On January 12, 2015, Senator Rob Portman (R-Ohio) and a bipartisan team introduced a bill to require state licensure and bid bonds for companies who bid for contracts under the Medicare DMEPOS competitive acquisition program. If you run a company that manufacturers durable medical equipment, prosthetics, orthotics or supplies (DMEPOS for short), you may wonder how this bill may affect your bidding abilities for future projects. While it's important to note that the bill may not pass or may be altered before it passes, here's what you need to know about its current form:
1. State Licensure
The bill has very sparse text around the issue of state licensure and in fact, only uses the term "licensure" four times in its text. Essentially, the bill states that entities who bid on contracts under the Medicare DMEPOS program must have the correct state licensure, and they must have it in place before the bidding deadline.
Currently, the Centers for Medicare and Medicaid Services already state that they will only award contracts to entities who have the correct state licensing in place, and bidding entities must have state licenses in every state in which they provide items and services. Mail-order suppliers must have licenses for every single state as well as the District of Columbia, Puerto Rico, the U.S. Virgin Islands, Guam and American Samoa. That means that currently, in order to claim a winning bid and carry through the work, you must have the correct licensing in place.
The new bill adjusts this criteria only slightly, in that it requires bidders to have their licensing in place before bidding. For conscientious bidders who were already used to having everything squared away before bidding, the state licensure portion of the new bill makes effectively no change to their process. To people who prefered to get their licensing at the last minute, this bill will require them to get licensed in a more timely fashion.
2. Bid Bonds
In addition to having the right licenses in place, DMEPOS bidders must also have a bid surety bond in place. To understand a bid bond, you must first understand the basics of surety bonds. A surety bond is a bond that a contractor uses to assure a project owner that he or she will finish the project on time and relatively on budget.
If the contractor fails – for any reason – to complete the project, the project owner claims the value of the surety bond from the bond issuer. The project manager then uses these funds to hire new contractors and cover expenses related to the delayed project. Similarly, a surety bid bond insulates Medicare from any damages or expenses it may incur if a winning bidder does not accept the contract. The value of the bid bond covers expenses related to delays in the project and choosing new bidders.
Under the current terms of the new bill, the bid surety bond must be worth $50,000 to $100,000 for every area in which you are bidding. If you lose the bid, the value of the surety bond is returned within 90 days. If you win the bid, one of two scenarios may play out.
If your winning bid was at or less than the median composite bid and you decide not to accept the bid, you forfeit your surety bid bond. However, if your winning bid was over the median, you can turn down the contract, and your bid bond will be returned.
According to the bill's authors, this requirement serves to protect Medicare and other bidders. For manufacturers and suppliers, this requirement simply means that they need to back up their bids with a bond. To learn more about bid bonds and surety bonds in general, contact a surety bonds expert at http://www.laprescali.com.