Patience and perseverance pay off in contract negotiation

Tags: practice management, payer, contract, negotiation, reiner

Patience and perseverance pay off in contract negotiation

By Bradley K. Reiner
Practice Management Consultant, Reiner Consulting and Associates

Have you ever wondered if renegotiating contracts is really worth the time and effort? Is an increase in payment even possible? Will payers consider changing your contracted rates?

I can tell you for a fact that if you have a plan in place, it can work. You will never get an increase if you never ask, right? Insurance plans don’t send out notices asking you to renegotiate your contract because they aren’t paying appropriately. What if I told you there was a chance you could get an increase between 3 percent and 5 percent for your negotiations? It might be worth considering. Just a 3 percent increase on total annual collections of $250,000 can put an extra $7,500 in your pocket. The effort may just pay off. What do you have to lose?

A few months ago I held an initial meeting with doctors in a practice to discuss their goals in negotiating their contracts. I asked them to answer a few questions.

  • Which contracts and with which payers do we want to renegotiate?
  • What are the top three items you want to accomplish in the negotiations?
  • What are the main factors in renegotiating your contracts?
  • What do you see as the significant issues or concerns you have for accomplishing these goals?
  • What are the strengths of your practice?
  • What measures have you implemented to save the insurance plan money or to increase the quality of care their members receive?
  • Have you implemented performance measures for chronic disease management protocols?
  • Do you prescribe generic over name-brand medications to reduce costs?
  • Do you have an after-hours clinic to avoid costly emergency room visits?
  • Do you have any billing issues with payers that cause additional cost expenditures?

We decided to negotiate with all of the major payers—Blue Cross and Blue Shield, United, Aetna, Cigna, and Humana—as they accounted for almost 90 percent of charges and revenue. Certainly any increase would generate a positive result.

Once the questions above were answered, we developed a formal proposal that identified the practice’s cost-saving measures and outlined the rationale for the requested increase. In such a negotiation, your job is to convince the payer that you offer superior service, above and beyond what other competitors offer. Here is a sample letter to start the negotiation.

AAA Family Medicine, comprised of three board-certified family physicians with over 50 years of service to Texastown and the surrounding communities, has been analyzing our current fee arrangements and contractual obligations with insurance companies and networks. During this analysis we discovered that fees have not been reviewed or negotiated for years and, in some cases, have never been evaluated.

After careful analysis, the current contract in place includes inadequate rates that are not consistent with the excellence, quality care, and cost effectiveness this practice has provided since its inception. This letter serves as a formal request for a more suitable fee schedule that mirrors our commitment to quality, patient satisfaction, and cost effectiveness.

The physicians at AAA Family Medicine represent some of the finest in Texas. It is our goal to provide our patients with the highest level of medical and surgical treatment in an environment that fosters a close patient-physician relationship. Our practice philosophy encourages our physicians to draw from the knowledge of our entire physician team when treating patients.

This means that when seeing one of our doctors, our patients benefit from the experience of all of our physicians. If services are needed, our physicians make sure patients are placed under the care of the one best suited for the service. By allowing physicians to focus on specific issues and encouraging referrals within the group to the most experienced doctor, each physician becomes highly experienced within their area of focus and therefore provides patients with the highest-quality outcome.

This group philosophy and team approach also means that if patients have an urgent need, we find the most available doctor with the expertise to handle their medical issue. Efficiency and experience means fewer complications and quicker recovery time with less expense to the insurance company.

Through our chronic disease management program, AAA Family Medicine provides a higher level of care to the most at-risk patients. This allows the doctors to spend the majority, and in some cases all, of their time taking care of patients with similar medical needs. While we provide services for all needs, this program was created to provide a more focused approach to patient care.

The cost of providing the highest-quality care through our disease management program has risen dramatically since the inception of our agreement with your company. Current reimbursement rates are too low to maintain overhead and provide the level of service we expect to give each of our patients. This is unacceptable.

The team has analyzed these rates thoroughly and has determined that to continue to meet overhead demands, an increase as outlined on the attached fee schedule is necessary. The proposal is based on a three-year stair progression. This increase will allow us to continue to render quality care and provide the services our patients expect and deserve.

We are willing to meet with your representatives to negotiate our contract if the attached request is not approved. Please be aware we will be forced to make some difficult decisions about the future if we are unable to negotiate fair and reasonable fees.

Thank you for your time and attention to this important matter. We look forward to hearing from you at your earliest convenience.

The goal is to tell a story about the practice and communicate why a raise in rates should be granted. If no increase is granted, you should consider terminating the contract. You should request a meeting with the payer so they will know how important it is that they approve the requested increase.

I submitted the proposal letter to the plans we identified. Then we waited. What do you think we heard from the plans over the next week? Crickets. Dead silence. Absolutely nothing.

Many plans are notorious for delaying their response. You ask for an increase and they ignore you in hopes that you will not follow up. If you don’t continue to pursue it, your effort has been for naught. For the plans in my example, we followed up every week until we got a response. You may not hear back in two weeks. You may not hear back in a month. I’ve had negotiations with a particular plan go on for months. However, after a length of time, persistence pays off and you generally get something for your efforts.

Our first reply was typical of most plans:

XYZ health plan currently participates only on our commercial products. Current reimbursement is set at a rate for your area. Your RBRVS-based fee schedule is above our market rates. A reimbursement increase is not possible at this time.

And another:

Thank you for the proposal. I presented it to senior management, and unfortunately we must respectfully decline the request at this time. However, senior management is reviewing the fee schedules across the board, and 90-day fee disclosure letters are scheduled to be mailed out by the end of April in order to make an Aug. 1 effective date. I would like to point out that senior management is focusing on family practice reimbursement this year, and I am hopeful the group will find it fair and reasonable. We appreciate the services that AAA Family Medicine provides to our members and look forward to your continued participation.

Do you think we gave up? Of course not. If you recognize the strategy, then it becomes easier to deal with. You can anticipate the reaction and settle in for the long haul. After following up with each, some multiple times, I achieved a positive result with most of their payers. In one case, the health plan did not grant an increase, but instead allowed the practice to join its new pay-for-performance program that offered them the opportunity to earn quarterly bonuses totaling up to $40,000 per year.

It takes endless patience and perseverance, but nothing a payer says should keep you from continuing to negotiate your agreements. What do they teach in Contracting 101? The squeaky wheel gets the grease. All contracts are negotiable with the right spin and gamesmanship. It is important to get every dollar you can. You deserve it.

Bradley K. Reiner, owner of Reiner Consulting and Associates, is TAFP’s practice management consultant. He can be reached at (512) 858-1570 or by e-mail at