Step Three: Negotiating Your Payor Contracts

negotiatingNothing is more important in any negotiation than preparation, preparation, preparation. It is no coincidence that the party that is better prepared for a negotiation is much more likely to walk out with the best outcome. Preparation includes understanding the standing, the perspective and the goals of the payor as well as that of your physician practice. As good contracts are a critical component to a successful revenue cycle process (no revenue cycle process can make up for bad contracts), it is worthwhile to put in the work upfront to optimize your payor contracts. Start out by understanding the payor - what is their situation, what is their reputation, what are their goals. When researching a payor, particularly if your practice has not previously contracted with that payor, you should consider the following questions:

  • What products does the payor/medical group/IPA offer (i.e., HMO, PPO, ACO, POS, Medicare, Medi-Cal, ERISA/self-funded, Workers Comp, etc.)?
  • Is the payor financially solvent? (more to come on how to find out in future blog posts)
  • What is the payor’s market share in your area? What is the total number of enrollees by product?
  • Which major employer groups are signed up with the payor?
  • Total number of physicians currently in the network (primary care and specialists). Obtain a list of participating providers by visiting the payor’s website. Most payor websites will allow you to search their provider directory by specialty and by zip code.
  • Are your referral sources participating?
  • How many and what is the nature of patient complaints that have been filed against the payor?
  • Does the payor have any plans for increasing the number of enrollees in your service area or for adding new products? (read their press releases)
  • What is the average turnaround time on payment of claims?
  • Does the payor lease its network to PPOs or other insurers (self-insured employers, TPAs, etc)? If so, how many enrollees in your area are from those ERISA/self-funded plans?

Next is to prepare for your side of the discussion. Know exactly what you want and be prepared to articulate your position. Start by understanding the value that your practice brings to the table for the payor. It is very important to make the business case as to why the payor should add/keep you in the network. It’s helpful to break your concerns into three categories:

  • Nice to haves
  • Like to haves
  • Must haves

Walk through several “what if” scenarios beforehand in preparation for the meeting. There is likely to be counter-proposal in response to the initial conversation. If you have thought through what you will do if you opt to cancel the contract and understand the impact to your short-term revenue, you will be better able to stick to your strategy as you will be negotiating from a position of strength. Ask for a response in writing to be sure the payor’s position is clear and nothing is open to misinterpretation. After you have collected key information on the payor and have developed a list of items to negotiate, it is time to schedule a face-to-face meeting with the payor. It is important that you request the meeting with a representative who has the authority to make binding decisions. Negotiating with someone who needs to obtain second level approval for every decision can prolong the process and delay the negotiations. This may mean opting for a phone meeting with out-of-state representatives decision makers. As a first step in the negotiations, determine and agree to the procedures and approval levels by each side with realistic time frames - this will help set expectations and reduce frustration. Contract Negotiating Tips

  • Verify the person negotiating on behalf of the payor has the authority to make decisions and potential changes to the contract.
  • Schedule your meeting when interruptions can be minimized. Only negotiate when you are fully prepared and unlikely to be distracted.
  • Consider how important each payor is to your practice (by product line). What does the contract mean in term of revenue? How would you replace any patients that you might lose?
  • Some contracts allow you the ability to opt-out of specific product lines. For example, if the payor has introduced a new product but doesn’t have many enrollees signed on, you may decide to wait until they have more enrollees to participate with that payor’s new product.
  • Have a friendly, professional demeanor. Remember that this is a professional business relationship. Your contracting contact may be the one going back to their leadership to request a new term or rate on your behalf and you may end up working with the same contact throughout your career.
  • Listen carefully - not only to what’s been said but sometimes more importantly what isn’t. Often it is better to listen more and talk less in the first meeting. It isn’t the one who talks more that is a successful negotiator but the one who is better prepared and armed with a deeper level of understanding.
  • Don’t be afraid to ask questions. If your reimbursement hasn’t changed in years, ask why. Ask open-ended question like, “How much flexibility do you have on rates?” Phrasing questions like this will take you further than, “Are you flexible?” or “Is the price firm?”
  • Focus on your strengths. Don’t hesitate to let the payor know what sets your practice ahead of your competition. For example, if your practice provides high quality service at a lower cost than some competitors, let them know it.
  • Avoid letting your emotions rule your negotiations. Making personal attacks on the plan or negotiating team will almost never result in achieving the terms or rates you are requesting and may tarnish your professional reputation.
  • Get all agreements in writing. No matter what the payor representative tells you verbally, if it is not reflected in the written contract, then it is not part of your agreement. This includes promises made in cover letters or emails prior to signing the contract.
  • Table items on which there is no agreement. Take note of them, but in the interest of moving forward, refocus on easier issues in order to address all concerns.
  • Do not sign anything until all of your questions have been answered. You should only execute an agreement that you fully understand.
  • Finally, be prepared to walk away. While walking away from a contract may not be easy, signing one that results in losing substantial sums of money or need to see a high volume of patients that results in long wait times, patient dissatisfaction, etc. is worse in the long run. Weigh your options carefully and know what you are comfortable agreeing to in advance.

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