Why the Cheapest Hospice DME Per Diem Often Carries the Highest Financial Risk

DME Used to Be Simple

For years, Durable Medical Equipment (DME) was a quiet line item in hospice budgets.

It was operational. It was predictable.

And as long as vendors were paid and equipment arrived, it didn’t raise red flags.

Most contracts focused on one number: the per diem.

Once a daily rate was negotiated, the assumption was that financial risk was locked in.

And for a long time — that assumption worked.

But the Environment Changed

Margins are tighter.

Labor is stretched.

Referral sources expect reliability.

Finance has fewer levers to pull when spend drifts.

In this new environment, DME isn’t just a supply cost — it’s a system that impacts:

• Utilization behavior
• Staff workload
• Vendor dependency
• Margin stability

The Per Diem: A Useful Number, Not a Full Picture

A low per diem makes sense to finance leaders.

It signals control, efficiency, and good stewardship of hospice dollars.

The problem isn’t per diem pricing itself.

The problem is assuming the per diem reflects the total cost of DME.

Where the Real Cost Hides

That daily rate often hides:

• Off-formulary items that aren’t bundled
• Extended rental periods tied to higher-acuity patients
• Service or admin fees that quietly accumulate
• Time spent by staff chasing orders or reconciling unclear invoices

At the start of a contract, things seem fine.

But over time, vendors tighten definitions of what’s “included.”

Requests that used to be covered now require authorization or additional charges.

The Risk Is in the Drift

Hospice care isn’t static — and neither is DME.

As census shifts and patient needs evolve, so does DME usage.

Suddenly, month-end reconciliation doesn’t match expectations.

But by the time those patterns become clear?

It’s often too late to intervene without disruption.

These aren’t conscious overspending decisions.

Costs creep in gradually — spread across invoices, buried in service lines, delayed by weeks or months.

What Looks Cheap Can Cost You More

This is the core risk of a “cheap” DME model:

It doesn’t eliminate cost. It relocates it.

From a visible rate into:

• Unplanned utilization
• Admin hours
• Delayed pickups
• Reactive reconciliation

The per diem may look great on paper — but it’s the system behind that rate that determines whether spend stays contained.

What Finance Teams Should Watch

If the system doesn’t offer real-time visibility into:

• Non-formulary usage
• Extended rental flags
• Pickup delays
• Billing anomalies
  
  

Then the per diem is just a number — not a safeguard.

Final Takeaway

For hospice finance leaders, the question is no longer:

“Is the per diem low?”

The better question is:

“Does this DME model give us early visibility to prevent cost from creeping in?”