Skip to Content
Close Icon

 

 

Navigating through payer relations with Commercial payers, Medicare Advantage plans, and Managed Medicaid plans can be challenging for HME suppliers.  Preparing yourself with information is always the first step prior to scheduling any meetings with these plans.  AAHomecare has collected resources and talking points to use in your discussions with these payers.

Current HME Market Environment Payer Letter

AAHomecare sent a letter to many major commercial payers to educate them on the challenges of providing DME in today’s marketplace with increased costs of goods, labor, and shipping.  It provides key stats on the pressures the HME community is facing and how without immediate intervention, it may become cost-prohibitive for suppliers to continue providing equipment, supplies and services, thus impacting patient access to care.  You are welcome to share the letter with the payers you work with and utilize this information to supplement reasoning for your asks in individually negotiated contracts. 

Key Resources 

Health Industry Distributors Association (HIDA) has developed some compelling infographics with data demonstrating some of the increased costs effecting HME provider.  This information can also be used to supplement your asks in individually negotiated contracts. 

Medline’s Supply chain update from February 2022 also contains key statistics and data points that providers can utilize in conversations with payers they are individually contracted with. 
(need a link to Medline’s PDF) 

Tools & Resources

More resources related to the HME industry’s current market environment can be found on AAHomecare’s Tools & Resources page including:

  • Media coverage stories
  • NIV white paper/studies
  • Urological supplies whitepaper
  • Ostomy supplies whitepaper
  • Incontinence whitepaper
  • New Incontinence resources Med Supply subgroup completing 
  • Woundcare educational resources
  • CRT whitepaper
  • Gloves
  • Value of HME (impact during pandemic, A day without an HME-McKesson, Value of HME digital brochure coming soon)
Reports & Studies

AAHomecare’s Reports & Studies page contains compelling research that HME providers can share with commercial payers they are individually contracted with including:

  • Impact of COVID-19 supply chain disruptions and increased costs on DME suppliers - In April 2020, AAHomecare surveyed the home medical equipment community on the effects of the COVID-19 pandemic on their businesses.  More than 500 HME suppliers responded with details on how the pandemic is impacting access to products on account of supply chain disruptions and rising prices from manufacturers and distributors. The survey results show a rapidly changing operational and product cost landscape that presents significant challenges for an industry already dealing with unsustainable reimbursement rates from Medicare and other payer segments. 
  • DME Cost Study - This study by respected healthcare consulting and research firm Dobson DaVanzo has helped AAHomecare make our case for fairer reimbursement policies with Capitol Hill and regulatory agency audiences and can also be used with payers.  Findings show that, on average, only 88% of provider costs are covered at Medicare reimbursement rates; payers making reductions from a Medicare pricing baseline cause even greater pressures on suppliers.  
  • HME Access Study - In another study conducted by Dobson DaVanzo & Associates, it was discovered that competitive bidding "negatively affected beneficiaries’ access to durable medical equipment (DME) services and supplies, adversely impacted case managers’ ability to coordinate DME for their patients and placed additional strain on suppliers to deliver quality products without delay.”  More than 1,000 Medicare beneficiaries, managers and HME suppliers were surveyed to complete this study.
Cost Calculator

When negotiating with payers about rates it is important to take into account all your costs associated with doing business. This goes well beyond your cost of goods sold (COGS) and should include associated labor, overhead, and other associated costs.  AAHomecare has developed a basic cost calculator to assist with this analysis and better prepare your business for rate negotiations with payers you may have the opportunity to individually contract with. 
(need link to calculator)

DME Payer Contracting Guide

Placeholder for DME Contracting 101 information (B&F compiling) 

HME Suppliers/Locations by State

Our research estimates that 29.6% of suppliers have gone out of business or been purchased since 2013.  Use this data to show the impact to your state and service areas.  Also, use supplier specific stories for your states to make the biggest impact.
(need link to latest DMEPOS rooftop report and individual state maps) 

