Negotiating with insurance companies is still an option, but requires preparation and perspective
Gil Weber, MBA
Adapted with permission from Ophthalmology Management
© Copyright, 2015. All rights reserved.
I'm regularly contacted by ophthalmology practices and ambulatory surgical centers and asked, "Can you help us get better reimbursements," or, "Can you help us get such-and-such a service added to our reimbursements?"
The answer is never "Yes" but instead, "Maybe." As with everything in managed care it depends. Circumstances of timing, local marketplace and service area conditions, and payor demeanors drive everything. I've successfully negotiated contracts (provider agreements) increasing reimbursement to levels in excess of 140% of Medicare Allowable, while in a particularly frustrating instance with a different payor I was unable to get it to move up a penny from a pathetic and insulting 70% of Medicare Allowable.
With successes there have also been exasperating and sometimes incomprehensible failures. And so to understand whys and wherefores of managed care negotiations it's essential to appreciate what has changed in recent years that has made negotiating and renegotiating more challenging.
Here I'll describe a couple of successes and some absurd examples of failures. And then I'll explain steps you can take to improve your practice or facility's chances of negotiation success.
In years past practices and ASCs had the opportunity to contact payors at contract anniversary dates and rationally discuss renewal terms including a "bump" in reimbursements. Unfortunately far, far too many allowed those contracts to sit in drawers without anyone paying attention to the anniversary dates, or to the language written into those agreements signed five, six, even ten years ago and never reviewed or renegotiated in that time. And the third-party payors were all too happy to benefit from allowing those rates to roll over and over.
Nowadays an administrator will give me a call and surprisingly often describe their situation along these general lines:
These and similar statements are "heads-up" notices that it's going to be a challenge bringing that practice or facility close to where it wants and/or deserves to be reimbursement-wise, especially given the changing dynamics of today's managed care marketplace. Consider a practice that in 2009 signed a provider agreement at 80% of Medicare Allowable, and in 2014 remained there. The owner(s) now wants an increase to at least 100% of Medicare. While that seems a completely reasonable target request to achieve it would mean the payor/healthplan granting a 25% rate hike just to get to Medicare Allowable which, to be quite honest, is an insulting payment level in itself. The provider relations representative may say, "Oh, we can't possibly grant such a large increase. It's way out of budget. But we'll move you to 84% of Medicare."
You almost want to reach through the phone and strangle the person at the other end. Do they have any idea what it costs to run an ophthalmology practice or facility today compared to five years ago? Do they have any idea what it now costs to keep current with new patient care technologies, or to meet the payroll of a growing staff, or to cover administrative and technological costs imposed by governmental rules and regulations that constantly make things harder, not easier?
Truth be told, some just don't care.
Since the first rumblings of the healthcare reforms that would eventually be passed as the Affordable Care Act in 2009 many payors have become increasingly stingy with increases. The new and common sentiment I often hear is, "Physicians are expected to take less for the good of the nation's health," and "Physicians have to get used to doing more for less." You can insert "facilities" for "physicians" in the previous sentences.
The full-blown implementation of the ACA and the Exchanges in 2014 has made dealing with payors harder as, understandably, they try to salt away as much money as possible in anticipation of additional claims exposure to cover the historically uninsured and underinsured. And they're also worried about claims exposure for those with certain pre-existing conditions that formerly were not covered, or those persons who, as a result, were "rated" in the past with higher premiums but are no longer.
Payors now are required to provide affordable insurance products to the marketplace with a promise, for what it's worth, that in 2016 the government (i.e., the taxpayers) will make them whole for any losses. Even assuming such financial security blanket is there, the ACA's fundamental uncertainties are causing many payors to restrict patient access through down-sized panels. The bottom line for physicians is that managed care plans will only grow more resistant to requests for higher reimbursements.
My experience is that while some payors still are interested in making the deal work for both sides, others won't negotiate even the simplest request. I've found one gauge you can take to the bank when sizing up those with whom you're dealing. If a plan's representative says "This is our standard contract. We can't change any of the language," that's not true. Everything in a managed care provider agreement can be changed except that which is mandated by federal or state law/regulation. So when you're fed that line about no changes allowed it's not the case that a payor can't change the contract but, rather, the payor doesn't want to change it. As with everything else in business, where there is a will there is a way.
