Forging Paths to Success in a Tough Market

With the many changes occurring in the industry—not all of them positive to say the least—HME providers have no choice but to change as well. Continued reductions in Medicare reimbursements, new regulations and increased costs from surety bonds continue to decrease profitability, forcing some business owners to either scale back their services or close down altogether. HME providers are an important part of their communities, and their dwindling numbers have a negative impact on the lives of their customers and those who care for them.

In the first article of this three-part series, we will look at diversifying payers and other considerations as a way for independent HME providers to continue to provide high quality customer care and services while remaining profitable and in business.

A Closer Look at Contracts

There are many contracts that allow a provider to remain profitable, but some may not. It is important to truly understand your costs, and you may benefit from having a qualified professional read every part of the contract to help you make that determination. There are times when it is simply not possible to take a contract at a rate that doesn’t make sense, but providers can be hesitant to terminate a contract out of concern that a competitor will take it instead. However, if a particular contract is not profitable for your business, in the end it may be best to let it go. Accepting low rates and hoping for the best is not a sound business strategy.

To understand what contracts make sense, you have to be honest with yourself about your processes. For example, are you collecting copays, do you know your employee costs, etc.? Once you know your cost structure, you can begin examining what alternate payer sources will help you optimize your reimbursements.

Nontraditional Payers

There are options for payer opportunities that fall outside what we all know as the traditional payer:

Benefit managers, Preferred Provider Organizations (PPOs), Managed Care Organizations (MCOs) and Medicare Advantage are just a few. By diversifying your payer portfolio to include these types of contracts, you will have access to more consumers and less reliance on less profitable payers. The different types of payers are endless, as are the different fee schedules associated with each of these plans. To maintain a profitable business, it is imperative that someone in your organization understands the different types of entities, as well as how to negotiate these contracts and how each payer type reimburses the claim. Benefit managers are third-party administrators (TPAs) that offer cost savings and reduced administrative burden for MCOs. They will often handle authorizations, claims adjudication and remittance on behalf of the MCO. Benefit managers might have lower reimbursement, but they may not require patient copays. They sometimes pay 100 percent of the fee schedule, saving you the time and frustration of collecting copays.

PPOs offer patients access to primary (in-network) and secondary (out-of-network) benefit levels for a wide variety of insurance plans. PPO networks do not typically handle payment or collection of premiums from patients. Rather, the PPO receives the claim from a primary insurance and re-prices it to the contracted rate. The PPO then sends the re-priced claim back to the primary insurance, and the provider and patient receive their Explanation of Benefits (EOBs). A PPO might have higher reimbursement rates, but patients may have higher copays or deductibles. Some PPO contracts offer reimbursement at a percent of billed charges, which may be profitable if you establish a reasonable usual and customary rate.

MCOs offer a variety of health plan options to individuals and employer groups. These health plans have the option to be customized, resulting in varying copay or coinsurance levels, network access levels and coverage levels. MCOs are usually the payer of claims, so claims should be submitted directly to the MCO, who will then submit a remittance. Medicare Advantage is a PPO plan that could provide Medicare Part A and Medicare Part B benefits to those enrolled, but its claims are processed through a commercial insurance company, rather than the Centers for Medicare & Medicaid Services (CMS). The insurance companies who process Medicare Advantage claims receive compensation from the federal government and assume the risk for the patient population they serve.

Cash and Retail Sales

If contracting with more commercial insurances or diversifying away from government payers is not what you are looking for, there are other products that can be purchased on a cash basis. However, the HME industry seems to be reluctant to ask for cash because of a perception that it will be met with resistance. The MED Group’s clinical network benchmarking surveys have found that people will pay for what they believe is important. If a patient wants an item that is outside of his or her insurance plan offerings and he or she wants to pay for it—why not provide them the opportunity to purchase from you? Some patients are willing to pay cash for their items simply to avoid the hassle of insurance requirements and activities. It is important to note, though, that the insurance plan may have requirements for these situations, and you must follow the terms of those contracts.

HME retail is an exciting opportunity for companies to replace lost revenue due to reduced reimbursements and also allows the provider to become even more involved in the continuum of care. If you are looking to start a retail operation or even grow your existing retail business, educating yourself and your staff is a great place to start. The MED Group, for example, offers retail sales training— “Creating the HME/DME Retail Sales Consultant”—that provides the tools and techniques to help you better serve your customers. Ensure that your staff is well-trained on all of your retail offerings, and create a plan to help your staff meet their goals to educate patients and caregivers.

When considering joining or expanding into the retail world, other decisions include what products to offer as cash-sale items, how best to set up your showroom and branding and marketing your company. You also want to consider e-commerce capabilities on your website, as well as an online catalog of retail items that your store offers.

Networks and Group Purchasing Organizations

If diversifying your payer sources and joining the retail marketplace sounds daunting, consider joining a network that will do the majority of the work for you. There are several companies that can negotiate contracts on your behalf, train your team to negotiate contracts and provide information about cash sales and revenue. While there are charges associated with joining these networks, doing so could be more cost-effective than having a full-time employee and legal counsel for your contract negotiations on staff. Some companies charge a flat rate, while others charge an hourly rate; still others charge per contract, or some will take a percentage of your claims, reducing your overall reimbursement and profit. Regardless of the path you choose, it is important to know your bottom line costs.

Members of Group Purchasing Organizations (GPOs) may be able to enjoy network benefits at no added cost. For example, members of The MED Group are able to access not only specific retail training and guidance, but they are also able to access several payers through The MED Group’s contracts, at rates that often exceed what is offered to independent providers. There is not a charge on the percentage of members’ claims with this service. If you are looking for a one-stop shop that can help you in all areas of your business, a GPO would be a great option for you to thoroughly research.

The HME industry is not the first, or last, industry to experience radical changes. Some providers have closed their doors because they cannot afford to stay in business at the falling reimbursement rates from government payers in addition to other industry changes. Those that remain need to take an even closer look at their business model and make adjustments to not only survive, but also thrive. Truly knowing your cost structure, diversifying your revenue sources by looking at nontraditional payers and cash sales and joining networks and GPOs are just a few things to consider to adjust to this new world.

Next month, we will take a closer look at determining your revenue model. Read other articles in this series here.