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Negotiating Insurance Contracts—Is There Any Hope?
Urol Clin N Am 32 (2005) 271–273
Negotiating Insurance ContractsdIs There Any Hope? Cindy Spears Dean, Dorton & Ford, PSC, 106 West Vine Street, Suite 600, Lexington, KY 40507, USA
During most of the twentieth century, physicians were in charge of their own reimbursements for services they provided. During this period, before the 1980s, there were few mandates or regulations regarding the services they provided; there were no bundling issues, no modifiers, and no written referrals. Physicians and their staff focused on healing patients, not on a business plan. The end of the century, however, brought new challenges and a completely different environment for health care providers. One of these changes is the responsibility of physicians to negotiate insurance contracts. Although this is a difficult task, the good news is that it can be done. This article outlines the ways to negotiate an insurance contract successfully.
Where do these changes leave physicians and their practices? Physicians were left with decreases in reimbursement that often did not cover the costs of providing services. Physicians had to make choices as to which commercial insurance companies they could afford to participate with. Practices also had to jump through hoops to get claims paid while lowering overhead to be profitable. Physicians began to question if they had to accept the proposed reimbursement or the current reimbursement and decide if they could negotiate for better rates. These negotiations have proven effective and generate better reimbursement for physicians. It is difficult to have the same result or success in negotiating with various payers and it is dependent on the state. There are, however, guidelines to follow when attempting to negotiate.
Where to begin? The process begins with gathering information about the market and then determining the importance of a practice’s presence in the marketplace. It is more difficult to negotiate in a market that is saturated with a practice specialty versus a market that needs a specialty. The market typically is considered a geographic area, but, in this instance, the market is defined by a physician panel for the insurance company and the number of physicians in the specialty in the entire geographic region. If insurance companies are marketing to a large company or moving into new geographic territories, they want to be able to market a large base of providers of all specialties. In this instance, providers have more leverage and the payers are more receptive to negotiations. To determine the specialty presence in the market, go to internet sites for the various payers and look up participating providers. Although these lists generally are not completely accurate, they are a starting point. It is advisable to call the physicians on the list and verify their participation with an insurance company. After the amount of leverage is determined, then what? Once leverage is determined and the decision is made to negotiate with a payer, it is time to gather the data necessary to support an increase in reimbursement and make an action plan for negotiations. One question to ask at this point is, ‘‘Can someone in the practice conduct the negotiations or is it necessary to hire an outside consultant to coordinate the process?’’ There are three basic strategies a practice can follow in contract negotiations.
0094-0143/05/$ - see front matter Ó 2005 Elsevier Inc. All rights reserved. doi:10.1016/j.ucl.2005.03.007
urologic.theclinics.com
272
What are the strategies and how to know which is best for a practice? The first strategy is for a practice to complete negotiations without using outside resources. The second is to hire a consultant to perform the negotiation. The third is for a practice to join a physician network. This type of network was developed to help physicians gain bargaining power. The network negotiates as a group versus each practice negotiating for itself. This strategy has proven beneficial in certain regions with certain payers but is not a sure shot to better negotiations. The first two strategies, a practice performing its own negotiations and a practice hiring a consultant, are similar in approach, each having strengths and weaknesses. The strengths for practices completing the negotiations themselves are cost and control. It can be costly to hire someone to negotiate a contract and sometimes the end result of the negotiation is not substantial. Also, practices keep more control if they do not hire someone else to perform negotiations. The main weakness with keeping negotiations internal is that many times managers or physicians do not have the time to dedicate to the process or they lack the extensive experience necessary to conduct a successful negotiation. The strengths for hiring consultants are experience and expertise. Consultants often have developed rapport with the payers, and they have knowledge of reimbursement trends in the market. Also, working regularly with payers creates a familiarity with the process, providing much-needed expertise. Be aware that although developing relationships with payers typically is a strength, it also can be a weakness. If consultants have allegiances to particular payers, those relationships can hinder them from advocating aggressively for practices. To determine which strategy to use, practices should inquire as to which method has worked best in the market. Some geographic areas have strong physician networks, whereas others have none. If there are no physician networks or a practice chooses to go another route, then consultants should be interviewed to determine their ability and experience in negotiating physician contracts. It often works best to have consultants perform the analysis and be go-betweens between practices and the payers, while keeping practices actively involved and notified of each step. Consultants always should be advocating for practices’ best interests. Regardless of the strategy, there
