How to negotiate physician payer contracts

Small and midsize practices are well positioned to negotiate contracts with payers.

There is a dynamic shift in the healthcare arena where insurance payers are willing to negotiate reimbursement rates for small and mid-size physician groups. The reason for this is because insurance payers are starting to realize that the ‘bread and butter’ of their network consists of small to mid-size groups (one to 10 physicians) and they have been ignoring this subset for far too long.

Insurers are also starting to realize that if they continue to ignore this segment of the network, these physicians will be forced to join larger groups that have more leverage to negotiate higher reimbursement rates. Payers understand that they have created the problem and seem to be offering the solution. They are willing to open the negotiation table - but be wise how you negotiate your reimbursement rates.

I recently worked with a neurology group of three physicians that had started the negotiation process with their largest payer. After 8 months, the practice was offered a contract that was supposed to be “10% higher than current rates” according to the payer. The practice was ready to sign until I reviewed the contract. The contract I reviewed was in fact an increase in aggregate of all CPT codes, but if you looked at the codes most commonly used by the practice, those rates were actually lowered about 15%. This would’ve resulted in a 15% decrease in revenue for that practice’s contract.

That’s a pretty egregious act on behalf of the payer. It is certainly not common to encounter this scenario, but it’s one of the many nuances that have to be considered when negotiating your reimbursement rates.

I escalated the negotiation to the vice president of network management. I felt it was important based on the circumstances. We were quickly presented with a fee schedule that was an increase in 18% of the most commonly used codes.

The takeaway is that you must be extremely vigilant and practice due diligence when negotiating with payers.

It can be worth hiring an expert to negotiate your rates. Be weary, however, as not every company that has negotiated reimbursement rates is an expert. Ask to speak to a consulting company’s past clients and ask them to provide verifiable references of practices they have worked with that are similar to your practice profile. They don’t necessarily need to be the same specialty, but they should be around the same size; A consultant that negotiates for larger groups doesn’t necessarily have the skills and knowledge needed to negotiate for a small or midsize practice.

You should also ask for examples of actual increases they were able to obtain on behalf of clients. Ask to see a spreadsheet of a previous client’s previous rates, their new rates and how long it took to obtain those increases.

There are too many consulting companies that promise clients the world and charge a significant amount. Follow these steps and you can avoid working with an unscrupulous company.

If you can find a reputable consulting company to work with, it is worth spending some money to have them help you. Although you could undergo the process on your own, a good consulting company has the knowledge, expertise and connections to get you better rates than you could get on your own. It helps to have a third party involved in the negotiation process.

If you decide to negotiate your reimbursement rates on your own, make sure you do your research. Put together a formal proposal to the insurance company outlining why you deserve an increase. Be sure to document anytime you have communication with the insurance company. Make sure that you have a qualified person review the contract that is presented to you - you may find that there are new provisions in that contract not related to reimbursement rates that may not suite your practice.

It is now prime time to negotiate your reimbursement rates. Whether you negotiate your reimbursement rates with the help of a consulting company or on your own, be sure you are being presented with a contract that is specific to the codes you use and relevant to your practice.

If you haven't negotiated your rates in the last three years, take advantage of this time to negotiate your contracts. It could mean thousands of extra dollars to your practice.

Feel free to head over to www.ngahealthcare.com for additional tips on how to negotiate, market and manage your practice.

Nathaniel Arana is nationally recognized healthcare business consultant with experience ranging across many different specialties. He has worked with many practices to negotiate reimbursement rates, market practice and help physicians remain autonomous. You can read some tips on how to negotiate your reimbursement rates on his website www.ngahealthcare.com.