The Big 10

Private Payor

• By David Kopf
• Jan 01, 2012

There is no doubt that private payor funding will see change in 2012 and perhaps even bigger change during the next. That change could happen in somewhat unexpected ways. The biggest challenge, of course, is that private payor insurance companies meticulously monitor Medicare reimbursement rates as a bellwether for setting their own rates.

Given that CMS has been on a non-stop campaign to cut funding for DMEPOS claims through the 36-month rental cap for oxygen; the removal of the first month purchase option for standard power mobility; and Rounds One and now Two of competitive bidding, private payor insurance companies have followed suit in reducing their reimbursement, and will continue to do so as Round Two plays out.

But there are other challenges when it comes to private payor insurance, and it couldn’t have come at a worse time. As providers deal with Medicare funding cuts, and perhaps the tough challenge of being forced out of a category by competitive bidding, they have sought to supplement their funding losses from Medicare by perhaps picking up some private payor reimbursement. In the same way HMEs have pursued cash sales as a way to not only reinforce their cash fl ow, but perhaps increase their revenues overall, some have explored private payor insurance. While some providers were already practiced hands in this space, others have just recently started exploring it.

The private payor space is changing in radical ways, and not necessarily for the better, at least where HMEs and their patients are concerned. The two main changes in private insurance are rapid consolidation among health insurance companies, and single-supplier deals in which a private insurance company contracts with a sole national or regional HME provider for its home medical equipment and related services.

The move by some insurers to contract with single providers made big headlines in 2011, especially with private insurer Humana Inc.’s decision to tap Apria Healthcare as its sole HME provider. Humana provided little detail publicly, leaving its base of previously contracted HME providers to piece together the arrangement after providers in various states began receiving letters late July announcing that their contracts had been terminated (usually citing a section of those’ providers contract with Humana); that Apria would be the contract holder; and that Apria had been designated at the “patient transition manager.” Providers were told that their patients can still use them as an out of network provider if they like, but at a 50 percent co-pay.

The letters told the cast-off providers to contact Apria to start facilitating the transition, and, in what took a good bit of gall, ordered that the terminated providers to supply Apria with a large volume of patient personal data, details on the equipment patients are using, and information on referring physicians and healthcare professionals involved in the patients’ care. Not galling enough? How about giving them a 15-day timetable to comply?

Consolidation among the private payors is another top concern for providers. Increasingly the larger private insurance companies are doing everything they can to edge out their competition, and that often comes about via growth through acquisition. So, there are fewer of the smaller private payors that might help keep rates at a reasonable level. As consolidation continues rates will go downward.

And this consolidation will see a stronger push toward single-provider arrangements, as well. The “big five” insurance companies — Aetna, CIGNA Health Insurance Company, Humana, United Healthcare and WellPoint Inc. — will seek to limit their provide panels to drive down costs. Certainly arrangements such as the Apria-Humana arrangement are being made with very low reimbursement rates.

There is a possibility that providers could act as subcontractors in singleprovider arrangements. These deals between large providers and larger insurers leave coverage gaps in smaller areas not served by the larger regional, or national HMEs. However, given the lower reimbursement rates associated with such deals, there might not be enough profit to go around.

In any case, the private payor segment will most likely continue to see difficult changes where HME is concerned during 2012. Providers that count on it as a funding source, or that are targeting it as a possible new funding source, should take care to monitor their private payor partners.

This article originally appeared in the January 2012 issue of HME Business.