A Successful Competitive Bidding Model

July 8, 2014

Brief Legislative History• The Balanced Budget Act of 1997-Demonstration Projects• The Medicare Prescription Drug, Improvement and Modernization Act

of 2003—Established NCB to be phased in in successive rounds starting with 10

• The Medicare Improvements for Patients and Providers Act of 2008—Halted Round 1 after 14 days

• Patient Protection and Affordable Care Act of 2011—Requires Round 2 to be expanded from 70 to 91 MSAs and extend NCB rates nationally by 2016

• Budget Control Act of 2011—Requires Medicare Provider Payments cut 2% (AKA—Sequestration)

• American Taxpayer Relief Act of 2012—Requires HHS to apply payment rates from national mail order for diabetic supplies to non-mail order

Financial Impact• Discount Capacity• Sustainable Growth Rate/Sustainable Loss

Rate• Key Threats

–Rate Cut–Deductibles–Audits

Elements of Strategy

• Acceptable Profit Margin—Know It/Operate to It!

• Costs Associated with NCB Contract

• Capabilities, Vulnerabilities and Intentions of Rivals

• Consequences of Winning

• Consequences of Not Winning

Planning for NCB• Identify SWOT

• Create Strategic Plan

• Identify Tactics to Accomplish Plan

• Manage to Plan

• Cash Flow vs. A/R

CB Preparation and Planning

• Core Competencies

• Cash Flow Management

• Outrun the Sins of Your Past

Business Expansion

• Open or acquire location in CBA–Open new locations for additional bid opportunity–Acquire non- CBA for diversification

• Expand to Non-CBAs• Diversify Payor Mix (Medicare still best payor)• Direct Contracts

– Hospice– Veterans Administration– SNFs

NCB Is In Place—Now What?

• The Strategic Planning Process• Plan A—Winning Our Bids is Critical

– The Winner’s Curse—now what?– Changes in operations– Changes in staffing– ABC process now really kicks into gear– Know your business/know your weaknesses

• Plan B—Not Winning Provides Chaos and Opportunity– Rely on branches in non-NCB areas (2016)– New programs/New services not affected by NCB (managed care, specialty programs

Vents, Infusion, Retail, Adjacent Business Opportunities• Plan C—Sell your company…