Best Practices Drive Better Payer Negotiations

SAP Partners | <b>McKesson</b>

In today's managed care environment, it is important that contracts between practices and payers include reciprocal language that affords a practice protection over processes, decisions, and changes to the agreement over time, while aligning with its business operation.

To thrive in today’s evolving health care landscape, network providers must be well informed about the managed care agreements governing their payer relationships. Not only is it critical to understand whether the practice is being reimbursed adequately for services it provides to the payer’s members, it is just as important to be sure the contract language is reciprocal and affords the practice protection over processes, decisions, and changes to the agreement over time, while aligning with its business operation. This is a massive undertaking as physician practices often deal with 40-50 or more different insurance companies with commercial, Medicare, and Medicaid programs as part of each payer’s offerings.

Understanding the implications of existing contracts that the practice has signed, new agreement templates under review, or (more alarmingly) amendments that may have automatically been incorporated into the current contract without mutual consent, is critical to identifying key items to address in any negotiation or renegotiation. Fortunately, there are several proven approaches that practices can use. These methods can help ensure an optimal and favorable outcome by identifying and communicating areas of concern as well as opportunities for improved rates and terms.

Enabling successful negotiations

Practices can enhance the negotiating process and make certain they are focusing on critical areas by employing a few best practices, such as the following key focus areas:

Communicating the practice’s value proposition.The practice’s value proposition, unique offerings that differentiate it from the competition, provide value to payers for their members. Some examples are cost savings, quality care and patient satisfaction. Payers may be unaware of the value a practice brings to its members, so meeting face-to-face and having meaningful discussions should be done frequently. Not only does this cultivate relationships, it also gives the payers talking points about the practice when selling their plans to employer groups. Additionally, it provides an opportunity for clinical discussions about the practice’s specialty which helps in collaborating with the payer.

Building relationships with payers. Building an ongoing relationship with payers creates a strong foundation for negotiations. Practices should sit down annually with their payer representative to:

  • Educate them about the practice’s specialty and value proposition
  • Introduce physicians from the practice
  • Listen to payer’s needs and find opportunities for collaboration
  • Discuss practice viability, and
  • Review readiness for alternative payment models.

A typical renegotiation effort can take several months, even up to a year or more. A practice can expect to devote adequate time and resources to attain a favorable outcome, all the while keeping in close contact with its payer representatives as a mutually favorable outcome is worked toward.

Reviewing contract language examples. There are several areas of importance when reviewing contract language. In a comprehensive verbiage analysis, more than 50 terms are usually examined. Following are 10 of some of the most critical ones:

Amendments. Each contract has language pertaining to the process by which contracts are amended or the ability for parties to revise the agreement. Some contracts allow payers to amend at will without consent, initiating changes the practice cannot stop. Practices should make certain the contract can only be amended upon mutual agreement, in writing, in advance and by mutual signature.

Timely filing. Ideally, practices should have 365 days to submit a claim. While most will send claims over quickly, having a fair time window for filing allows for anything that may fall through the cracks.

Prompt pay. Contract language should specify payers are required to reimburse the practice within 30-45 days on all plan products for properly submitted claims or are otherwise subject to state regulations.

Over/underpayments. Contract language should specify a mutual timeframe for both parties limiting how far back either can go to collect or refund the amount over or under paid. Elimination of a payer’s ability to offset overpayments can surely ease the administration and accounting a practice has to support.

Termination. Contract language should specify either party can exit the agreement without cause within a fair amount of time. Contracts often have a tight window for termination ability including sometimes being tied to an anniversary date which narrows the exit opportunity even further.

Mergers/assignment. Contract terms relating to mergers and assignments should be reciprocal to the payer and the practice. Payers enter mergers frequently and do not ask the practice for permission. Similarly, practices should have the same freedom to conduct a business transaction, whether it is a merger or assigning a contract.

All services. Contract language should allow practices to provide (and be reimbursed for) all services within the scope and expertise of their specialty and license, so that they are not limited to a certain set of services.

Medical records. Timelines for the payer’s ability to request records should be well defined. Language can also be inserted to limit the number of medical records and frequency of reporting requested in a given period.

