Second Opinion: We Battled the Payers and Won

April 1, 2007

A California family physician on battling payers - and winning.


If you read “Power to the Payers,” the article about the fast-declining physician reimbursements in the January issue of Physicians Practice, you were probably disheartened, as I was. And while the suggested responses offered in the article - a tough attitude on collections and contracting, and choosing service lines with the view of maximizing profits - are entirely logical, I can’t help wondering whether this harsh, inefficient healthcare system is really what we want for the long term.

All this is discouraging. But from my own experience, I can tell you it is possible to win battles with private payers.

I am the CEO and founder of the largest primary-care group in a semi-rural area of Northern California. Our experience with contracting with payers is that the physician shortage is beginning to work in our favor. All of our contracts are at Medicare or above; most are 108 percent to 120 percent of Medicare on our most-billed E&M codes, and we require insurers to renegotiate annually unless they agree to a 3 percent “escalator” clause that raises reimbursement automatically. When they refused to pay an amount for vaccines that allowed us to make a profit, we refused to vaccinate their clients. Instead we sent them to the public health department with a letter explaining why we are doing this. And we provided the address where they can send complaints to the insurer. All but one of our insurers now pay an economic rate after this.

I think physicians can get a better deal in many areas where there is no oversupply of physicians by being tougher but fair in negotiating.

I’m close to an executive in provider relations at a big insurer. He told me they laugh at rates some physicians will accept and have contempt for physicians’ business ability. I got to know him after his insurer’s first offer for a PPO was 40 percent of Medicare. I told him to shove it and stayed out until the company offered 100 percent of Medicare. He lamented that my county is not a “competitive market” and accused physicians of “colluding.” I told him it was simple market forces: We don’t have to accept bad deals, and we won’t. There are three primary groups in the area. Ours has eight physicians; the other two have five and six, respectively. None of them accepts contracts below 100 percent of Medicare, and I don’t think that is going to change. We dumped the only insurer that refused to raise rates, and we don’t deal with California’s Medicaid system.

Ultimately, I think the only way for physicians to take on insurers is to gain the size they have. Form a national physician services company and only sell our services through it. The federal government can’t arrest all of us like it tried with the air traffic controllers - there are too many of us! Or perhaps we could form our own insurers and work exclusively with them. If you can’t beat them, join them. We have what they don’t have: the physician supply.

Yet despite our success in dealing with payers, reimbursement has been declining in real terms against inflation. We have responded by automating and charging patients for all noncovered services. Patients who want more time, more hand-holding, phone and e-mail service, and more personal service have to sign up for our retainer product and pay the extra cost themselves. This has proved successful. They understand the concept of business class vs. economy class.

The insurers may be in the process of committing suicide. If they drive doctors out their networks and price insurance beyond the reach of employers and patients, their future may be as mere claims administrators for national Medicare created by the political revolt when the public has had enough.

Family physician Roy L. Bishop, MD, is the CEO of Argyll Medical Group in Chico, Calif.

This article originally appeared in the April 2007 issue of Physicians Practice.