Power Over Payers

January 1, 2005

Physicians are pushing back on managed care contracts - and winning.

Most physicians consider "managed-care contract negotiation" an oxymoron. In most cases it's seemingly impossible to go back to payers after the ink is dry and secure better rates. Nonetheless, some physicians are pushing back on the insurance companies -- and winning.

Associated Cardiovascular Consultants in Cherry Hill, N.J., did just that and succeeded, thanks to good clinical data.

"Without data, it's hard to negotiate," says Steven Fox, MD, one of 31 physicians in the group. "What [the payers] want to do is save money. You need to be able to prove that you're a quality practice, that you are not over-ordering and readmitting patients ... . If you're going to control your future, you need to do your own homework."

Fox and his colleagues are living proof that when practices can demonstrate their clinical excellence and their value to the payer, or show the payer that its fees are too low, they can win at the negotiating table.

"Doctors tend to think they can't do anything about [poor payments], but they can. Just don't go at it from a hostile point of view ... . Get in there, build a relationship with these people, sit down next to them at a table and talk about it. Say, 'What would you like from me, and here's what I want from you,'" says practice management consultant Judy Capko of Capko & Co. in Thousand Oaks, Calif.

John Morris, executive director for Associated Cardiovascular, remembers the day three representatives from one of his major payers visited, concerned about the practice's patients with congestive heart failure. Evidence-based guidelines say these patients should be prescribed a beta-blocker and ACE inhibitor. The insurance company --  relying on information from diagnosis and CPT codes on 59 patients -- contended that the practice appeared to write those prescriptions only 74 percent of the time.

"I let them finish," Morris says, "and then asked, 'Would you like to see a study based on 3,000 patients?' They said, 'Oh, sure.' So I showed them, and they were just wowed."

Using its EMR, the practice was able to prove that it was, in fact, compliant with the beta-blocker and ACE inhibitor guidelines 94 percent of the time, and that if a patient was not on the recommended drug therapy, there were clinical explanations for the aberration 20 percent of the time.

Dialogue gets dollars

"Their data and our data were like night and day. It's amazing. Most of the time the [payer] data is just wrong," Fox says, adding that it's imperative that physicians take charge of the negotiation process.

"They were excited about [the data], and a bunch of things followed," Morris adds. "They invited one of our doctors to be on their advisory board. They've given us a little bit more money for all of our codes."

The group decided to take the same data to other payers. "If one payer will [pay more], so will others," Morris points out. "In one instance, we got a 22 percent increase, in another one 10 percent, and in a third about 15 percent."

None of these payers had established pay-for-performance programs, but "we were the ones to bring it up," Morris says. "What that means is that we've opened the dialogue ... .  Every other week either I -- or one of our physicians --  will get a call from one of these insurance companies with a cardiology question ... . It's great that we now have an open dialogue with our three biggest payers. We can talk about these things in a business-like way instead of pointing fingers saying, 'You're ordering too much' or 'You're paying too little.' You can't put a price on that."

This practice's EMR was essential to proving performance to the insurers. Fox was initially skeptical about the practice's Amicore software, worried about the price. Now he is a believer: "If [the EMR] can help us cut deals and take better care of patients, it's worth it."

"We went into the EMR because we thought we'd save money. Now we look for ways to make money with it," Morris adds. "Insurance companies are willing to listen to you when you have data."

Define referral patterns

Andrzej Klos, one of seven physicians with Hoboken Pediatrics in New Jersey, also finds success when he comes to the negotiating table armed with statistics.

In part, he educates payers about the Hoboken marketplace. Though just a ferry ride from New York, few Hoboken patients are willing to go to Manhattan for care; culturally, it's a world away. Klos' group is the only comprehensive pediatric practice in Hoboken, giving him great leverage once he shows payers how many of their patients are coming to see him. He routinely needs to explain why practices in Manhattan or even other New Jersey communities aren't his competition. "Patients don't want to leave Hoboken," he says.

Indeed, practices can't always trust that payers understand referral patterns in a given market, points outs Craig Bakken, administrator and CEO of Rocky Mountain Gastroenterology Associates in Lakewood, Colo. That's partly because of what he describes as high turnover among payer representatives. The person you negotiate with may be a newcomer who needs to hear again what you've already told his four of five predecessors -- and see data-based proof.

"We are geographically diverse and have almost no competition," says Bakken, describing his practice. "If people don't do business with us, they have to send people across town or some distance outside their normal referral patterns. We make that abundantly clear. I bring maps."

