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Most physicians don't really negotiate commercial payer contracts. But that doesn't mean they shouldn't try.
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David Rea is fatalistic when it comes to commercial payers and their allowables.
"Most doctors are pretty much at the mercy of payers," he says. I don't think very many of them negotiate. Most just accept their fees and go on from there."
Rea, president of Memphis-based Rea & Associates, a practice management consulting firm, agrees with most physicians, who complain that payers typically offer one schedule, and their choice is to take it or leave it.
Of course he's right on one count: Most physicians don't really negotiate commercial payer contracts. But that doesn't mean they shouldn't try.
Though your options can be limited, there are ways to get payers to boost reimbursement -- and to make sure you get the most mileage out of what they do pay.
"Doctors have a lot more leverage than they think," says Todd Welter, a Denver-based practice management and coding consultant. "They just have to be creative in finding it."
Just speak up
The simplest way to boost reimbursement? Just ask. As Rea suggests, many physicians never bother to question yet another year without an increase or, worse, one with deeper cuts. Instead of just taking what payers offer, take a deep breath -- and ask questions.
It worked for Welter who, during one negotiation session, complained that his physician client couldn't take yet another pay cut. The payer actually laughed: "'We wondered if you guys would ever complain. We figured we'd just keep cutting until you squawked,'" Welter reports. "You can't be afraid to ask stupid questions." Indeed, his experience only points out that asking blunt questions isn't so stupid after all.
Goshen Orthopedic Associates, a hospital-owned practice in rural Indiana, had a similar experience, and its success was "partly just a matter of asking," according to Linda Flagg, the office manager.
All of Goshen's contracts were negotiated by a management services organization (MSO) created by the hospital, Flagg says, and rates were declining steadily. "We were at 110 percent of Medicare for E&M visits; for procedures we were getting 160 percent, sometimes 125 percent," Flagg recalls. She believes the hospital negotiators spent a lot of time pushing for hospital reimbursement, ignoring the outpatient practices.
The group finally hired a messenger -- someone who represents the practice in negotiations with payers -- to intervene. Today, reimbursement for E&M visits is up 20 percent to 30 percent and procedures are at 180 percent to 200 percent of Medicare, Flagg reports.
Strength in numbers
If asking for more pay doesn't do the trick, try lobbying, suggests Debbie Welle-Powell, senior director, managed care, for Exempla Healthcare in Wheat Ridge, Colo. "Make sure you are part of the medical society. It can represent your issues more vocally and broadly."
Another group worth lobbying? Employers. "Administrators and physicians need to begin thinking about the employer connection to the payer. In our yearly negotiations, we ask the payers who their top employers are, and we keep the information on file. There is nothing better than sending the CEO of a company a note saying we are thinking of canceling our contract with a payer -- and suggesting that he get involved if he wants to continue using his doctor in our group," Welle-Powell says.
Joining the local chamber of commerce is one way to get to know employers and their concerns. Another way to increase your clout is to join a physician association - sometimes called independent physician associations or IPAs -- that can negotiate contracts on your behalf using a messenger model, suggests Anna Wood, office manager of Family Practice Associates in Carthage, N.Y. The Jefferson Physician Organization negotiates most of the commercial contracts for her two-physician family practice.
Wolfgang Klamp, who works as a messenger for IPAs, says, "It's easy for an HMO to intimidate a solo provider ... whereas if physicians collectively negotiate a higher rate, the managed-care organization (MCO) has more to lose. The only thing the MCO has to sell is the service of the physicians they contract with; if it is in jeopardy of losing lots of physicians, it will come up [in price]," Klamp explains.
Contract time is the time to play up your strengths. "Ask yourself, does your practice provide unique services that are necessary or important to the payer? What can be leveraged? If there is anything, try it," urges Welle-Powell.
Obviously, if your practice is the only one supplying some key service to the community, you should point that out. Offering high-quality, low-cost services also can help. "If you are able to demonstrate that you are a cost-effective group, you can negotiate a better rate," notes Judy Hayes, office manager for PriMed Physicians in Dayton, Ohio.
"We physicians ought to go to the [negotiating] table with data," agrees Chuck Kilo, MD, founder of GreenField Health System in Portland, Ore. "I don't think it's right that the person who is the best negotiator gets paid the best. In every other industry, the higher the quality of the product, the higher the price you can demand. In healthcare, we think we ought to be paid more, but can't provide any evidence."
Independent Health, a managed-care company based in Buffalo, N.Y., is one that does pay more for quality. Practices that meet access and patient satisfaction goals earn an extra $1.50 per member/per month, according to Daniel Horrigan, vice president of managed care.
That may not sound like much, but when multiplied by 500 or so patients - a typical population from one payer -- it grows fast. "Every health plan is trying to do something like this," Horrigan says. The challenge for physicians is to be able to track outcomes, access, and satisfaction well enough to be able to report on them.
Make the most of it
Of course, not every practice can negotiate. For example, Carl Smith returned to his rural, coal-mining hometown of Harlan, Ky., after training to become a pediatrician. Eighty percent of his patients are on Medicaid. Of the rest, the coal miners and their families are covered by Anthem; the town's teachers and state employees can choose between two other payers.
With so few payers to choose from, Smith's office manager, Peggy Smith, doesn't feel she's in a position to turn down many managed-care contracts, no matter how bad the reimbursement. "We don't do a lot of negotiating. We look at the fee schedule, and talk about it a little bit. If it's not reasonable, we don't accept it," she says. But at the end of the day, "We either take the money [the payer offers] or we see the patients for free."
If negotiation is simply not possible, as in Carl Smith's case, practices can still improve their financial outlook by making the most of what they do get paid.
Here are some steps to take:
Pamela L. Moore is senior editor, practice management for Physicians Practice. She can be reached at
This article originally appeared in the
May/June 2002 issue of Physicians Practice.