Appeal

Resources (reactive)

No chance to obtain what is required (DOS / no pressure)

Write OFF $


Deliver ONLY When 100% READY

Proactive (up front PRIOR to delivery)

Opportunity to obtain what is required

SUCCESSFUL Reimbursement (no Audit worry)

Implement a Protocol for Successful Reimbursement

Ensure everyone involved understands the requirements and are acting in the best interested of the company

Assign someone within as the final decision (give them the authority to make these decisions without question)

Don’t allow delivery until all requirements are met

PROACTIVELY ADDRESS COMPETING FORCES WITHIN

Contact Information

Dan Fedor

VGM / US Rehab

O: 844-794-8459

F: 844-307-5729

[email protected]

Ronda Buhrmester, CRTVGM / US RehabO: 888-665-6518F: [email protected]: @RondaBuhrmester

mailto:[email protected]:[email protected]

Session #4

•The 2016 rural roll-out, bundling, acquiring contracts and the MPP Methodology.

“The Affordable Care Act amended the Medicare Modernization Act statute to mandate use of

information from the DMEPOS competitive bidding program to adjust the fee schedule amounts for DME in

areas where competitive bidding programs are not implemented by no later than January 1, 2016.”

Introduction…

• On October 31st, 2014, the Centers for Medicare & Medicaid Services (CMS) released a “final rule” (CMS-1614-F) which affects all durable medical equipment suppliers in the United States.

• The Rule establishes a new reimbursement methodology that makes national price adjustments to payments for Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) items currently paid under Medicare fee schedules.

• This affects all HCPCS codes currently included in the Round 1 and Round 2 geographic competitive bidding areas.

• Reimbursement for these items will be reduced to an amount based on the current competitive bid “single payment amounts”.

• Today I will explain the various “regions” within the United States that CMS has created (see next slide, Texas suppliers are included in the “Southwest” region); with each region having its own unique “regional single payment amounts”.

• Examples of the new reimbursements will be offered for high utilization DME items, as well as a link to a calculator which includes all affected items.

• For the competitive bid DME items, the final rule phases in, over 6 months, a new reimbursement rate for non-competitive bidding areas (CBAs).

• On January 1, 2016, the reimbursement rate for these claims (with dates of service from January 1, 2016 through June 30, 2016) will be based on 50 percent of the un-adjusted (current) fee schedule amount and 50 percent of the adjusted (reduced) fee schedule amount which will be based on the regional competitive bidding rates.

• Starting on July 1, 2016, reimbursement rate will be 100% of the adjusted fee schedule amount which will be based on regional competitive bidding rates.

• Industry stakeholders, including VGM, AAHomecare and the state associations are attempting to delay and/or mitigate the implementation on January 1, 2016 of this Rule.

• We argue that the application of payment rates, set by a “competition”, to non-CBAs is flawed and will disrupt Medicare beneficiaries’ access to the DME items they need.

• In CBAs, suppliers accept contracts for DME items at a lower rate because there will be a reduced number of suppliers that can operate in that bid area.

• Suppliers try to make up for the drastic payment cuts through increased volume of beneficiaries served.

• As a result of CMS’ final rule, suppliers - such as those in attendance today- in non-competitive bid areas will receive the same drastic payment cuts set in CBAs, without exclusive contracts or increase in volume of business.

• The industry also has data that indicates providing DME items in rural areas have a higher cost than in urban areas.

• Today I will clarify the background, final rule detail and proposed implementation of the program.

• All of you will receive estimates of the new “regional single payment amounts” via an electronic link.

• While the industry will not give up on its fight against competitive bidding, DME staff personnel must be aware to the likely continuance of the program and prepare accordingly.

• Once more, the Affordable Care Act amended the Medicare Modernization Act statute to mandate use of information from the DMEPOS competitive bidding program to adjust the fee schedule amounts for DME in areas where competitive bidding programs are not implemented by no later than January 1, 2016.

• CMS estimates that by applying bid rates throughout the entire United States it would save over $7 billion over FY 2016 through 2020.

• This obviously affects the many non-metro regions of Texas!

Summary…• Beginning January 1, 2016, CMS will implement the Patient

Protection and Affordable Care Act’s directive to adjust payments nationwide based on DMEPOS Competitive Bidding Program (“CBP”) pricing, starting with fourteen categories of DMEPOS items.

