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Negotiation tactics for HME providers: How to have strategic conversations with payers

If you're a home medical equipment (HME) provider who has found your profits being squeezed, you're not alone. Most providers are feeling the pain of decreased reimbursements from Medicaid due to a shift to a managed care landscape. This decline has caused many to leave the industry or consolidate because they're unable to sustain their business. Ultimately, patient care suffers, as patients have less access to services and products they need.

That's why providers must be aware of how they can position themselves with powerful payer negotiation tactics, according to Kris Srinivasan, senior manager of payer relations at McKesson Medical- Surgical. "I believe the pandemic helped strengthen the value providers bring to the healthcare continuum. They showed they were able to achieve high patient satisfaction while relieving some of the burden on others in the continuum of care," he says, noting that new doors have opened to providing more care in the home, including care for chronic diseases. "When compared with nursing homes and assisted living, HMEs can deliver a high level of service to patients in their own homes. We want to see reimbursement align and follow this great work," states Srinivasan. 

Would you like to increase your reimbursements? Here's an insider's look at how HMEs can use effective payer negotiation tactics to help boost profitability while maintaining customer service. 

1 | Start the conversation with patient examples

You'll be better positioned when you show the payer why you're the best choice to provide the customer service they strive for. Srinivasan recommends compiling background data on patient satisfaction and other metrics that allow you to prove the value you bring to the payer. "If you're demonstrating your commitment upfront, it's more likely they will see your value and realize the importance of making sure they are serving their patients from a clinical service and patient experience standpoint, and that you're best suited do it."

The more real examples you have, the more compelling your presentation can be. You'll want to discuss specifically how the patient or member will be well taken care of. Be prepared to underscore how your solutions support a better experience and outcomes for patients through access to specific brands or types of equipment that best serve their needs. Highlight your devotion to customer service and providing great care in a timely manner, with a quality product. You can even consider including a patient who is a beneficiary in the conversation.

Whenever possible, back up any claims with data points, such as figures on utilization of products and comments or scores that reflect patient satisfaction. "Payers won't expect you to have paid for third-party research, but we find that our most successful providers have a customer service or clinical services team that solicits patient feedback," explains Srinivasan.

Finally, remember to emphasize that you're committed to solving issues that arise.

2 | Do a deep dive into your own financials

"Knowing your business is critical," says Srinivasan. "You have to know exactly what products cost and where you make your margins so you can better understand where you have room for negotiation."

This data allows you to modify your ask as needed. For instance, you may find that financially, you can make your margins work at an existing reimbursement rate due to volume, which allows you to focus on those product lines where you may lose margin. "The providers who are most successful look at their entire mix of products, not just the one being negotiated at that time," says Srinivasan. "For example, you might be upfront with your costs/margins for a wheelchair, but they'll need to increase the reimbursement for a crutch or other product so that you can deliver adequate care and access to their members."

"Look at your portfolio of products and see where you have opportunity to negotiate on value first and then cost. We've seen providers take this approach to be successful in negotiating payer contracts that benefit their patients, their book of business and the payer." Srinivasan suggests that value-based care can be achieved when incentives are aligned. 

3 | Understand how negotiations work

Harvard Law School has compiled seven key components of negotiation that can help you understand each side's business objectives and develop effective payer negotiation tactics for your business:1

  1. Interests: Both parties have needs and motivations that will drive the negotiation. Make sure you understand what's motivating the payer to make decisions. If you start the conversation based only on unfair reimbursement rates as you see it, the conversation may not go far
  2. Legitimacy: Both parties need to perceive the negotiation as fair. Remember that just like you, payers want to be sure you're listening to them and acknowledging their position. And hopefully, you'll get this from them in return
  3. Relationships: Building rapport and emphasizing an ongoing connection can lead to a better outcome. Remember that you both have a common goal: providing great care to patients at an affordable cost
  4. Alternatives and BATNA (best alternative to a negotiated agreement): Think through other options in advance so you can make another offer. Consider what you're asking of them at the end of the conversation – perhaps it's a range rather than a specific amount
  5. Options: These are the various alternatives that will meet your needs, such as conditions and contingencies. Make sure you are prepared with various outcomes and what the potential impact may be on real beneficiaries. The more knowledge the payer has, the better they are able to make decisions based on fact
  6. Commitments: This is the signed contract you will ultimately create
  7. Communication: Strive for a mutually agreeable solution by brainstorming options rather than making demands. If you come out of the meeting with an alternative solution, or perhaps even another meeting, think of it as a win. It means you've given them strong information to consider and you're working toward building a relationship. Recognizing how all these factors work together and considering both sides can help you become a better negotiator

4 | Be prepared for all potential outcomes

You want to start from a position of strength with a strong ask. "An HME suffers by waiting for the payer to dictate the number, rather than bringing a suggestion upfront," Srinivasan says. "If they make the starting offer, you're already at a lower leverage point and coming from a position of defense."

That's where knowing your numbers will give you the background you need for your next step, in case the payer responds with a hard-nosed "take it or leave it" offer. "Some providers can navigate those waters and still be profitable, while others might not be able to, and they might have to walk," Srinivasan notes.

If their suggestion is not feasible, you can communicate to the payer why you can't provide the service at the lower cost. That means those patients have to go elsewhere, which might cascade into problems surrounding access to care. "The key issue, of course, is that providing access to care is the right thing to do. But the underlying truth is that they need to conform to Medicaid standards for access to care," Srinivasan says.

If the negotiations continue, have additional counteroffers in mind. According to Srinivasan, "Some agencies will be open to dialogue and collaboration, whereas others may present you with a firm budget figure."

Remembering that there are two sides in the negotiation allows you to better recognize what constitutes a "win" and accept it. Srinivasan recommends that providers should take offers that help them balance achieving reimbursements that still make their services profitable.

5 | Foster relationships that can help you today & in the future

Srinivasan believes there is power in building relationships across the industry, and this can contribute to your payer negotiation tactics.

First, he suggests reaching out to state Medicaid representatives to help build continuity. Doing this will mean that you'll have a listening ear to help you address issues quicker, rather than downstream when they snowball. "Some agencies and directors get heavily involved, and HMEs benefit from having a good relationship with the Medicaid director and team in those cases," Srinivasan says. He recommends having regular meetings with key players of the payer organization if they're open to it.

You can also collaborate with other HME providers. "There are times that entities are formed within a coalition of providers in a given geography who distribute orders to each other," Srinivasan says. As some providers narrow their product offering, they may become a specialist in one particular area, which opens up more opportunities for referrals. If you don't service a particular product, you can refer that category to another peer and vice versa.

Additionally, you could consider getting involved with industry associations like AAHomecare (American Association for Homecare) or one of the many state or regional HME associations, which can serve as a resource and support. By participating in meetings, you can help build relationships and find options for collaboration, as well as join forces to share a consistent message as you grapple with common issues. And when you advocate to payers as a group of providers, your collective voice is much louder than if you were to negotiate with the payer on your own. There is strength in numbers.

6 | Prepare for future negotiations

No matter how successful your initial negotiations were, you know that you'll be back at the table at some point – so now is the time to prepare your case for the future. Your first priority should be to continue with your excellent standard of care so that you have a positive story to tell. Next, put processes in place for tracking data on an ongoing basis so that you have solid information for the next year.

Finally, Srinivasan advises always keeping a positive attitude and going through the year knowing that you're providing a valued service.

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