Strategies to Get the Most from Payer Negotiations

August 31, 2015
Dan Candage

Despite various changes in the healthcare industry, payer negotiations can help your medical practice prosper - if you prepare and leverage your data.

In the changing landscape of small practice management, payer negotiations definitely deserve the emphasis they are getting as a way to help small practices navigate forthcoming industry changes such as ICD-10 and the shift to outcome-based payment models. Payer negotiations are an opportunity to turn the tables on that feeling that your practice is at the mercy of myriad industry forces. It's not.

Make the investment in preparation for payer negotiations. Think about it as an opportunity for your practice data to tell a story that you can use in your negotiations and that demonstrates how your years of hard work improving patient health are advantageous to the payer. Payer negotiations can help your business prosper in spite of industry changes.

Know Thy Practice: The Value of Data

Every practice has its unique characteristics and strengths. Payer negotiations that seem overwhelming are, in fact, a chance to articulate these aspects of your business. Statistics show that private practices that present data during payer negotiations could be awarded contract terms between 3 percent to 10 percent higher than those who don't present data, according to Medical Economics. When preparing, keep in mind all the ways the health plan has benefited from your quality care to their members.

Make payers aware of any outstanding quality metrics and patient satisfaction scores you have. Assemble comparative data about your practice as compared to others in your area and/or specialty. What makes you stand out? Third-party billing services are sometimes a great source for various benchmarking information related to your specialty and payers. Some of the major industry trade and specialty associations also offer comparative metrics that can be useful in understanding and positioning your practice. Even payers keep and maintain scorecard data on healthcare providers and are happy to share that information. Any health plan that's serious will make at least its qualitative data available. Bottom line, if you can demonstrate your quality of care actually prevented hospital admissions, readmissions, or unnecessary procedures, negotiating favorable terms will come more easily.

Inevitably, gathering all this data will also help you create a clear picture of your practice and a strategy to improve your position with each payer. These are good things to have in your back pocket when the negotiations turn to, "What can you do for us?" Having the ability to provide qualitative metrics such as HEDIS and meaningful use measures may swing the negotiations in your favor as well. For example, being able to exhibit your diabetic patient population's A1C levels may allow you to squeeze out incentives or bonuses based on your results.

Contract Negotiation Preparations

As a benchmark, allow 150 days before the contract end date to prepare. Look to see if contracts have evergreen clauses which are critical to initiating timely negotiations before the contract rolls over into its new term. This means you may have to actually terminate your agreement before you renegotiate it. Designate someone in your practice who can lead payer-negotiation efforts and make them the central point of contact to prevent any payer miscommunication. The key negotiation points should be understood by this person - including those critical clauses where you may decide to walk away from negotiations. Define your "ideal" terms, but be realistic. All aspects of a contract should be up for examination during negotiations. Map out specifics like termination procedures, fee schedules, and pre-authorization waiver terms.

Anticipate Working Together

In contract negotiations, it's important to verify the reimbursement schedule and claims filing deadlines. The reimbursement schedule is one of the most important parts of your payer agreement. Do not sign a contract until you have been able to verify and compare rates for at least the top 80 percent of your procedures. It goes without saying that the procedures you do most often are the most important when doing your analysis. For example, you can give on a procedure you do less frequently if you improve on high volume procedures. It boils down to achieving a positive sum gain. Depending on the payer, claim filing deadlines can also vary widely and impact cash flow when they are missed. Some payers want claims filed within 60 days of the patient's visit; others will give you up to 365 days to file. These are sometimes negotiable but, at a minimum, your practice should ask that they be stated clearly in the contract. The contract may also specify a payment timeline for accepted claims - be sure these terms are reasonable. Speed to payment can be as important to a small practice as the amount of the payment. Know where your payers stand relative to each other on this key metric to help tailor your negotiations.

Correspondingly, for claims that get denied, you need to know what that experience will be like for your business once ICD-10 arrives. It is estimated that due to ICD-10, claim denial rates will increase up to 200 percent, according to Laura Palmer senior industry analyst with the Medical Group Management Association. This new reality of business could be a real threat to your cash flow and ultimately the business. Therefore, it is extremely important to look at your denial rates by top payer which can provide additional leverage to the negotiations.

Remember, a local commercial plan with a 15-percent denial rate is not the same as Aetna with a 5-percentdenial rate. Effectively, what it is costing you (in terms of time and delayed cash flow) is much higher with the local commercial plan in this instance and needs to be weighted appropriately during rate negotiations. Given the expected complexity of the ICD-10 rollout as of Oct. 1, 2015,, it is also reasonable to request prospective payments in case the payer experiences claim processing issues or delays due to the transition. You may not get it unless you're a critical requirement to their provider network, but it's still reasonable to inquire.

The power of combining both qualitative and quantitative data cannot be overstated in helping you develop a strategy prior to payer negotiations, no matter how small your practice may be. Your bottom line has everything to gain from the effort.

Dan Candageis drector of medical billing services operations, at ADP AdvancedMD. He can be reached at dcandage@advancedmd.com