How to Negotiate Better Payer Contracts
Providers should look up Medicare reimbursement rates for their practice’s locality.
Nancy Brown, CFO and partner in Think Big Health Care Solutions in Wellington, Fla., said she has been to physicians' practices that have not negotiated new payer contracts in almost a decade.
If you have ever received a fee schedule from a payer and thought, “I can't work with that,” then it is time to negotiate, she said. These contracts can be changed, and there are measures providers can take to negotiate favorable new payer contracts.
Go in prepared
Preparation is the first step in negotiating better payer contracts, asserts Steve Selbst, CEO of Healthcents, Inc. About 50% of the entire negotiation process should be focused here. This step can begin with a matrix showing when your contracts are up for renewal or termination. It would be a good idea to “ping” someone on the staff when it is time to start the negotiation process, which is about 6 months before the termination or renewal date.
It is important to start early because this is not a quick process. Just getting in touch with someone at an insurance company can take weeks or months. Also, some evergreen contracts require a 90-day notice (before the renewal date) or the terms are automatically continued.
Basic benchmarking is the fundamental purpose of the preparation phase. Selbst said a practice has to know which 20% of their CPT codes are driving 80% of their revenue. Providers should look up Medicare reimbursement rates for their practice's locality and compare how much private insurers are paying them relative to Medicare. If a payer reimburses at 132% of Medicare rates while other payers reimburse at 160%, then focus on that payer.
An exception, Brown said, is ancillary procedures. Things like blood draws may not be money makers, but they bring additional business by keeping patients in the office. Those may be worth losing some money or breaking even on, and could stay off the negotiating table.