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The Great Practice Makeover: He Wants More Money. But He’s Worth It.


An in-demand psychiatrist needs help leveraging his popularity for a more appropriate fee schedule.

Bill Sinclaire, MD,* has a tough decision to make. The payer that covers 40 percent of his patients reimburses at levels that verge on scandalously low - below Medicare, below Medicaid, and below every other payer in his area. As a result, he and the other psychiatrists in the Southern practice where he’s medical director are seriously considering dropping this payer. Still they’re justifiably worried about the hit revenues will take, and about what will happen to their patients who can’t afford increased out-of-pocket expenses.

Sinclaire brought in a consultant to work with this payer’s reps to try to improve rates, but the consultant hit a brick wall. “I think she was sort of led on for a couple of months,” he says. “They talked with her as if they were open to negotiation. She got together claims data to submit to them, and after talking to them over about a period of two months, [the payer] came back and said that they weren’t willing to negotiate, and in fact the rates were set across the state.”

Even more maddening, Sinclaire knows of several other specialists who have had success in negotiations with this particular payer. But that’s actually good news: It means Sinclaire shouldn’t give up.

What recourse?

Aside from knowing that this payer can be negotiated with, Sinclaire has a few more tools at his disposal for dismantling this intractable payer’s brick wall.

He definitely needs to push back on the assertion of a set rate across the state. With the exception of certain aid programs, it’s unlikely that a truly mandated rate exists. A national rep from this particular payer tells Physicians Practice that the company absolutely does not have a ban on negotiating with psychiatrists, so, frustrating though it may be, at least one more salvo is in order.

Sinclaire needs to conduct a detailed review of the terms of each contract - not just the ones he feels are especially onerous. Although he has a fairly good handle on his various payers’ allowables, a closer look wouldn’t hurt. Too many solo docs unwittingly end up employing an overly simple heuristic as a substitute for thoroughly analyzing the true patterns occurring in their practices. Too many also assume they’re actually getting paid the contracted rate, and plenty more aren’t attempting to objectively classify each payer’s “hassle factor.”

Try a simple ranking method that accounts for the volume of procedures, automatically assigning greater weight to the reimbursements attached to the services you provide most frequently: Over a period of six months to a year, calculate average total dollars received per visit. Take the total amount collected for each contract or government program, and divide it by the number of patient visits over the same period. The resulting values will help you more accurately compare your payers.

In addition to objective fee schedule criteria, consider more subjective measures such as physician and staff time to collect on claims, and the time and effort involved in resolving administrative issues such as credentialing or trying to recover disputed claims. Look, too, at average number of appeals required and time spent on preauthorizations for each payer’s patients.

Sinclaire might also consider contracting with additional plans in the area, or at least approaching them, so he’ll have more information with which to “prove” the going market rate to the poor payer. Colorado-based consultant Marcia Brauchler often helps clients negotiate with managed care companies, and she recommends compiling a list of your state’s insurers, along with how many covered lives each one represents, to target your efforts to the players that matter in your market. (The state insurance commissioner should be able to provide this info.)

Creating your own carve-outs also can be an especially effective strategy for specialists, too: “Mr. Insurer, how about you pay me 120 percent of Medicare’s rate for codes X and Y” - codes that constitute a sizable proportion of your business, of course - “and I’ll make you a deal! I’ll accept just 85 percent of Medicare for every other code I bill!”

Before you take the step of dropping a poor payer, tell them about your plans. Pointedly. Take the matter as high up the food chain as you possibly can, and enter the discussion armed with data. For Sinclaire, that would include his perpetual two-month waitlist for initial consultations and a limited number of colleagues to whom he can refer the overflow. Patient satisfaction data and any compelling outcomes stats would come in handy as well.

Also ask patients or their caregivers to contact the insurer - and their employers’ benefits offices - on your behalf. It’s like politicians getting pressure from their constituents, and payers do listen.

Finally, says Brauchler, find out if your state has on the books a statute or regulation requiring that managed care companies maintain sufficient providers to ensure “network adequacy.” Indeed, Sinclaire’s state has such a rule, which may mean that the payer must reimburse providers in a given specialty - the non-contracted folks, anyway - their billed charges (not just the payer’s allowable) if the ratio of patients to providers is too low.

Some quick searching turned up more potential ammunition for Sinclaire’s negotiations: The county where he practices is a federally described Health Professional Shortage Area, a designation made by Health Resources and Services Administration of the Department of Health and Human Services. The bottom line: Don’t give in too easily, as help is available.

If all else fails

Still, if the brick walls won’t budge, Sinclaire may eventually be forced to drop this payer.

A loss of the magnitude the practice would likely suffer will be tough to weather. But exactly how big would it be? And how long could Sinclaire survive on that reduced revenue? Here again, base your projections on actual data from your practice.

“What we’ve thought about doing is staging a withdrawal,” says Sinclaire. “We’d have one person drop off [the payer’s panel] and build their practice back up, and then have another drop off … .” This would be a time-consuming undertaking given the approximately 20 providers in Sinclaire’s practice, potentially stretching on for years, but it may be the best way to avoid crippling the practice’s cash flow and ensuring that the physicians feel comfortable with their patients’ continuity of care.

They’ll have to be careful, of course, not to simply have all of Dr. A’s patients transfer to Dr. B when A drops the payer. And at the very least, assuming your contracts allow this, don’t accept any new patients under the plans you’ve determined aren’t worth dealing with. (Another reason you’ll have to be intimately familiar with each of your contracts.) Continue the patient education campaign, too, making sure staff have clear answers to pass along when that payer’s patients come calling.

Plan ahead, ideally giving patients at least six months’ notice that you’ll no longer be accepting their insurance. Although there’s no need to delve into specifics, tell them why. Just keep it simple and non-accusatory (no whining!), and offer a list of the plans you will continue to accept (or otherwise explain how they’ll be able to pay you if you’re going completely cash-only). Try to post patient notices about changes in your practice’s contracting during early fall, as that coincides with most employers’ open enrollment periods - loyal patients may be able to switch plans to one you’re still accepting.

Scan contracts for an “evergreen clause,” which means that your contract will automatically renew unless you give advance notification that you want out. The clause may stipulate that you submit notification a certain number of months in advance, or you may only be able to terminate during a certain period each year. You may also be obliged to continue accepting that payer’s patients, both new and established, for up to 12 months after terminating a contract with them.

Terminating a payer contract may not be as easy as you’d think, but in the end that step may not be necessary anyway.

*Names have been changed.

Laurie Hyland Robertson is senior editor, projects, for Physicians Practice. E-mail her at, or join the online discussion at

This article originally appeared in the February 2009 issue of Physicians Practice.

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