If you're a Medicare-certified home health or hospice agency, expanding to private insurance can seem like a natural next step.
But here’s the truth: most agencies underestimate how different working with private insurance really is.
At The Home Health Consultant, we’ve seen agency owners dive into private payors without understanding how authorizations, billing, and surveys work—and they pay for it later.
So in this guide, you’ll learn:
- What separates Medicare from private payors
- Four critical factors to understand before contracting
- What billing and authorization actually look like
- How to avoid the most expensive mistakes
By the end, you’ll know exactly what to evaluate before signing that first private insurance contract.
Why Do Most Home Health & Hospice Agencies Start With Medicare Before Adding Private Insurance?
While a state license is enough to start accepting patients legally, many private insurance companies require Medicare accreditation as a prerequisite for contraçting with them. This is because many states don’t require licensure to start working. In these cases, Medicare accreditation becomes the only indicator a company knows what they’re doing.
Medicare gives agencies more control and flexibility in the day to day.
With Medicare, you accept patients according to your company’s eligibility screening. You don’t need Medicare to pre-approve an admission. The plan of care is based on your agency’s evaluation and judgement of medical necessity. You manage visits. You handle billing at regular intervals.
Private insurance flips that script.
Private insurers control admission authorization, visit approvals, documentation rules, and timelines. Deadlines are short and strict. You lose a bit of control, and if you’re not prepared for it, that changes everything.
If you're not used to the pace or demands of private insurance, the transition can overwhelm your team quickly.
What Are the Financial Risks of Relying Only on Medicare for Home Health & Hospice Agencies?
Medicare seems easier than private insurance, and in many ways, it is. You decide the plan of care. You determine eligibility. You bill on a more flexible timeline.
But here’s the reality no one talks about enough: With Medicare, you’re always one ADR away from a cash flow crisis.
Medicare uses what’s called an ADR (Additional Documentation Request) to audit your claims. Agencies are selected for ADRs in a variety of ways.
Sometimes, algorithms flag unusual billing patterns, which can make the process feel random. Other times, ADRs are issued completely at random to help maintain checks and balances in Medicare billing. Regardless of the way your agency is selected for an ADR, they can show up out of the blue and without warning.
During a pre-payment ADR, you won’t get paid at all until your documentation passes their review. That means no cash flow until the entire chart is approved. And if you fail, you won’t get paid at all.
And if you fail an ADR, sometimes they just deny that claim, other times, they calculate the percentage of failure and recoup a percentage of all your payments, including payments for patients you served months, or even years, ago.
Going forward, new patient revenue gets withheld until that overpayment is repaid. Think of it like being a 1099 worker who forgot to save for taxes, only worse.
Meanwhile, appeals can take years, and contractors reviewing your charts are financially incentivized to find errors. Their job is to make sure Medicare hasn’t overpaid any providers and recoup costs if they find proof of overpayment.
Bottom line: Working with Medicare long-term means living in a constant state of risk. You’re responsible for proving compliance at every turn, and the financial consequences of a mistake are heavy. Fighting back can sometimes be more expensive than the penalty itself.
That’s why working with private insurance isn’t just a growth opportunity. It’s a financial safety net. When Medicare revenue is frozen due to ADRs, private payors can keep your doors open and cover payroll. They can be the buffer between temporary review and total shutdown.
So yes, private payors are harder upfront. But in the long run, they might be the reason you survive. If you do choose to work with private insurance, there are a few key concepts you need to understand first.
What’s the Difference Between In-Network and Out-of-Network Rates in Private Insurance Contracts?
With Medicare, you’re either enrolled or not. There’s no rate tiering.
Private insurance includes two models:
- In-network: You’ve contracted with the payor.
- Out-of-network: You haven’t contracted with the payor, but you still provide services at a lower reimbursement rate.
The tricky part? These rates can be negotiable. But the payor usually holds the leverage. Agencies rarely get premium rates without a fight, unless they’re in underserved areas.
Pro Tip: If you do choose to work with private insurance, it never hurts to ask about rate negotiation (even if it seems unlikely).
How Are Private Insurance Authorization Rules Are Stricter Than Medicare?