SPEARS
are steps to follow in gathering the data and preparing the analysis. After determining a negotiations strategy, what information should be gathered? Determine reimbursement by CPT code for the payer. Run a frequency report for the payer (a report for the most recent 12-month period that includes CPT code, frequency of CPT code, and the dollar amount charged and reimbursed for the code). Determine method of current reimbursement currently (RVUs, percent of Medicare, and so forth). Determine the proposed reimbursement amount and the means to determine (150% of Medicare, $65 conversion factor); make this amount higher than expected to allow room for negotiation. Determine the minimal amount of increase that will be accepted and the consequences if the demands are not met (eg, terminate contract). Determine how the payer reimburses for items pertinent to the practice, such as:
Midlevel providers Injections Laboratory work in the office Procedures specific to the specialty Modifiers Payment for multiple procedures
Review old explanation of benefits (EOB) to see if there are issues with reimbursement accuracy, rejections, or length of time to receive the payment. Review current contract for issues that need to be addressed (eg, filing limit). Determine procedures or services where reimbursement does not cover the cost to perform services. Make a list of negotiation topics (eg, inflators: rate increases each year over a period of time). Once the information is analyzed and in place, contact the insurance company representative to schedule a meeting. It is important to have all bases covered and strong support for reimbursement demands. It also is important to review issues other than reimbursement during this meeting. For example, address problems related to billing,
NEGOTIATING INSURANCE CONTRACTS
such as delayed payments, filing limit not allowing enough time, and modifiers not recognized. What is needed to prepare for a meeting with an insurance payer? In preparation for a meeting with a payer representative, prepare a simple document that includes current reimbursement rates, proposed reimbursement rates, and other negotiation topics. This initial meeting serves as a means to provide a proposal to the payer. Most likely there is no actual negotiating at this meeting. The negotiation process can be lengthy and may encompass several meetings. Because of this lengthy process, it is important to establish a timeline for payers that clearly states the expectations of practices. Another topic of discussion at an initial meeting is which process the insurance company uses to determine increases in rates now and in the future. If a carrier bases reimbursement on RVUs or the Medicare fee schedule, it is important to know which year it uses and how often it is updated. Also, ask the representative for any reports that may be beneficial (eg, payment data from their system on certain codes).
273
support the requested increase. Also, if there are invoices for supplies indicating that the costs to perform a procedure are more than what is reimbursed, the invoices can be supplied for support. There may be several counterproposals throughout the process. The practice has to decide how firm it is going to be and what is nonnegotiable. Throughout the proposal and counterproposals, spreadsheets should be kept as to the expected dollar increases by using frequency reports. These spreadsheets should show the actual cumulative expected dollar increases, which can be used to assess the need to continue in negotiations. What happens if an agreement cannot be reached? If an agreement cannot be reached, then a practice must decide if it terminates the contract or agrees to accept what is offered. If the terms are agreed to, then the contract is signed with an effective date. The contract should be reviewed closely to ensure all terms are accurate and stated clearly. Payments received after the effective date should be reviewed for accuracy and audits should be performed periodically to ensure there are no changes made to reimbursement.
What happens next? Most likely, insurance company representatives take proposals and conduct reviews and analyses themselves with their data, then come back with a counterproposal. Once a practice receives the counterproposal, it should look for areas of acceptance and areas it is not willing to accept. This narrows down the issues to stand firm on. The practice then should develop a counterproposal and provide any additional supporting documentation. The practice may have EOBs from other payers showing another carrier pays more for certain codes, which can be supplied to
Once the contract is signed, how does a practice know the negotiations are a success? Look at the bottom line. Is the expected revenue amount substantial enough to support a practice participating with a payer, and does it pay for the time and resources it took to negotiate? Payers still have the majority of the control over reimbursement; however, physicians can negotiate terms effectively and achieve reimbursements with a positive outcome. These may be baby steps, but they are steps forward. Now, if there only were hope for malpractice rates.
