Business Solutions

Private Payor Pro-Tips

Two industry experts sit down with HMEB to discuss the opportunities in the private payor arena and how providers can take advantage of them.

• By David Kopf
• Apr 01, 2015

For several years, the writing has been on the wall: Medicare funding cannot completely carry HME businesses they way it once did, and providers have worked overtime to drive new revenue to the bottom line. One of those key revenue drivers is private payor insurance.

Private payor reimbursement is familiar territory. Providers have already been working in this arena due to Medicare beneficiaries using supplemental insurance, and in the case of some business models, such as sleep therapy, private payor insurance is a key revenue source.

But as familiar as territory as private payor insurance might be to some providers providers, it is not without its challenges. For starters, most private payor insurance carriers set their rates based on Medicare reimbursement. Similarly, private insurance companies are increasingly auditing claims and demanding repayments on faulty claims or overpayments.

And in some cases, private payors have tried to mimic Medicare’s efforts to reduce the number of DMEPOS providers. While Medicare might have opted for competitive bidding as a solution, some private payor carriers have gone straight for single-provider contractors in an attempt to drive down their cost structures. A good example would be 2011’s Apria-Humana deal that saw the large carrier try to use the national mega provider as its single DME source. That deal produced mixed results, and the practice hasn’t seen much replication, fortunately.

Regardless of whatever challenges the private payor insurance market presents, it is an undeniable source of alternative revenue that providers must continue to pursue. So providers must ensure that their billings and claims, referral sales, delivery and support departments are all up to the task. Moreover, providers must ensure that they have the right accreditation for each of the private payor plans they wish to serve so that they adhere to the right billing protocols, policies and procedures.

And from a sales perspective, establishing solid relationships with private payor insurance carriers will require providers to do some higher level dealmaking that they might have previously conducted in referral partner sales efforts. Now the management and ownership level will need to participate in the practice. They will also need to involve a larger sales team for such deals, and will likely need to include care and product experts, as well.

To look at some of the opportunities and challenges of the private payor insurance market, HMEB sat down with two industry experts on the subject: Georgie Blackburn, vice president of government relations and legislative affairs for HME provider BLACKBURN’S, and Dave Kazynski, president of Homelink, VGM Group Inc.’s managed care division, to gain their insights on this important funding market.

HMEB: Why would providers look to pursue increased revenue via private payor insurance?

Blackburn: In this new healthcare arena, no revenue opportunity should be missed. The paramount thing that has happened is that providers no longer design or have a business that is 50 percent Medicare. It’s important to diversify payor sources as well as product lines.

Kazynski: There are a number of different types of private payor contracts providers should consider. Group Health plans are the most common and most providers are aware of who these companies are or work with. The other types of contracts these providers should be looking at are workers’ compensation companies or networks, local third party administrators (TPAs), Medicare or Medicaid Advantage plans and Accountable Care Organizations (ACOs) getting started in their area.

HMEB: What are the opportunities and advantages of private payor reimbursement?

Blackburn: Private payors will often give a line of communication when working with involved clients, such as a complex rehab case. Most also have a prior authorization process that suppliers view as a positive. Audits are less intimidating!

Kazynski: As a general rule, workers’ compensation companies pay higher rates than Group Health plans (with some exceptions). It is easier to negotiate with TPAs and if a provider positions itself correctly it can get even higher rates from local ACOs.

HMEB: What are some of the drawbacks or challenges?

Blackburn: Suppliers really need to evaluate the level of payment. With Medicare’s bid system dictating the “standard” payment, more payors are paying at the same rate or a percentage of it. Volume, just like with competitive bidding, is not guaranteed, so we must weigh the ability to drive enough volume to prohibit losses.

Kazynski: The biggest challenge in contracting with Group Health companies is getting on to their preferred provider list. In the case of national payers, the rates are usually so low a dealer will lose money by accepting the agreement. The other drawback is the sales cycle for a typical plan. It may take two or three years to get a contract and most providers simply give up sooner than that.

HMEB: What is the state of private payor reimbursement rates?

Kazynski: National company reimbursement rates are very low and have been for years. As Medicare rates have gone down, some payors have attempted to lower their rates with limited success. DME providers have negotiated higher rates in many cases around the country.

HMEB: Are they following Medicare fairly closely?

Kazynski: Some payors have been following Medicare allowables, but not the competitive bid rates. In one case, a large payor tried to lower their rates to a discount off the competitive bidding reimbursement, but didn’t get many (if any) takers.

HMEB: What about audits; are private payor insurance carriers auditing claims to an increased degree?

Kazynski: We have not seen any increase in private payor audits. If fact, we have only had one in the past three years.

Blackburn: Audits have become second nature to the supplier community whether it be a Medicare claim or private payor claim. Often, with the private payers, audits will encompass claims with excessive quantity or a specific product line. Ten years ago, receiving a large audit request was unnerving … now audits are expected.

HMEB: Are private payor audits as bad as Medicare audits?

Blackburn: Audits are “bad” whenever they occur because the auditor doesn’t always interpret policy correctly. Suppliers who seriously train intake staff and delivery staff on medical policy, documentation and technical requirements will usually fair better in audits and will have a solid base to argue against negative outcomes.

HMEB: A few years ago, some private payor insurance companies tried to establish exclusive relationships with HME/DME providers, such as the Apria/Humana deal. Is this still an issue, or has the situation changed?

Kazynski: Yes there are still exclusive relationships like this, but most payors are not “putting their eggs in one basket.” They want to work with more than one company so they can give their beneficiaries choice.

Blackburn: Preferred provider agreements will always be part of the fabric unless legislation to allow for any willing provider passes in the future.

HMEB: What key things do providers need to do in order to take advantage of private payor opportunities?

Kazynski: The greatest opportunity I see is in the ACO marketplace. As the Affordable Care Act continues to move forward, insurance companies, hospital and physician groups and employers are going to look at ways to reduce costs. Even if the ACA is repealed or replaced, this fact will remain true.

If they haven’t already been, DME providers should be contacting hospital administrators and their referring physicians to see what activity is taking place in their hometowns. These organizations will be locally controlled and operated so they have an advantage when it comes to access. In many cases DME and Home Health Nursing will be paid outside of any capitation arrangements at Fee For Service rates, with the expectation that they will provide exceptional service in a timely manner, helping the ACO reduce re-admission rates.

Blackburn: Marketing credibility, patient outcome management processes and customer-servicing philosophy is important for any supplier to gain payor trust. Insurance companies want to partner with suppliers who handle their beneficiaries with care, urgency and efficiency.

Staff training, compliance training and accountability enters into the conversation. The landscape demands we do more for less…it is up to us to find cost effective ways to do that! What hasn’t changed, is that the customer is front and center, whether it is the payor source or the beneficiary who is covered by that source.

This article originally appeared in the April 2015 issue of HME Business.