What Hospices Get Wrong About DME Contracts Before Signing

he per diem looks right. The vendor seems responsive. The formulary covers what you need today. You sign.

Three months later, you're being billed a minimum of 20 days for a patient who passed on day four. You want to bring in a secondary vendor for a service gap but your contract says you can't. Your nurse manager found a lower rate with a local vendor but you'd need to give six months' notice to make the change.

None of that was hidden. It was all in the contract. It just wasn't the part anyone read closely before signing.

Here are the clauses that catch hospice teams off guard most often - and what to look for instead.

Minimum Patient-Day Billing Requirements

Some DME vendor agreements include a minimum billing window for each rental. Typically this means that even if a patient uses a piece of equipment for only a few days, you're billed for a minimum number of days - often 20.

For hospices with short-stay patients - which is most hospices, given that median length of stay has been declining - this clause can significantly inflate your monthly invoice. A patient admitted on day one who passes on day four generates a 20-day billing charge. Multiply that by your monthly short-stay volume and the cost compounds quickly.

Before signing, ask explicitly: is there a minimum billing period for any item or category? If yes, get the specific terms in writing and calculate what that means for your historical census data.

Exclusivity Clauses

An exclusivity clause requires you to use one vendor for all - or most - of your DME orders. You cannot bring in a secondary vendor, even for items your primary vendor can't supply or can't supply on time.

This clause exists because it benefits the vendor. It guarantees them volume regardless of their service quality. For your hospice, it removes the competitive pressure that keeps vendors responsive.

When a vendor is your only option, they know it. Delivery windows slip a little. Pickups get deprioritized. Equipment substitutions happen without notice because there's nowhere else for you to go.

An exclusivity clause is the contractual version of being stuck. Read carefully whether the agreement requires you to give your vendor "first right of refusal" versus requiring you to use them exclusively. Those are meaningfully different.

Notice Periods for Termination

Most DME contracts have a notice period - the amount of time you're required to give before you can terminate the agreement. Notice periods of 30 to 90 days are standard. Notice periods of six months are not uncommon.

A six-month notice period means that from the moment you decide to switch vendors, you are still paying your current vendor for half a year. If you're unhappy with their service quality, you're paying for six more months of it while you transition.

Before signing, confirm the notice period for termination and the notice period for non-renewal. They are sometimes different. And check whether the contract includes automatic renewal terms - some agreements renew for one or two additional years unless notice is given 90 days before the expiration date.

What Your Per Diem Clause Should Say

Most contracts specify a per diem rate but are vague about what it includes. The rate appears clearly. The formulary may be attached as an exhibit. But the clause that defines what happens when a patient needs something not on the formulary is often buried or missing entirely.

The per diem clause should specify:

• The exact per diem rate and the effective date
• A reference to the formulary exhibit, which should be a numbered list of covered items
• The non-formulary rate card or a reference to where those rates are published
• What happens to the per diem during rate review periods - when and how the rate can change

A per diem clause that says "rates subject to change with 30 days' notice" gives the vendor the ability to raise your rate every 30 days. Clauses that specify a fixed rate for a defined contract term are significantly more favorable.

How Hospice DME Per Diem Rates Get Calculated

Service Level Agreement Requirements

The contract should define what service looks like - not just what equipment costs. If there are no documented service standards, there's no baseline for holding a vendor accountable when they fall short.

Service level agreement (SLA) terms to look for:

• Delivery timeframes - how many hours for a stat order, how many hours or days for a routine order
• After-hours coverage - are deliveries available at night and on weekends, and is there a documented process for accessing them
• Pickup requirements - how many hours after notification must the vendor complete a pickup
• Substitution protocol - is the vendor required to notify and receive approval before substituting equipment

If none of these are in the contract, the vendor's behavior is governed by their own judgment on any given day. That's not a service agreement. That's a hope.

The Auto-Renewal Trap

Auto-renewal clauses are easy to miss and expensive to trigger accidentally. If your contract automatically renews for a one-year or two-year term unless you provide written notice 90 days before expiration, you can miss your window without realizing it.

Mark your contract expiration date in your operations calendar the day you sign. Set a reminder 120 days before that date to review whether you want to renew, renegotiate, or switch. Giving yourself 30 days of buffer before the notice deadline is the difference between a decision you make and a commitment you drift into.

What Good Contract Language Looks Like

The best DME contracts are specific without being complicated. They define the per diem, the formulary, the non-formulary rates, the service standards, the notice periods, and the conditions for rate changes - all in clear language that your team can reference without a lawyer.

Qualis uses standard contract language built around all of the above. If you want to understand what a well-structured DME agreement looks like before your next renewal conversation, start at qualis.com/contact-us.