Negotiating Insurance ContractsdIs There Any Hope? Cindy Spears Dean, Dorton & Ford, PSC, 106 West Vine Street, Suite 600, Lexington, KY 40507, USA
During most of the twentieth century, physicians were in charge of their own reimbursements for services they provided. During this period, before the 1980s, there were few mandates or regulations regarding the services they provided; there were no bundling issues, no modifiers, and no written referrals. Physicians and their staff focused on healing patients, not on a business plan. The end of the century, however, brought new challenges and a completely different environment for health care providers. One of these changes is the responsibility of physicians to negotiate insurance contracts. Although this is a difficult task, the good news is that it can be done. This article outlines the ways to negotiate an insurance contract successfully.
Where do these changes leave physicians and their practices? Physicians were left with decreases in reimbursement that often did not cover the costs of providing services. Physicians had to make choices as to which commercial insurance companies they could afford to participate with. Practices also had to jump through hoops to get claims paid while lowering overhead to be profitable. Physicians began to question if they had to accept the proposed reimbursement or the current reimbursement and decide if they could negotiate for better rates. These negotiations have proven effective and generate better reimbursement for physicians. It is difficult to have the same result or success in negotiating with various payers and it is dependent on the state. There are, however, guidelines to follow when attempting to negotiate.
Where to begin? The process begins with gathering information about the market and then determining the importance of a practice’s presence in the marketplace. It is more difficult to negotiate in a market that is saturated with a practice specialty versus a market that needs a specialty. The market typically is considered a geographic area, but, in this instance, the market is defined by a physician panel for the insurance company and the number of physicians in the specialty in the entire geographic region. If insurance companies are marketing to a large company or moving into new geographic territories, they want to be able to market a large base of providers of all specialties. In this instance, providers have more leverage and the payers are more receptive to negotiations. To determine the specialty presence in the market, go to internet sites for the various payers and look up participating providers. Although these lists generally are not completely accurate, they are a starting point. It is advisable to call the physicians on the list and verify their participation with an insurance company. After the amount of leverage is determined, then what? Once leverage is determined and the decision is made to negotiate with a payer, it is time to gather the data necessary to support an increase in reimbursement and make an action plan for negotiations. One question to ask at this point is, ‘‘Can someone in the practice conduct the negotiations or is it necessary to hire an outside consultant to coordinate the process?’’ There are three basic strategies a practice can follow in contract negotiations.
0094-0143/05/$ - see front matter Ó 2005 Elsevier Inc. All rights reserved. doi:10.1016/j.ucl.2005.03.007
urologic.theclinics.com
272
What are the strategies and how to know which is best for a practice? The first strategy is for a practice to complete negotiations without using outside resources. The second is to hire a consultant to perform the negotiation. The third is for a practice to join a physician network. This type of network was developed to help physicians gain bargaining power. The network negotiates as a group versus each practice negotiating for itself. This strategy has proven beneficial in certain regions with certain payers but is not a sure shot to better negotiations. The first two strategies, a practice performing its own negotiations and a practice hiring a consultant, are similar in approach, each having strengths and weaknesses. The strengths for practices completing the negotiations themselves are cost and control. It can be costly to hire someone to negotiate a contract and sometimes the end result of the negotiation is not substantial. Also, practices keep more control if they do not hire someone else to perform negotiations. The main weakness with keeping negotiations internal is that many times managers or physicians do not have the time to dedicate to the process or they lack the extensive experience necessary to conduct a successful negotiation. The strengths for hiring consultants are experience and expertise. Consultants often have developed rapport with the payers, and they have knowledge of reimbursement trends in the market. Also, working regularly with payers creates a familiarity with the process, providing much-needed expertise. Be aware that although developing relationships with payers typically is a strength, it also can be a weakness. If consultants have allegiances to particular payers, those relationships can hinder them from advocating aggressively for practices. To determine which strategy to use, practices should inquire as to which method has worked best in the market. Some geographic areas have strong physician networks, whereas others have none. If there are no physician networks or a practice chooses to go another route, then consultants should be interviewed to determine their ability and experience in negotiating physician contracts. It often works best to have consultants perform the analysis and be go-betweens between practices and the payers, while keeping practices actively involved and notified of each step. Consultants always should be advocating for practices’ best interests. Regardless of the strategy, there
