2022 HME Business Handbook: Payer Relations
Negotiating With Payers Preparation Is The Key
- By Laura Williard, David Chandler
- Jun 01, 2022
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.
KNOWING YOUR PAYER
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
- 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
YOUR VALUE PROPOSITION
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
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.
HIGHLIGHTING CHANGING COSTS
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.
PERSISTENT AND PROACTIVE
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.
POINTS TO REMEMBER
- HME suppliers are not required
to take a contract “as is” from a
- Understanding how your payers set
their rates is critical to assessing
your opportunities to improve
- Defining your company’s value
proposition and showing how rising
product and operational costs are
- Establishing credibility with payers
take a persistent, long-term
Find more resources to help you
directly engage your payers and advocate
for better rates and requirements
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.