Evaluating the Value of a Payer Contract
Published in
Government Relations
on June 24, 2025
By Melanie Ewald, VP of Payer Relations and Reimbursement, VGM
In our last article, Key Payers Denied Your Application Citing Their Network Is Closed – Now What?, we discussed strategies for addressing payer contracting denials due to a closed network. As indicated, this process can be an extremely time-consuming exercise with no guarantees and mixed results. Below are a few things to consider as you evaluate whether a contract is worth the extra effort.
DMEPOS providers continue to navigate a minefield of challenges such as shrinking margins, regulatory complexities, and challenges with payer reimbursement and contracting. Deciding whether to enter or remain in-network with a given payer is one of the most critical decisions DME providers will make. Getting in-network under the right contract can expand access to more patients and thus increase revenue.
Entering or remaining in the wrong contract can chip away at your profitability. You are not required to accept every contract offered to you. Consider the following as you evaluate new and existing contract opportunities.
Does the contract bring in new patients? Does it increase your ability to say “Yes” more often to referral sources? Are you getting paid more than what you paid to acquire the product? Do you require profit on every transaction? Each of these points is important on their own; however, even when combined, they do not necessarily make a contract worth having or viable.
Viable long-term contracts provide for at least the following:
- Reimbursement covers ALL costs, not just product acquisition.
- Policies are actually followed as prescribed in the contract and provider manuals.
- Transparent notice process for contract amendments and policy updates.
- Clearly defined resolution process for when issues arise.
Pay close attention to arrangements that may have hidden profit diminishers such as:
- Administratively burdensome requirements that increase your costs. i.e., employee time required to handle frequent prior authorizations and denial management due to unclear documentation requirements and unclear appeals processes.
- High volume low-reimbursement arrangements may provide access to more patients, but will not fix profit margins and may drain critical resources.
Today’s payer environment is such that not every contract is worth having and some could ultimately be detrimental to your business. Each contract, particularly those requiring extensive effort and resources to execute, should be evaluated closely with profitability, operational efficiency, and strategic fit in mind.