In a recent article, HME News has found that the next competitive bidding round may provide hurdles for small supplier networks, as the logistics may be too prohibitive.
Why?
For one, the Centers for Medicare and Medicaid Services (CMS) plans to implement a Remote Item Deliver (RID) program in the next round of the Competitive Bidding Program (CBP). This could, effectively, exclude smaller suppliers.
Baird, chairman of the Health Care Group at Brown & Fortunato, states: “The goal of CMS that at least 30% of the winning bidders be small suppliers – that’s unrealistic.”
He goes on to mention that, though small suppliers can form networks, the qualifications are restrictive, including:
- Each small supplier network cannot have more than 20 suppliers whose gross revenue cannot exceed $3.5M annually.
- The small suppliers must certify that they cannot service the entire competitive bidding area (the entire country) but must agree to furnish all the items in the category for which the network is awarded a contract.
- The combined market share of all suppliers in the network cannot exceed 20% of demand for that particular category.
- All network members must meet enrollment, accreditation and state licensure requirements.
Baird summarizes the problem well: “The challenge with putting this together is let’s say we have a small DME that grosses $3.5 million – it will have to contact (other small suppliers around the country) and bring them onboard. They’d have to determine does each supplier meet the criteria, combined do they all have the licensure and so on and so forth. Logistically, it can be a challenge.”
What Does This Mean for DMEs/ HMEs Today?
1. Small suppliers may be effectively shut out
As mentioned, the new nationwide Remote Item Delivery (RID) model requires contract suppliers to serve beneficiaries across the entire country rather than in regional bidding areas.
For many local and regional DMEs, this means:
- Higher administrative burden
- More licensure and compliance requirements across multiple states
- Greater operational complexity
- Lower likelihood of submitting a bid at all
2. More suppliers may exit Medicare fee-for-service
Because competitive bidding only applies to Medicare fee-for-service beneficiaries, some suppliers may conclude that the cost of competing outweighs the potential revenue.
3. Industry consolidation could accelerate
Many providers believe competitive bidding will push more small companies toward:
- Selling their businesses
- Merging with larger organizations
- Exiting affected product categories altogether
Industry surveys have shown many providers already expect further consolidation as competitive bidding returns.
4. National providers may gain market share
The nationwide RID structure inherently benefits organizations that already have:
- Multi-state licenses
- National fulfillment capabilities
- Large compliance teams
- Strong purchasing power
Smaller suppliers may struggle to compete against vertically integrated or national organizations that can spread costs across a larger patient base.
5. Automation becomes increasingly valuable
If reimbursement pressure increases and administrative requirements grow, suppliers will need to operate more efficiently.
This creates a stronger business case for high-impact workflow automation, such as:
- Resupply automation
- Order processing automation
- Documentation workflows
- Billing workflow visibility
