By Kim Fenton, Coastal Healthcare Consulting, 949.481.9066
Perhaps you’ve just joined a medical practice and inherited the managed care agreements of your predecessor. Or you’re established in your group, but day-to-day operations don’t give you time to focus on a payer contracting strategy. Regardless, these tips on managing payer contracts will help you get organized, analyze your data and apply more provider-friendly language. Defining your plan and taking one a task at a time will allow
Inventory your current contracts
Allow yourself four to six weeks to complete an inventory of your group’s agreements with insurers. Gather all of your agreements with amendments and pull from each:
- Payer/network name
- Anniversary date
- Number of days’ notice to terminate/ renegotiate contract
- Notice address in the agreement and the current representative contact
- Reimbursement terms
If you are missing some agreements or rates, request copies – in writing – from the payers or networks.
Analyze current reimbursement
While gathering your contracts, start a payer-by-payer line up of all of your practice’s procedures, not just the top 20. Weight each procedure by the amount of use over a recent 12-month period. Take into account which ones you did in a facility (e.g., at a hospital or ambulatory surgery center) and in your office. Look at your best and worst payers by procedure and determine your collection rate by comparing charges. Also compare your collection rate against expected allowables. Don’t be embarrassed if you haven’t been tracking your allowed contract rates, but plan on doing so going forward. Determine the rates you want to offer or counter-offer in negotiations.
Look at the weighted net effect of all of your procedures. Most times your schedules will be based on a given year of Medicare, either by percentage or the Medicare conversion factor (CF). If a payer schedule seems OK except for a few procedures, calculate the carve-out rates your group needs for them, as many payers will consider a few exceptions. Be aware of the year of Medicare a payer is using for a fee basis. Far too many practices focus on the percentage or CF but fail to realize that finding a good year for your
specialty is just as important. With proposed cuts to Medicare rates in the years ahead, stay clear of reimbursement schedules that refer to current or prevailing year Medicare RBRVS or to the payer’s standard market reimbursement.
Verify that your charges are appropriate
Use both publicly available usual, customary and reasonable (UCR) charge data and Medicare rates to verify that your fees are not too high or low. It is not uncommon for UCR in any given market to be between 250 percent and 350 percent of Medicare. If your charges exceed that range in either direction, plan to update your chargemaster. In almost all cases, your practice should charge the same amount to all payers – government, commercial and individual. You can then take off contractual discounts, prompt pay/hardship discounts or uncollectible amounts from the same basis, making collections rate comparisons easier.
Start the negotiation process
With all of the above information in hand, identify payers whose contracts are coming due for renewal. Most will require 90 to 120 days advance written notice, so don’t wait until your anniversary. Send a notice to renegotiate well within the time frame required, ask for a new agreement (not an amendment) and provide deadlines by which you expect responses.
If you state in the letter that you plan to terminate the contract on the anniversary if your group and the payer can’t reach acceptable terms, the clock starts and you can walk away from the agreement on that date. You can pull the termination off the table or extend the notice if you are getting close to an acceptable agreement. If putting a termination notice on the table makes you nervous, expect negotiations to take longer, because the payer does not feel pressure to conclude the bar gaining. If you have not heard from payers by the deadlines, notify them that you expected a response.
Don’t accept canned lines
If a payer says it’s evaluating its fee schedule and asks you to check back in “x” months, indicate that you don’t want its standard schedule, that you are abiding by its contract terms and expect its representatives at the table. Don’t be coerced by the argument that you must take a pay decrease and do your part to keep healthcare costs down as a reason that you cannot expect fair reimbursement.
Do a little research on the increases a payer is giving employer groups in your area and learn its executives’ salaries, to the extent they are available. If your practice is a multi-doctor group with one tax identification number, request a group agreement so you do not have to manage many agreements. Expect flack from some payers or networks, but push for the group agreement which is sometimes more negotiable than individual agreements.