• Unlike prior CBP rounds, which offered suppliers exclusive contracts in large metropolitan areas in exchange for reduced reimbursement, under the 2016 DMEPOS fee schedule CBP updates, the reduced rates will apply to suppliers nationwide, without exclusive market share.

• While CMS views this expansion as a source of great savings for Medicare, DMEPOS suppliers argue that reduced payments will not even cover their costs.

• The CBP currently is employed in 109 CBAs in 43 states, plus a national mail order program for all states and territories.

• The average savings from the latest CBP rounds show significant reductions from then-existing DMEPOS fee schedule amounts: The Round 1 CBP Rebid, initiated in 2011, achieved a 32 percent average reduction; Round 2, initiated in 2013, achieved a 45 percent average reduction; and the Round 1 Recompete, also initiated in 2013, achieved a 37 percent reduction.

• As I noted previously, CMS is required to recompete contracts at least once every three years, and has now initiated a recompete for Round 2. For the items included in these CBP rounds, the lower payments amounts established by competitive bidding will be used beginning in 2016 to set nationwide payment amounts that apply outside the geographic areas of the CBAs.

• Under the Final Rule, CMS stated it attempted to “accounts for regional variations in costs”, establishing Regional Single Payment Amounts (“RSPAs”) calculated for each of eight regions.

• CMS calculates the RSPA for each region using the unweighted average of the SPAs for a DMEPOS item from all CBAs that are fully or partially located in that region, regardless of population.

• CMS also states that the unweighted average avoids giving “undue weight” to SPAs in more heavily populated areas. CMS then uses the average of each RSPA, weighted by the number of states in that region, to calculate a national average RSPA.

Let’s look at this more closely…• Once more… CMS will adjust fee schedule amounts for states in different

regions of the country based on previous competitive bidding round pricing in these “regions”.

• The regional prices would be limited by a national ceiling (110% of the average of regional prices) and floor (90% of the average of regional prices).

• There were originally three possible “Regions” in the proposed rule (see next).

• Again, Texas suppliers here today service the “Southwest” BEA region.

• CMS determines a regional price for each state equal to the average of the single payment amount for an item or service from the CBAs that are fully or partially located in the same region where the state is located.

• CMS determines a national average price equal to the average of the regional prices.

• Adjust fee schedules annually using CPI-U

• Revise the SPA each time there is a new round of bidding.

• BUT…to be clear, the current RSPAs have already been determined using Round 2 (e.g., Atlanta) and Round 1 recompete (e.g., Miami) single payment amounts.

• And, CMS’ Joel Kaiser has suggested that if the Round 2 recompete SPAs are determined prior to the roll out, these prices will be used.

• “Although we believe that the costs of furnishing items and services in rural areas are different than the costs of furnishing items and services in urban areas, there is no evidence to support a statement that the difference in costs is significant.

• However, in order to proceed cautiously on this matter in the interest of ensuring access to covered DMEPOS items and services, we are proposing to phase in the price adjustments, as explained below, so that we can monitor the impact of the adjustments as they are gradually phased in.”

• What this means: One half the reductions take effect January 1, 2016; the remainder on July 1, 2016.

While not released…

• We have the current SPAs in all markets from the current programs.

• As CMS has provided us the methodology to determine the regional payment amounts (RSPAs), and has confirmed that the “BEA” regional array will be utilized, we can hence estimate the RSPAs for Texas and the other regions now (*).

(*) This assumes the R2RC prices are not determined in a timely manner; if they are, then the following estimates may not be accurate

Summary of Provisions• As noted, the new adjusted pricing for DMEPOS CBP items will begin on January 1, 2016. This will be a phase-in process over 6 months, allowables will be reduced by 50% on 1/1/16 and 100% on 7/1/16.

• CMS finalized a pricing methodology for non-competitive bidding areas.

• A rural area will be defined as a postal zip code that has more than 50 percent of its geographic area outside of a metropolitan area (MSA) or a zip code that has a low population density area that was excluded from a competitive bidding area. The payment amount will be 110 percent of the average of the SPAs of all the areas where CBPs are implemented.

• Let’s look at Texas:

• Counties in an “orange” metropolitan area but not included in any CBA are paid at the RSPA.

• Texas is in the Southwest region.

• Using the averages of the E1390 oxygen single payment amounts in the of all CBAs in this region, the reimbursement would be $137.74 on January 1, 2016, and then $94.56

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