Now that the Medicare Modernization Act (MMA) is the law and you
are apprehensively awaiting next year's cuts, you should be
planning your company's next move.
For many home medical equipment providers, that means honing in
on operational inefficiencies, such as refining the office flow.
Others are speaking to their congressmen and providing data to
AAHomecare in hopes that CMS will repeal the planned cuts. Still
another group of providers is busily diversifying their market
segment.
The businesses in this group are undoubtedly considering many
questions: Should they expand geographically, keeping the same
payer and product mix? Should they enlarge the product mix while
maintaining their core referral base and payer mix?
It is natural to think about shifting away from Medicare in
favor of other payer sources, but be aware that doing so does not
always spell enhanced profitability — or fewer hassles. You
could be trading one challenge for another. While exploring your
options is worth the effort, do your homework thoroughly to
determine whether diversification into any new market segment would
prove profitable for your organization.
The first step is to examine the various payer choices you have.
Some of the payer types HME providers often encounter include
Medicaid, private insurance, managed care, commercial and
private-pay customers.
Medicaid
A move to increase Medicaid business may require you to accept
less money and rely upon Medicaid's prior/reauthorizations (not
always electronic) before claims can be filed. Depending upon your
state, Medicaid has had more difficulty lately with timely payments
and balanced budgets than Medicare and other payer sources.
Further, Medicaid seems fickle in its approach to managed care,
routinely switching contractors. Some states are still trying to
launch competitive bid initiatives. But providers that work readily
with Medicaid know it can be a great payer source if its billing
idiosyncrasies are understood. And surprisingly, for select items
in some states, Medicaid even pays more than Medicare.
Obviously, the amount of Medicaid business you receive
correlates directly with the socio-economics of your environs. If
you are considering taking more of this business, visit your
state's Medicaid Web site to see what it takes to get paid. Seek
assistance from your state HME associations. Carefully scrutinize
the rules and requirements, and examine the allowables before
engaging in this business.
Private Insurance
Although there is less private indemnity insurance business than
ever, where it does exist, it often pays more than other sources.
In the current climate, however, many private plans mimic managed
care payment qualifications, making them look more like an HMO
(health maintenance organization) than private insurance. This
means that many of these plans require prior and reauthorizations
and limit the number of total rental payments. Additionally, once
an item is rented for a certain number of months, insurance will
stop paying because it has reached its “cap,” or the
purchase price.
Despite the attempt to act more like managed care in its
requirements, private insurance typically pays more quickly than
managed care. If you decide that this is the type of business you
are looking for, seek out local employers who might be self-funded.
The best way to do this is to contact their human resource
departments.
Some companies actually handle their own claims processing while
others outsource the function. In either case, if the employer is
local, this also provides you an opportunity to conduct in-services
for the employees and to meet regularly and keep up communication
with company management.
Managed Care
In contrast with the old private insurance business, managed
care business can be a maze that is cumbersome to deal with and
slow to pay. It is layers deep, and each contract typically
involves a wide variety of contract arrangements and plans.
Some patients may be part of a plan that shares risk between the
provider and the plan. Others may pay based only upon the
discounted rate. Some plans require a preauthorization by the
primary care physician, while others want the authorization to come
directly from the case manager in the utilization review
department.
Further, recognizing that there are commercial plans within each
contract that vary by employer, HME billers may need training
sessions to learn each plan's nuances. In fact, one employee may
have a choice of three or four different plans for one HMO.
The greatest dilemma is marrying the authorization with the
payment, because the former is received by the IPA (the plan's
administrative arm) and the latter is rendered by the HMO.
Communication is the obvious key in these matters, but needless to
say, getting paid when the HMO can't locate the authorization is
problematic.
Beyond all this, the most difficult consideration when entering
into a contract with an managed care organization (MCO) is that
payments are heavily discounted, sometimes by as much as 40 to 60
percent off of the Medicare allowable. For this type of discount,
you would expect to receive your money in a timely manner with
little effort required to bill, but this is not normally the
case.
So, when you consider adding managed care to your payer mix, you
will need to examine the amount you would gain versus the price you
will pay to increase your business. If you decide to become a
managed care provider, you will always have to stay on top of
accounts receivable. By turning your back for even one month, you
may encounter collection issues.
Commercial Business
Another payer source found less often in the typical HME company
is the commercial payer. This is a business for which you provide
equipment and/or services and get paid directly. Commercial
accounts include nursing homes, hospice and home health agencies
and, if managed tightly, can be an excellent source of revenue.
However, even if the terms are net 30 days, the sources can take
longer to pay. Most HME companies that focus on commercial business
employ accounts receivable staff to work with specific accounts.
The best part is that they don't need the documentation that
third-party insurers require.
Private Pay
The payer that most often comes to mind when looking to steer
away from Medicare is the private pay customer. This business
exists for the customer/patient who does not have, or does not want
to use, insurance, or one who needs a noncovered item. You will
likely find more of this business in a retail HME setting, which
lends itself to cash-paying customers. If you stock non-covered
items, for instance, you will naturally generate more cash
customers.
The best way to succeed in this market is to collect your money
up front. If you don't collect at the time you dispense the product
and time lapses before you attempt to collect, the chances of
receiving payment diminishes rapidly. Once the patient misses a few
payments, it is much more difficult for them to catch up.
For rental patients or recurring sale patients, you should not
let more than 30 days lapse before making aggressive attempts to
collect your money. You may want to begin even sooner.
On expensive cash sale items, take all — or at least most
— of your money up front. Credit cards are an excellent way
to accept payment when there is credit available, and when you do
not have to pay an astronomical fee to use the credit card service.
Some banks will work with you on financing expensive items, like
scooters and power wheelchairs, to the customer. As long as the
lending institution owns the receivable, this can be a great
arrangement.
Regardless, at some point you could find yourself in a
private-pay collection mess. You will likely wind up creating
collection plans that allow incremental monthly payments until
customers finish paying off your bill. This could take years for
some. In this situation, always send these customers a
“promise-to-pay” letter or contract, and let them know
that if they renege, you will ask them to pay the amount in
full.
Similar to commercial payers, the private-pay customer can prove
lucrative. And, these sales are easy to manage because there are no
medical necessity requirements as with third-party payers. However,
if the customer fails to pay after 30 or 60 days, this type of
account can become the hardest receivable to collect. It is also a
tenuous collection effort because of the patient-referral
relationship.
As with everything, there are pluses and minuses to these payer
choices. Inevitably, changing your payer mix will require
compromise. One thing is certain: It is prudent that you create a
diversified portfolio of payers. You should recognize that you may
need to make up a healthy revenue percentage caused by Medicare
cuts. It is definitely within your control to minimize future
exposure by refocusing your company's payer mix now.
Miriam Lieber is president of Lieber Consulting, Sherman
Oaks, Calif., specializing in operations management and
reimbursement for the HME industry. She can be reached by e-mail
at miriam@lieberconsulting.com or at
818/789-0670.
