Reporter’s notebook: Hospice landscape squeezing providers 

When Medicare’s competitive bidding program was first being implemented, many DME providers turned to servicing the hospice market to offset some of those business losses.  

In the past several years, however the hospice industry has seen not only consolidation, but the rise of DME benefit management companies, or DBMs, which promise greater efficiencies and lower pricing for hospices. That means DME providers who wanted to retain their hospice contracts were forced to accept those lower rates. 

“They sweep in and woo a hospice with savings on two sides: the per diem rate and also with labor as far as administration and managing the equipment,” says Gerry Finazzo, a regional account manager for VGM. “The hospice says this is great, then they tell the DME they are going to (lower) their rate.” 

However, DME providers are starting to push back, refusing to accept DBM contracts, particularly from companies like StateServ Medical, one of the largest DBM firms in the country, says Finazzo. 

“We have a number of members who have turned StateServ contracts away,” he said. It’s an interesting dynamic. In many metro areas, (the DBMs) are pushing DMEs around but not in rural areas. StateServ is not in (places like) Missoula, Mont.” 

While hospice work can be rewarding, and there’s a lot of appeal with its business-to-business model, it’s still a very tight margin business, says Finazzo. 

“It’s still difficult to be profitable when you have a per diem of $4.50 and the cost of gas per gallon is $3.50,” he said. “If you have to buy 10 beds or oxygen concentrators and lease them, it’s going to take a year to break even. That’s a tough proposition.”