Bakken also brings along proof that Rocky Mountain Gastroenterology Associates' ambulatory surgery centers allow the group to claim more efficient treatment than gastroenterology practices that do procedures in area hospitals.

Even with that information, not all payers take his point, Bakken admits. "We put the big squeeze on Aetna ... and they wouldn't do business. So we left their network."

Put price on the line

Klos also comes to the table with data about what all his major payers are paying for his 20 most frequently used CPT codes, which represent 90 percent to 95 percent of his reimbursement. He literally shows managed-care representatives what their competition is paying for each service (without naming names). "They'll never agree to increase everything, but you will see money for specific codes," Klos says.

Bundling is another area where Klos pushes back. For his pediatric practice, for example, it's a big deal when payers break with CPT guidelines and bundle payments for vaccines and their administration --  usually two separate payments. Klos insists that payers play by the rules on this and other specific billing issues.

John Rogers, whose consulting firm, Health Management Strategies, of Ridgewood, N.J., works with Klos, encourages practices to take the time to gather facts on reimbursement and market share before starting a negotiation. It's not going to help you much to tell a payer that it's the lowest paying in the market on specific CPT codes and that it represents only 10 percent of your patients. In that case, if payments don't improve, your only option may be to walk out on the contract.

Sometimes a multipronged approach is needed to get ahead with payers. Rogers worked with one radiation oncology group that had no real competition but was still getting just 35 percent of the Medicare fee schedule from Aetna. The practice pulled data and demonstrated how poorly those rates compared to other payers, and got a small increase. But it didn't stop there.

The practice also solicited reference letters from referring physicians attesting to the need for its services and equipment and arranged a meeting between the medical director of the managed-care plan and the medical director of the group. Finally, allowables went to about 95 percent of Medicare, Rogers reports.

Cut the hassles

It doesn't matter that a payer's allowables are high if your staff is spending hours each day jumping through hoops to get claims paid. What matters is money in the bank, not a promised fee schedule. There is more to payer relationship than price --  you've got to also consider the "hassle factor," say Capko and Rogers.


Review your outstanding claims reports to identify payers that account for the highest volume of outstanding claims and those that account for the largest amount of revenue due on outstanding claims, Capko suggests. Look at the aged receivables report and weigh the time spent on getting authorizations and juggling denials.

Good customer service can be hard to come by in the practice-payer relationship, so some practices have decided to make it part of the contract. For example, Alpenglow Medical in Fort Collins, Colo., a solo practice that is part of a large IPA, contractually obliges payers to follow timely filing, bundling, and appeal-processing standards, according to Daniel Griffin, MD, who runs the practice and is medical director of the IPA.

"If the contract is really clear we can actually get a lawyer involved [if a payer acts poorly]. We can say, 'This isn't a negotiation issue, this is a legal issue. You've violated the contract ... .'" Many payers have settled out of court at that point, Griffin says.

In other instances, the IPA takes cases before the state insurance commissioner. Right now, it is going head-to-head against United Healthcare for the way the company handles appeals.

"They'll reject claims, then when you go ahead and appeal it goes back to the same person who rejected it the first time, and he rejects again 100 percent of the time. They don't really have a true appeals process ... . When you try to call, they put you through to someone in Jamaica or India who knows nothing about what's going on. We're saying that they're really not following their contracts," Griffin explains.

Find your own strategy

While it's useful to know what strategies other physicians are using to push payments higher, there really is no standard to follow. As Bakken puts it, "If you've seen one managed-care negotiation and contract, you've seen one managed-care negotiation and contract."
The key is understanding what you and your payers need given your particular situation --  based on geography, specialty, access, or any other point of leverage you can think of.

Do some homework that will help you find a mutually agreeable outcome, Capko suggests. "It's so geographically sensitive. An urban area could have 100 different pockets around it that all vary tremendously ... . If there is a need for that specialty, you've got a ton of negotiating power," she says. "Or if the specialty is being served but it is getting bad customer service marks ... then you are in a better position. It starts by building a better relationship with the payer and finding out if its needs are currently being met. And if not, why not? You can work to fill those gaps."

And maybe --  just maybe --  negotiate a better rate.

Pamela L. Moore, senior editor, practice management, for Physicians Practice, last wrote about developing fair call schedules in the November/December 2004 issue. She can be reached at pmoore@physicianspractice.com.

This article originally appeared in the January 2005 issue of Physicians Practice.