Managed Care: Survive service agreements

Tuesday, December 22, 2015

Q. What’s the deal with service level agreements?

A. Have you ever noticed that with each new cut in reimbursement there are no reductions in the service levels required? Service level agreements or SLAs, are the salt in the open wound known as your profitability. This contradiction between revenue and service requirements is one of the reasons the HME industry needs a new service model.

If only healing this wound was as simple as going to the health plan and renegotiating the service level. We won’t solve this issue in this column but here are some things to keep in mind. 

• Patient expectations: SLAs have not changed much in the last 10-plus years, so that means that patients in general already have expectations for service that were put in place by the health plans.

•  Start early: This requires an education campaign and will be very difficult to negotiate if you wait until contract time.

•  Convenience and medical necessity are not synonymous: Not every item needs to be delivered within four hours of discharge.

•  Know the difference: Do you know what it costs you to deliver an item same day versus next day? When you do the comparison make sure you are using fully loaded costs. Things are not always what they appear to be.

Don’t sign any agreement in which the service level requirements are not crystal clear.
When dealing with networks, remember that it is likely that the network has already negotiated an SLA with the health plan so you will be obligated to whatever they agreed to regarding service requirements.

Lynn Everard is managing director of Valumatrix, LLC. Reach him at