Negotiating terms for your payer contracts involves considerable preparation, but the work pays off when coupled with solid negotiation strategies. If you learn how to tackle the renegotiation process, you can boost your revenue and gain more power in the healthcare market.
So let’s dive back into the process with Step 3, The Formal Notice.
Decide which to pursue first, based on the notice dates and financial impact on your practice. “Figure out your dates and figure out who has the worst schedules,” Noyes says. “Then marry the two and go after the weakest.”
Search your contract to find the notice terms, which are frequently in the termination provisions. This will help you to decide which to pursue based on the timelines of all your payers. “That’s where you start and end the negotiation process,” Noyes said.
Be warned, though. The most common response from payers is: ‘Oh, we’re not negotiating at this time’. And that is why it’s imperative for you to submit a notice.
The warning shot fired in the form of a termination notice begins the process, and now it’s time to push for negotiation.
“It might be a long time before [the termination notice] works its way to a human being,” says Noyes. “Send it to the notice party stated in your contract.”
“Then send it to your rep saying that it was sent by certified mail on whichever date, but you thought it was a courtesy to send it directly to them,” Noyes continues.
You can expect the initial response to inform you of a moratorium on negotiation or a “not at this time” message. “Don’t accept that. Tell them that’s not in the contract, then move forward on your mission,” Noyes said.
Typically, payers will then ask what you’re going for. Ask them if you need to base this on their proprietary fee schedule, or if you can propose something based on a certain year or percentage of Medicare. There may be something they can put together more readily.
“The payers are pretty darn stingy (about rate increases). Like, smaller single digit numbers: two, three, maybe four percent. But if those codes represent 30% of a small practice’s business, that can be hundreds of thousands of dollars over a year,” Noyes notes.
“Tell them your providers are really disappointed with their offer, then ask to take whatever percentage seems fair and carve out certain profitable procedures. Or, accept the offer if you can make it a three-year deal and put a 2% escalator in the contract.”
If a payer asks you, ‘What do you have in mind?’ respond with a question. Qualify if they are asking for a percentage increase. You might say something to the effect: “The practice is looking for a 7.5% increase. Can you model something for us?”
If the payer asks you to model an offer first, respond by asking what basis they can administer. For example, do they administer their rates based on a specific year and locality of Medicare Resource- Based Relative Value Scale (RBRVS), a payer’s proprietary schedule, or in percentages?
You must ask yourself this very real question: Are you willing to walk out on the contract and terminate if the network or payer won’t work with your terms?
Select payer contracts that are outdated or outmoded, and be firm on the terms you want. Noyes said at MGMA’s Financial Management and Payer Contracting conference that she couldn’t think of a time when a payer terminated a contract with a provider. You have bargaining power—more so than you realize. Use it!
It’s important to create realistic expectations of potential rate changes for yourself and your physicians. Know that your major payers are somewhat aware of each other’s rates when you try to leverage them. It’s up to you to decide what to accept.
You should be verifying your rates annually. “Ask yourself, what if you get notice saying rates are changing in 60 days, and by not objecting within 30 days of notice you’re accepting them?” Noyes asks. Her point is to emphasize that you must manage your contracts even if you don’t plan to renegotiate. “You can’t ignore these things. Rates can change without you knowing, so keep your amendments in order and up to date once a year.”
When it comes to contract negotiations, you can’t afford to go it alone. Team up with the TCI experts and get the revenue you deserve in your provider contracting with the Secrets of Successful Provider Contracting.
Also by TCI, Financial Intelligence for Physician Practices will arm you with financial planning processes and tools to capture the profits you deserve.