SPEARS
are steps to follow in gathering the data and preparing the analysis. After determining a negotiations strategy, what information should be gathered? Determine reimbursement by CPT code for the payer. Run a frequency report for the payer (a report for the most recent 12-month period that includes CPT code, frequency of CPT code, and the dollar amount charged and reimbursed for the code). Determine method of current reimbursement currently (RVUs, percent of Medicare, and so forth). Determine the proposed reimbursement amount and the means to determine (150% of Medicare, $65 conversion factor); make this amount higher than expected to allow room for negotiation. Determine the minimal amount of increase that will be accepted and the consequences if the demands are not met (eg, terminate contract). Determine how the payer reimburses for items pertinent to the practice, such as:
Midlevel providers Injections Laboratory work in the office Procedures specific to the specialty Modifiers Payment for multiple procedures
Review old explanation of benefits (EOB) to see if there are issues with reimbursement accuracy, rejections, or length of time to receive the payment. Review current contract for issues that need to be addressed (eg, filing limit). Determine procedures or services where reimbursement does not cover the cost to perform services. Make a list of negotiation topics (eg, inflators: rate increases each year over a period of time). Once the information is analyzed and in place, contact the insurance company representative to schedule a meeting. It is important to have all bases covered and strong support for reimbursement demands. It also is important to review issues other than reimbursement during this meeting. For example, address problems related to billing,
NEGOTIATING INSURANCE CONTRACTS
such as delayed payments, filing limit not allowing enough time, and modifiers not recognized. What is needed to prepare for a meeting with an insurance payer? In preparation for a meeting with a payer representative, prepare a simple document that includes current reimbursement rates, proposed reimbursement rates, and other negotiation topics. This initial meeting serves as a means to provide a proposal to the payer. Most likely there is no actual negotiating at this meeting. The negotiation process can be lengthy and may encompass several meetings. Because of this lengthy process, it is important to establish a timeline for payers that clearly states the expectations of practices. Another topic of discussion at an initial meeting is which process the insurance company uses to determine increases in rates now and in the future. If a carrier bases reimbursement on RVUs or the Medicare fee schedule, it is important to know which year it uses and how often it is updated. Also, ask the representative for any reports that may be beneficial (eg, payment data from their system on certain codes).
273
support the requested increase. Also, if there are invoices for supplies indicating that the costs to perform a procedure are more than what is reimbursed, the invoices can be supplied for support. There may be several counterproposals throughout the process. The practice has to decide how firm it is going to be and what is nonnegotiable. Throughout the proposal and counterproposals, spreadsheets should be kept as to the expected dollar increases by using frequency reports. These spreadsheets should show the actual cumulative expected dollar increases, which can be used to assess the need to continue in negotiations. What happens if an agreement cannot be reached? If an agreement cannot be reached, then a practice must decide if it terminates the contract or agrees to accept what is offered. If the terms are agreed to, then the contract is signed with an effective date. The contract should be reviewed closely to ensure all terms are accurate and stated clearly. Payments received after the effective date should be reviewed for accuracy and audits should be performed periodically to ensure there are no changes made to reimbursement.
What happens next? Most likely, insurance company representatives take proposals and conduct reviews and analyses themselves with their data, then come back with a counterproposal. Once a practice receives the counterproposal, it should look for areas of acceptance and areas it is not willing to accept. This narrows down the issues to stand firm on. The practice then should develop a counterproposal and provide any additional supporting documentation. The practice may have EOBs from other payers showing another carrier pays more for certain codes, which can be supplied to
Once the contract is signed, how does a practice know the negotiations are a success? Look at the bottom line. Is the expected revenue amount substantial enough to support a practice participating with a payer, and does it pay for the time and resources it took to negotiate? Payers still have the majority of the control over reimbursement; however, physicians can negotiate terms effectively and achieve reimbursements with a positive outcome. These may be baby steps, but they are steps forward. Now, if there only were hope for malpractice rates.