Mark Higley Answers Round 2 Recompete FAQs

Posted on in Billing/Reimbursement, HME Government Issues

This week we follow up Mark Higley’s analysis in last week’s CONNECT of the Round 2 Recompete bid winners with several frequently asked questions regarding Round 2.

Q: Tell me once more how to convert the “SPA” to the “purchase amount” that I bid on.

A: Oxygen was a monthly bid and its “single payment amount” is a monthly payment for 36 months.  That’s the easy one.

Capped rental – items like CPAP, K0001 wheelchairs, hospital beds (but NOT the wheelchairs that used to be paid with a first-month purchase option like K0823) are paid in 13 months. Here is how to convert:

Very simply, the SPA you see for capped rental items is the payment you will receive on the first, second and third month of the rental. It is equal to 10 percent of the purchase price of the final bid program payment. As before the bid program, you receive this amount for the first three months (of the 13), then that amount is reduced by 25 percent. 

Here’s an example: 

SPA is $100. That means the purchase price (how you bid) must have been $1,000.

You receive $100 for the first three months. Then, you receive $75 (think 75% of the SPA) for 10 more months. Add it up! 3 X $100 = $300; 10 X $75 = $750; total = $1,050.

If your patient uses the capped rental equipment all 13 months, you will receive 5% “more” than the purchase amount ($1,050 versus $1,000).

Quick math! Take the SPA for capped rental items and multiply it by 10.5. That is the amount you will be paid, assuming the patient uses the equipment all 13 months. Thus, short cut: SPA X 10.5.

Q: So, what about those power wheelchairs?

A: Different formula! It affects the old “first-month purchase option” chairs (K0813 – K0898).

“Effective for items furnished on or after January 1, 2011, the section regarding the lump sum purchase payment for standard power wheelchairs (classified under the HCPCS codes for Group 1 power wheelchairs or Group 2 power wheelchairs without additional power options) was eliminated.”

The SPA for these chairs is the first, second and third month rental amount (just liked capped rental). BUT, it is not 10% of the purchase bid program amount. It is 15%.

Assume the chair has a purchase price of $1,000. You will receive the SPA (first three months of rental) of $150, or 15% of the purchase.

After three months, it drops to 6% of the purchase, or $60 for 10 months.

Let’s do the math: 3 X $150 = $450, plus 10 x $60 = $600. Total is $1,050; again 5% “more” than the purchase! Short cut: SPA x 7.

Q: I bid 20 percent higher than the SPA and still was offered a contract. How did that occur?

A: At the risk of boring readers with any statistical mumbo-jumbo, the bidding offers had a “positive skew” (see graphic below), with the right tail of the distribution fairly long.

And, most suppliers listened to our coaching about not offering high unit capacities in their bids.

What it means is that many companies who bid at the higher end of the cut-off – and offered minimal units – were still offered contracts. But, to be clear, the program “rules” require the SPAs to be at the median bid. The graph above, unfortunately, illustrates the outcome of requirement.

Q: Are there variances among the regions or by CBA?

A: Yes! And, we are working on a summary. In the meantime, it appears that the “brick and mortar” licensing states have fared better (well, comparatively; none of these new reimbursements are acceptable) than those states without such restrictions. 

Take a look using the same five high-use codes:

These two states (Alabama and Tennessee) had brick and mortar restrictions in place before the R2RC bid:

These two states (Colorado and Kentucky) had legislation relative to licensing, but still some R2RC out-of-state bids were received due to enactment timing and/or enforcement/exceptions allowed:

As always, I am here to offer support, suggestions and to answer your questions. I am proud of my 18+ years representing you, the HME provider. My contact information is below.