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Tools for Payer Negotiations You Don't Even Know You Have


Payer negotiations can favor medical practices if they take steps to know more about themselves and their patients.

Whether you think the days of payer negotiations are gone in healthcare or you feel your practice is either too small or not equipped to go head-to-head with payers, there is a very powerful set of tools within the four walls of your office that can change that attitude.

"You have more leverage than you think you have," said Randy Cook, president and CEO of AmpliPHY Physician Services, a Brentwood, Tenn.-based consulting firm. "You don't know what it is, but you have it. …And you have more leverage than health plans tell you about."

Cook said practices can discover and increase their leverage with time and energy, and perhaps most importantly, believing they can make the needed changes to help their practices' finances.

One key area Cook said every medical practice should look at first is their market position. This includes the number of providers offering the same services in your marketplace; the physicians who are the main care providers for these patients; and the community demographics. This data can be pulled from various sources, including the chamber of commerce, Google, and other resources.

Cook also advised practices to look at their "primary-care orientation" - the degree to which patients seek out providers for specific services - and "geographic isolation" - those services practices uniquely provide in the community. Both can make you an attractive candidate to health plans and can boost your leverage in negotiations.

"The key is to act confident that leverage exists, even if you don't fully understand it," he said.

Cook believes practices should examine their capacity and demand. He urged practices to have slightly more demand versus capacity - saying the market will fill that void if it is too large. Keys t

o assessing demand include determining your new patient to all visits ratio, your payer mix, and surveying those patients asking for their medical records, "because they are about to go somewhere else for their care," he said.

Knowing your demand can be a powerful leverage tool, especially with your lowest payers, Cook said, as in most cases, you can terminate with low payers and still make up the difference with higher-paying payers. But don't get too cocky or too confident based on that one data set alone, he advised.

Cook also addressed the controversial subject of "managing patients based on their payer," indicating that there are no prohibitions against managing your payer base, but "you need to be sensitive, smart … and sophisticated about it."

So with information about your community, your patients, the need for medical care in the community, and which payers are paying you for what percentage of your services, know it is time to use the data you've collected to establish and increase your leverage.

"You are the source of the data," Cook said. "You have it before everyone else and that gives you the power without even knowing it."

As an example, Cook highlighted a fictional payer that is one of a fictional practice's lowest reimbursement sources - to the tune of 28 percent difference between what the practice gets paid and what it costs to see those patients. By knowing what they pay, how much it costs your practice to see patients, and the average payments from your other health plans, you can then approach the payer in question and negotiate for a better reimbursement, indicating that if you need to, you can terminate the plan and take more patients from your other contracts.

"Use the data to prepare yourself," Cook said. "And use the data so you know what to ask for."

Having this data ready to present to payers not only boosts your confidence, but it provides hard examples for your physicians - who may be hesitant to rock the boat - and shows the payer you know what you have, and what they need to provide. Often, Cook said, that data, when collected properly, gets to the decision makers a bit faster.

"The data can tell you how to argue," he said.

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