Arbitration. The contract should have reasonable and fair arbitration language, ultimately ensuring both parties are permitted to access all protections under the law. Clear time frames and cost responsibilities are critical, as well as proper jurisdiction. The contract should be governed by the laws of the state where the practice is located rather than where the payer is headquartered. Arbitration should also occur in a location convenient for the practice.

Prohibition against Mandatory Vendor Imposition. Protective language should be included prohibiting a payer from requiring patients to obtain their drugs from an outside pharmacy or a location other than the practice’s pharmacy when the drugs will be administered by a practice physician. This is a topic of particular interest today, with many payers implementing frequent policy changes, so it is important for practices to open this conversation during negotiations.

Calculating basic payer analytics. Calculating the practice’s payer mix prior to negotiations is very important, as it is critical to understand what percent of the practice’s business comes from each health plan. These reports should be done annually, as the payer mix can change quickly. Shifts in large employer group plans may occur, patients may migrate from traditional Medicare to Medicare Advantage plans managed by commercial payers and volume of Medicaid or uninsured patients may change―all of which impact the payer mix. It is important to stay on top of these developments, as this information enables practices to prioritize payers for renegotiation. A practice’s service mix may also change over time, depending on new offerings at the practice. These service line changes impact the volume distribution which can lead to fluctuations in the overall weighted reimbursement. Finally, it is crucial to perform a weighted reimbursement analysis, which considers the practice’s utilization history for all codes, current payer fee schedules, and where each service line comes in as compared to a percent of the current Medicare Fee Schedule.

Benefits of payer negotiations

Negotiating can be intimidating, but many benefits can be gained. Not only does negotiating build relationships with payers, it also keeps the practice top of mind among the payer’s network providers. Additionally, it gives practices the opportunity to demonstrate their value to payers while giving clarity on issues within their specialty. In the end, successful negotiations result in improved reimbursement and contract language that protects the practice’s business interests.

From the payer’s perspective, it is never time to renegotiate. Consequently, practices must be prepared to initiate renegotiation. By performing payer analytics annually, they can stay on top of which plans and services are driving the most volume. Keeping a payer scorecard becomes important to track against other top plans, as well as pain-points and deal-breakers that may be able to be rectified with contact language changes. Armed with this knowledge, they should reach out annually to open negotiations to address fair compensation and verbiage that needs tackling. Multi-year agreements with rate escalators are highly recommended, eliminating the need to come to the table every year.

Best practices yield positive results

Providers have realized considerable success by employing best practices. A few examples demonstrate what can be achieved when sound negotiating principles are applied:

  • A 25-physician specialty practice was locked into multiple managed care contracts for a single payer. The payer unilaterally amended one of the agreements, significantly decreasing reimbursement with no renegotiation. The payer requested to move other agreements to a standardized fee schedule while keeping revenue neutral. Utilizing best practices, agreements were consolidated and moved to a standardized structure with a rate improvement. A 10 percent increase, as a percentage of Medicare, was achieved, administrative burden was reduced, and protective verbiage was secured for key items. The impact was significant: a $220,000 annual increase to net revenue was projected, which represented a 6 percent increase for that payer.
  • A specialty practice with 21 physicians was losing volume due to a non-participating status with a large payer. Patients were accessing out-of-network benefits at a higher cost share, and all doctors required credentialing. A multi-year group agreement was secured to include verbiage protections including reciprocal language in important areas, improved timely filing and medical record request timelines, and the ability to access all remedies under the law. A $1 million positive impact to practice revenue was projected as a result of the negotiation.

Empower better negotiations for better results

Providers who employ these best practices before and during negotiations gain a critical understanding of their practices, giving them the confidence and knowledge they need for success at the negotiating table. Knowing which payers are driving the most volume and examining contracts to ensure they are reimbursing adequately and protecting the practice are extremely important. Those providers who embrace these principles will be well equipped to meet the challenges of the evolving payer landscape, helping ensure the long-term viability of their practices.

Author Information

Jaimee Jones is a regional director of Managed Care Contracting for McKesson’s Provider Advisory Services, a business consulting service that maximizes operational performance and improves financial results for specialty practices