June 12, 2019
By: David Groll, Founder and CEO of Circadiance
The registration window is now open for the DMEPOS Bidding System secure portal. Does your company plan to submit a bid for Competitive Bidding Round 2021?
There have been a number of significant changes to the system from the previous round. For instance, the new round is based on “Lead Item Pricing” which determines bid pricing for a whole category of items based on the bid price of one item in the category. There is also a “clearance price” which will in effect become the new payment rate for that lead item and be used to determine the payment rate for all other items in the category.
CMS has set up a web site to help explain the new system. https://www.dmecbpeducation.com/
This web site includes a “Bid Calculator” which will help you determine the effect of a new rate for the lead item on the rate you are able receive for all items in the category. This should help you determine how much to bid for each lead item in the categories you want to supply.
I ran a quick test to determine how this new bid system will work. I chose our local CBA (Pittsburgh, PA) and selected CPAP products, where the January 2019 rate for a CPAP is $435.40. If I input a bid rate of $435.40, the average price for all of the items in the CPAP category went down on average by 19%. Conversely, I raised the bid price for a CPAP to $540 (24% increase) just to keep the average price for all of the items in the category the same. A bid price of $590 (36% increase) resulted in an increase of the average price for all items in the CPAP category of 10%.
Of course the payment rate is only one factor in determining how much revenue the winning bidders will receive. A more detailed analysis would consider the frequency that each item in a category can be billed and how much of each item you expect to sell in a year.
The takeaway from this quick analysis is:
- You need to learn to use this bid calculator and any other tools or training you can find to understand how the new rules will impact your revenue.
- You may need to bid a significantly higher rate than the current allowable just to keep average prices at their current level, and even higher if you want to see prices rise.