Do your homework. Before proceeding in negotiations with a payer, make sure you have an understanding of the extent of leverage you have with the plan. This will drive the negotiation process. If you have negotiated a contract before, you most likely will know the payer representative you will be working with. If not, ask questions of you colleagues about the payer and the payer representatives that have responsibility in your market.

 

Look through the contract and identify supplemental documents (i.e., sample fee schedule, provider manual, UM/QA policies and procedures) referenced in the agreement. Request this documentation from the payer and advise the payer that the contract review will be finalized after receipt and review of the supplemental documents. Supplemental documents referenced are deemed part of the legal contract.

 

There are three main types of fee schedules: historical-based, market-based and cost-based. Most of the insurance companies use the market-based methodology in setting their fees. It is in your best interest to use the cost-based method and show the payer data that supports your request for an increase in payments.

 

With a cost fee schedule, you calculate the cost per procedure based on RVU utilization and all direct and indirect expenses, then add a profit margin. By having a cost-based fee schedule, you have a much greater knowledge of which contracts you can afford to accept. Real data like this supports your request. Most negotiations in the past have just been to throw some numbers out on the table which gives the payer rep a sense you are requesting and negotiating subjectively versus objectively and it becomes easier for the payer to deny your request. If the fee schedule is not cost-based, particularly in today’s economy (and is historical-based or market-based), then the practice runs the danger of not knowing whether a particular contract will be profitable, financially disastrous or somewhere in between. 

 

I would be remiss in not pointing out that it does not matter how good a contract and fee schedule you negotiate, if you fail to capture all the services performed or neglect to code correctly and use the right modifiers that will increase you reimbursement. Have a professional coder come into your practice for a “coding checkup” and also send your staff to coding seminars on a consistent basis (at least once a year when new CPT code manuals come out).  

 

Knowing that you have the current economic conditions working against you, understand your payer rep is under pressure from his/her employer to deny or keep rates as low as possible to maintain the business relationship they have established and want to keep. There is pressure coming from all sides, however I have never seen positive outcomes resulting from an adversarial negotiation process. The person you deal with today will most likely be the same person you will be dealing with next time you come to the table to renegotiate your agreement. With good information and understanding, you can relieve some of the pressure the payer representative is under. Having a good relationship and working toward some mutually beneficial outcomes is helpful. For instance, if you can show how your practice can reduce costs to the payer, lower admission rates, reducing length of stay, and sharing quality indicators on your group it  not only shows the payer rep you have done your home work, but also helps them feel that you are not asking for something without giving something in return. After some initial discussions between yourself and whoever may be representing you, bring one of your physician leaders into the further discussions with the payer’s medical director. It has been my experience in negotiations whenever I have been able to bring a physician into the process, I am usually able to have a better chance at achieving a better outcome. I also try to have some of the negotiations take place at the medical practice and give both the payer rep and the medical director a tour of the facility and point out any unique capabilities of the practice, which can help in the negotiations. 

 

Most contracts can be improved by negotiations using good data, and it never hurts to ask.