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Bidding
Financial Measures

The laws and regulations governing the Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) Competitive Bidding Program specify that the Centers for Medicare & Medicaid Services (CMS) may not award a DMEPOS Competitive Bidding Program contract to a supplier unless that supplier meets applicable financial standards. Applying financial standards to suppliers is needed to assess the expected financial health and quality of suppliers, estimate the total potential capacity of selected suppliers, and ensure that the selected suppliers are able to continue to serve market demand throughout the duration of the contract period.

The Request for Bids (RFB) Instructions specify the financial information used to evaluate bidders' financial health. CMS uses the required tax return extract and the required financial documents to calculate standard accounting ratios for each bidder. These ratios, along with the credit report and numerical credit score or rating, are used to determine bidder compliance with financial standards.

If a financial document(s) is deemed unacceptable (e.g., ending cash on the statement of cash flows does not equal the cash reported on the balance sheet), the bidder will not automatically be disqualified. Rather, these bidders will receive a zero for all financial ratios associated with the unacceptable document(s). In these situations, a bidder may still be able to receive a financial score that meets the financial requirements and be eligible for further evaluation.

The following financial ratios will be used for Round 2021: 
 

  • Return on Sales = Net Income (Loss)/Annual Net Sales
     
  • Current Ratio = Current Assets/Current Liabilities
     
  • Sales to Inventory = Annual Net Sales/Inventory
     
  • Collection Period = (Accounts Receivable/Annual Net Sales) x 360
     
  • Working Capital = Current Assets – Current Liabilities
     
  • Accounts Payable to Sales = Accounts Payable/Annual Net Sales
     
  • Debt to Equity = Total Liabilities/Net Worth
     
  • Current Liabilities to Net Worth = Current Liabilities/Net Worth
     
  • Quality of Earnings = Cash Flow from Operations/(Net Income + Depreciation + Amortization)
     
  • Operating Cash Flow to Sales = Cash Flow from Operations/(Revenue – Adjustment to Revenue)


last updated on 03/07/2019

 

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