10 top-notch tips to negotiate payer contracts

December 4th, 2014 - Lisa Eramo

With a little hard work and patience, practices can succeed at negotiating stellar contracts with payers, Marcia Brauchler, MPH, CMPE, CPC, CPC-H, CPC-I, CPHQ of Physicians Ally, Inc. told attendees at AAPC’s 22nd annual HEALTHCON conference in Nashville, TN earlier this month.
 
“[Contracts] represent 100% of the revenue to the practice,” Brauchler said. “Everything comes to your practice via payer agreements. The more time you put into payer agreements, the more time you’re freeing your practice up to stop focusing on cutting expenses.”
 
Many practices don’t realize that their contracts are extremely outdated, thus they are cheating themselves out of reimbursement that they deserve, she said. “It’s your practice’s paycheck, and you need to go ask for a raise,” she added.
 
Brauchler provided some tips that practices can use to negotiate more effective contracts.
 
Tip #1: Don’t give up. Payers are not going to agree to renegotiate on the first try. However, don’t accept ‘no’ for an answer, she told attendees. “Your costs have gone up, your health insurance premiums have gone up, your rent has gone up, your malpractice insurance rates have gone up. Go get yourself at the very least a cost of living increase,” Brauchler said.
 
Tip #2: Make the task a priority. Renegotiating a typical practice’s contracts takes approximately 100 hours over six months, Brauchler said. Most practices will need to allocate this time over several months. “But if you don’t have 100 hours in your calendar blocked out, you’re going to end up succumbing to the endurance test and not getting through the process,” she said.
 
Tip #3: Use health plan mergers to your advantage. Health plan mergers are becoming more common, and practices need to capitalize on this rather than fear it, Brauchler said. “When those health plans merge and get acquired, it’s an opportunity every time to renegotiate,” she added. She urged practices to ensure that the highest possible fee schedule is in place after any merger or acquisition.
 
Tip #4: Know your baseline. Twenty percent of the time spent negotiating contracts occurs during the initial phase as practices gather data about current payers and fee schedules, Brauchler told attendees. This information is crucial because it helps determine whether any counter-offers are appropriate, she added.
 
Brauchler urged attendees to visit their state’s division of insurance Web site to determine what payers have presence in their state. “There might be an insurance company out there that you might not know about because you’re not contracted,” she said. Who are the licensed HMOs? What are their member volumes? Can you prioritize them? Do any of them work with intermediaries? Be open to negotiating with all entities, she said.
 
However, practices should prioritize payers. “Put the bulk of your 100 hours into the big payers,” she said.
 
Then ask these questions:
 
·       Do you have an independent practice association model or a direct agreement with each payer?
·       What is the effective date of the rates?
·       What is your current fee schedule for each payer?
·       Is each payer actually paying your practice according to this fee schedule?
·       Who is the specific contact at each payer? Look at old agreements—who signed these letters? Compile this information in a database.
 
Tip #5: Identify your most frequent CPT codes. “What codes matter to your practice?” she said. This information can help negotiate contract carve-outs for specific high-frequency codes, she added.
 
Also pull a frequency of ICD-9 codes. How many of these codes are unspecified? If it’s a large percentage, consider improving documentation and coding before approaching payers to renegotiate.
 
Tip #6: Review your charges. “If a doctor has a charge lower than Medicare or lower than Medicaid or lower than worker’s compensation, you want to fix that charge before you go to the insurance company,” Brauchler said. How do these charges compare to the charges paid according to your highest fee schedule? Ensure that the practice is charging as high as possible before negotiations begin, she added.
 
Tip #7: Know your weighted average reimbursement. This helps practices identify what a certain percentage increase will mean to payers in their dollars, Brauchler said. “This really puts it into perspective for the payers,” she added.
 
Tip #8: Leverage unpaid claims. “If a health plan owes $40,000 or $50,000, we leverage that into a contract negotiation because at some point, it’s going to be old enough that even if they do pay it, it’s not worth it to post the difference and generate an EOB for every patient for that small amount,” Brauchler said. “We would lump that money into a negotiation—you pay us $40,000 or you give us twice what you’ve been paying us for a year. It’s smarter to do this with a contracting department rather than appealing it.”
 
Also consider your payer-specific denials. Has your payer typically denied certain services in the past? “You may never get paid for these, but you can leverage this into an increase into everything else that they do pay for,” she said.
 
Tip #9: Convey your practice’s value proposition. Your negotiation letter should convey the following:
 
·       Quality and volume of the care your practice provides
·       Current rate vs. what you want
 
Let physicians review the letter, and ask them all to sign it, Brauchler said.
 
Tip #10: Monitor, monitor, monitor. Post-negotiation, practices must absolutely monitor payments to ensure that new contracts are in effect, Brauchler said. Just because a new contract is in effect doesn’t mean that payers will actually follow through with paying the new amount, she said. 

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