Medicare trusts your clinical judgment to determine eligibility and care, as long as you can provide timely documentation to back it up. Later they verify eligibility through the ADR process with random patient chart reviews.
Private insurance, on the other hand, needs to receive and authorize proof of eligibility before you start delivering care. Even after you’re authorized to deliver care, there are a few nuances to be aware of.
With private payors:
- You must get authorization before visits.
- Pre-approved visits are often limited (usually 1–5).
- Further visits require evaluations and paperwork.
If you provide care without written approval, you won’t be paid, no exceptions.
Pro Tip: If you choose to work with private insurance, build strong back-office workflows to track authorizations and revisit limits in real-time.
How Are Billing Timelines Different Between Medicare & Private Insurance?
Medicare gives you 12 months to submit final claims, but this is not the case with private payors.
With private insurance:
- Some payors give you only 5–10 days post-visit to submit, others up to 30 days.
- You must submit the clinical note with your invoice.
- Missing a deadline usually means no payment.
To complicate things, documentation must meet the payor’s standards, not just clinical standards or Medicare standards.
While some private payors work off of Medicare’s systems for compliance, documentation, and more, other private payors have their own internal requirements. More on this in the next section below.
Pro Tip: If you choose to work with private insurance, ask payors to provide documentation examples or templates in advance.
Do Private Insurers Require Additional Surveys for Home Health & Hospice Agencies?
If you’re reading this article, you already know how rigorous Medicare surveys can be. While passing your Medicare enrollment survey is enough for some private insurers, others conduct their own additional surveys.
Private payors (like Kaiser for example) may conduct their own surveys for both enrollment and re-credentialing. This system mimics Medicare’s enrollment and triennial surveys, but can come with different requirements.
However, most private insurers will default to this approach:
- If you're Medicare-certified and active, that’s enough.
Pro Tip: Ask each payor about their credentialing process before applying.
What Happens If You Make a Mistake with Private Insurance in Home Health or Hospice?
Private insurance moves quickly. You’re often on the clock from the moment a referral comes in.
Without airtight processes, your team could:
- Miss visit authorization deadlines
- Submit non-compliant documentation
- Lose reimbursement due to minor errors
And unlike Medicare, private payors won’t give you multiple appeals or a year to correct mistakes.
4 Questions To Ask Before Your Home Health or Hospice Agency Works with Private Insurance
If you’re considering working with private insurance, here are a few key questions to ask before signing any contracts:
- Do we understand this payor’s documentation and billing rules?
- If Yes: Great. You’re less likely to face denials or delays. Move forward with clarity.
- If No: Stop now. Request their billing guide and sample documentation. If they can’t provide it, think twice.
- Who will manage the visit authorization process internally?
- If Yes (You have a plan/person): You’re ready to keep visits compliant and timely.
- If No: Assign someone now. Without clear ownership, authorizations will fall through the cracks.
- Can we track deadlines and follow-up quickly on denied claims?
- If Yes: Your billing process is ready for the fast pace private insurance requires.
- If No: Invest in tracking tools or staff training. Missed deadlines = lost revenue.
- Is this insurance company financially worth the effort?
- If Yes: Make sure rates align with your costs and time investment.
- If No: Walk away. Just because you can contract doesn’t mean you should.
How to Know When Your Home Health or Hospice Agency Should Work with Private Insurance
Working with private insurance isn’t impossible. In fact, it’s one of the most common ‘next-steps’ an agency takes to continue growing or safeguard their operations.
But working with private insurance is different than working with Medicare. It demands faster response times, tighter paperwork, and less flexibility.
By knowing where you stand and whether or not your internal systems can handle taking on a private payor, you’ll be able to make the best decision for your agency.
If you’re looking to grow your agency but you’re not sure where to start, building out a strong compliance program is always a great investment. To read more about why compliance maintenance is essential to your agency’s continued success, check out our article below.
*This article was written in consultation with Mariam Treystman.
*Disclaimer: The content provided in this article is not intended to be, nor should it be construed as, legal, financial, or professional advice. No consultant-client relationship is established by engaging with this content. You should seek the advice of a qualified attorney, financial advisor, or other professional regarding any legal or business matters. The consultant assumes no liability for any actions taken based on the information provided.