For one practice in the upper Midwest I was able to negotiate a series of contracts with rates that exceeded what I had hoped for at the beginning of discussions. Key to that success was a generally physician-friendly negotiating posture taken by the various plan representatives in that market. And for a physician group in another state facing the imminent prospect of a significant rate reduction or loss of a key contract with a self-insured employer I was able to negotiate a much smaller reduction that preserved an important revenue source. Even though reimbursements went down that client was pleased with the results. But it wasn't happenstance. Key to this decision was a financial analysis demonstrating that even with the reductions the resulting reimbursements were still meaningfully profitable.
What should be your first steps in preparing for negotiations?
I always advise clients to give some thought to the negotiations process from the payor's perspective. Assuming you have already identified the person at each payor/plan responsible for handling contracting of your location (and there is always someone specifically responsible), then consider the following:
To have any chance of making your case you must understand the environment in which you're working.
Based on my experience dealing with and working for third-party payors I must warn you that the process from first contact to contract signing likely won't be quick and simple. Getting to the right people will take time, and getting them interested in addressing your concerns is a challenge. Remember that you're one of many seeking better deals. To that end it's essential to limit your requests to what you really need, not to everything you'd like to achieve if you were on a level playing field.
For each contract under review what is your assessment of the existing fee schedule/reimbursement terms? Specifically which reimbursements are not acceptable and by how much? Is it E&Ms, or surgeries, or diagnostic testing, or some combination? Is it all groupers in the ASC or just certain ones? Is it inadequate or no reimbursement for donor corneal tissue or glaucoma implants?
The more limited your reimbursement requests, the better your chances of getting a payor to consider them. Thus a blanket request that all reimbursements be raised by "X%" will likely be viewed quite differently than a request for an increase of "Y%" limited to four E&M and three surgery codes, or limited to two ASC groupers with a carve-out reimbursing invoice cost for donor corneal tissue.
A word of caution if you're currently being paid a percentage of Medicare Allowable based on some previous year. Let's say, for example, that your contract specifies "Q%" of 2009 CMS. For the services you provide most often are you better off at that "Q%" of 2009 than you would be by asking for the same "Q%" of 2014 CMS? Carefully analyze how your key service reimbursements have trended from then to now under CMS.
So if yours is a practice heavily dependent on cataract surgery it may not be beneficial to ask to maintain the same percentage of CMS while bringing the schedule basis year forward from 2009 to 2014 (or 2015 assuming Congress doesn't let the annually threatened physician cuts go through). On the other hand, if yours is a sub-specialty practice where key service payments have generally trended upwards in recent years, or if yours is a multi-specialty practice doing a reasonable amount of surgery other than cataract, then the recent cuts in cataract may be more than offset by moving to a more current CMS basis year.
As to requesting changes to the contract's language, here you really have to be selective. Since it's essential that clients understand the hidden nuances and dangers in contracts, the reports I issue them point out every "wart" I detect. I'll comment on each bothersome issue even if experience tells me that there is little if any likelihood that a payor will make changes to the language no matter how unfair. (For example, one of the most egregious is a payor reserving the right to retroactively deny eligibility after authorizing care, and to then takeback monies already paid or offset amounts against future payments.) Payor intransigence to change language that places you firmly under its thumb is a fact of life in managed care.
But there are sections of the provider agreement where a payor is more likely to offer some concessions. These include the initial term, claims submission deadlines, right to "opt-out" of new product lines introduced after the contract's effective date, the right to waive patient-owed amounts in the event of financial hardship, and, on a precious few occasions, changes to the wording on amendments.
That's just a short list among many issues my clients have asked to have changed and on which we've achieved more balanced terms. However, with some payors it's take-it-or-leave-it, and they'll be very blunt.
Managed care contracting more often than not feels as if you're going into battle. And in a way you are -- for your practice or facility's financial survival. So you fight the good fight as best you're able. Every contracting effort is different. Every plan's rules and conduct throughout the process will be different. But if you apply my three rules of managed care contracting you'll have a better chance of avoiding problems.
Gil Weber, MBA (321) 433-0623; firstname.lastname@example.org, is a nationally recognized author, lecturer, and practice management consultant based in Viera, Florida. Mr. Weber was the 1996 Adrien and Gladys Drouilhet Lecturer in Ophthalmology at the University of Texas-Houston Medical School. He also served as Director of Managed Care for the American Academy of Ophthalmology.