2022 HME Business Handbook: Payer Relations

Negotiating With Payers Preparation Is The Key

Payer RelationsEngaging commercial payers, including Medicare Advantage plans and Medicaid MCOs, can be a challenging exercise for HME suppliers. These payers can access considerable data, sophisticated analysis, and financial leverage on their side. Nonetheless, suppliers may be able to directly bolster their bottom lines through negotiating for better reimbursement rates or on other aspects of their contracts with payers. It is especially important to take advantage of these opportunities as the share of people covered under Medicare Advantage and Medicaid MCOs continues growing.

Simply put, HME suppliers are not required to take a contract “as is” from a commercial payer. You can and should try to negotiate if the terms are unfavorable or unsustainable for your business. Effective preparation is the key to successful negotiations with your payers. This preparation includes both understanding contract provisions and the payer’s rate-setting mechanisms, as well as your company’s strengths and the value you deliver to the payer and the patients they cover. In addition, arming yourself with data on the cost environment that you are operating under can improve your negotiating position and give your payers the data they need to grant you improved terms.


A thorough understanding of your payer contracts is an absolute requirement. Enlist legal counsel if you do not have a strong grasp on the language. Look for provisions that can help determine if there are opportunities for improvements in the claims process. Is there sufficient time to submit claims and respond to audits? Is the payer required to respond to authorizations, appeals, and inquiries within a reasonable timeframe?

Knowing how your payers set their rates and what they will consider in this area is critical to assessing your opportunities to improve reimbursements. Questions to ask your payer could include:

  • What is your methodology for determining rates?
  • What is a standard gross profit margin that is acceptable and what elements in the payer contract can influence the margin toward an acceptable range?
  • Is there a mechanism to adjust reimbursement based on inflation? How about for changes in suppliers’ cost structure, including higher manufacturer prices?


Suppliers should be able to assess what they excel at and what sets them apart from other HME companies, and how can they can quantify those successes. Payers will want to know how a supplier helps them rein in costs, improve outcomes, and boost patient satisfaction.

Your company’s value may also be enhanced by an ability to provide more timely delivery and better services if there are relatively few suppliers in your area, or if you are the only supplier providing certain products or services that patients need quickly.

Suppliers may also need to evaluate — and articulate — how their companies are suited to work with payers in value-based care models and move into outcome-based reimbursement as a strategy to remain profitable.

You might intrinsically know what your company does better than other suppliers do, but you also need to make sure you can highlight and quantify the most important components of your value proposition on paper.


Widespread inflation and the new operational and product cost landscape stemming from the COVID-19 pandemic has presented significant challenges for an industry already dealing with unsustainable reimbursement rates from Medicare and other payer segments. Before you engage with your payers, you will need to document how higher product prices from manufacturers, shipping surcharges, new PPE costs, increased labor costs, and surging gas prices are impacting your company.


Securing better terms from your payers is likely to require a long-term commitment to refining your approach, collecting data, and establishing credibility with provider relations representatives. Like most aspects of building a successful business, persistence is the watchword for engaging with your payers. You have to take the first step; you aren’t going to receive better terms from your payers if you don’t ask.


  • HME suppliers are not required to take a contract “as is” from a commercial payer.
  • Understanding how your payers set their rates is critical to assessing your opportunities to improve reimbursements.
  • Defining your company’s value proposition and showing how rising product and operational costs are essential.
  • Establishing credibility with payers take a persistent, long-term approach.


Find more resources to help you directly engage your payers and advocate for better rates and requirements at aahomecare.org/payer-relations.

This article originally appeared in the May/Jun 2022 issue of HME Business.

About the Authors

Laura Williard is vice president of payer relations for the American Association for Homecare. Follow her on Twitter at @WilliardLaura.

David Chandler is senior director of payer relations for the American Association for Homecare. Follow him on Twitter at @DavidCHME.

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