Payer Engagement Resources

Reports & Studies

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

• 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.

Tips and Talking Points for HME Payer Negotiations

• Medicare has given a net of 15.3% CPIU increase since 2019.
• 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. 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:
  • Employment cost increases:
    • 5% in a 12-month period ending September of 2022
    • 4.2% in a 12-month period ending September of 2021
    • 2.4% in a 12-month period ending September 2020
    • 2.8% in a 12-month period ending September of 2019
  • Inflation cost increases:
    • 7.2% of 2022 annualize cost inflation
    • 3.2% increase in 2023 projected
    • 2.5% increase project in 2024
    • 2.0 federal reserve target
  • The average cost of ocean freight is 2.2 times higher than pre-pandemic.   
  • Ground transport parcel shipping cost increased 5.9% in 2022, following a 4.9% increase in 2021.
  • Diesel cost at $4.99 per gallon in September 2022 is up 147% year over year.
  • 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.
  • Medical equipment shortages, recalls, and increased costs are impacting product availability due to limited core components manufacturers require to produce equipment and supplies.
  • 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?
• 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?