Tips and Talking Points for HME Payer Negotiations
  • HME providers are not required to take a contract “as is” from a payer.  You can and should attempt to negotiate if terms are unfavorable.
  • When evaluating individually negotiated payer contracted rates, it is important to quantify not only your cost of goods sold, but also other direct and indirect costs associated with providing equipment, services and care (see Cost Calculator above). In AAHomecare’s published DME Cost Study (linked above), only 88% of overall costs are covered by Medicare reimbursement.  Furthermore, cost of goods sold only accounts for 58% of overall costs of doing business.  Costs covered for product categories ranged from 67% TO 94%.  Discounts off Medicare pricing will create an even greater disparity for HME suppliers and exacerbate access to care issues.   
  • While it is important to breakdown your total costs to provide care by your major individual products, payers may find it helpful to segment your product offerings by category (i.e. respiratory, mobility, medical supplies, etc..)  to target areas where your reimbursement may need to be addressed. 
  • Access to care is always an important topic to address and AAHomecare’s published HME Access Study (linked above) is a great resource to point out.  This survey was completed by 428 patients, 358 case managers, and 266 suppliers.  52% of beneficiaries reported access problems.  77.6% of case managers experienced difficulties with timeliness of discharge process due to HME access issues.  
  • Depending on the payer and their HME expertise the supplier may have to explain the complexities related to running an HME business.  For example, what added services go along with the equipment and supplies you provide.  Do you employ clinical staff that is not separately reimbursed or other customer support employees?  HME suppliers employ patient support staff to encourage compliance, patient satisfaction, and achieve overall health outcomes that save the payer money.  HME suppliers are encouraged to track data to support this message.  
  • Examples of why HME supplier costs continue to increase are included in the Current HME Market Environment Payer Letter (linked above) and include:
    • The average cost pre-pandemic to ship a container from Asia to the United States was $1,500 and it is now more than $14,000 as of January 2022.   
    • Freight shipping costs across the United States have also increased dramatically during the pandemic.  As an example, one of AAHomecare’s largest mobility manufacturers noted the standard full truckload rates have increased by 266%.
    • Costs for raw materials utilized to manufacture HME, including plastics, metals, and microchips have also increased drastically, forcing every major manufacturer and distributor to implement price increases as well as additional freight charges, handling fees, and surcharges that have added 15% to 40% to overall costs in some instances.
    • CPAP shortages, recalls, and increased costs are impacting product availability due to limited core components manufacturers require to produce equipment and supplies as well as the Philips recall of these devices.
    • HME manufacturers and distributors continue to stress that additional price increases may be coming in the very near future.  
    • Higher delivery costs, including gasoline prices are currently 41% higher than the average of the 6 preceding years (Nov. 2015-20 vs. Nov. 2021, all grades).
    • Annual PPE costs that range, on average, between $12,000-$15,000 per HME location.
    • HME suppliers contain costs by serving your members in the home (the least expensive site of care) and allow patients to be discharged from hospitals, nursing homes and other health care facilities (the most expensive site of care) to continue their care in the home setting at far lower costs – for example, approximately $4/day for home oxygen versus thousands of dollars per day in the hospital setting.
       
  • Suppliers should read contracts entirely or have legal counsel review.  Some key provisions to look for include:
    • Does the contract allow for material changes to be made through bulletin and memo releases or is material notice with a response required?
    • Does contract include fee schedule change requirements for notification?
    • Is sufficient time allowed to submit claims and respond to audits?  
    • Is there a lookback limit on audits and recoupments?
    • Is the payer required to respond to authorizations, appeals, and inquiries within a reasonable timeframe?
    • Others???
       
  • Suppliers should have specific asks in mind when negotiating with payers and have data specific to their company to back these up.  For example, 
    • Is there a mechanism to adjust reimbursement based on inflation like Medicare’s CPI-U adjustment?
    • What is a standard gross profit margin that is acceptable to you and what elements within the payer contract can influence that margin toward an acceptable range?