Negotiating Payer Contracts (Part 2): Taking Action

You’ve done all of your research and amassed a wealth of supporting data. Now you’re ready to make a super strong case for increasing your reimbursement rates with a particular private payer. (If you missed my post about preparing for payer contract negotiations, you can check it out in this blog post.) But this isn’t your average business negotiation; making a deal with a health plan representative is a little more complex than, say, haggling over the price of a used Honda Civic. With that in mind, here are a few negotiation tips to help put the odds in your favor.

1. Remember that everything is negotiable.

Plan reps may tell you that there’s no room for contract negotiations in an effort to discourage you from pushing the issue. But, as this Journal of Oncology Practice article points out, you should take such dictums with a grain of salt: “Physicians often think the terms offered in a contract are immutable, and the plan representatives may say that they do not negotiate with physicians. In fact, everything is negotiable.” The article goes on to quote a physician who says payers often tell him, “This is what we pay in your market, and you're simply going to have to accept it.” When responding to such statements, the physician said he employs a bit of hardball strategy by telling the payer “he is glad the competition is accepting these rates, because within a few years, when they are out of business, the plan will have to come back to his practice, and much higher rates will be demanded.” Boom.

2. Meet face-to-face.

When it’s time to negotiate a contract, schedule an in-person meeting with the plan representative. That way, you can more easily—and effectively—present all of the data you’ve gathered. As you explain your position, speak clearly and confidently, and make sure your facts and figures are organized in a digestible, easy-to-understand format. But keep in mind that this is a conversation—which means you’ve got to let the plan rep have some air time, too. "A basic negotiating principle is to remember that you are negotiating a relationship, not a transaction,” the Journal of Oncology article suggests.

3. Play your all-star.

If there is someone else inside—or even outside—of your practice who is better equipped to advocate for you in a negotiation meeting (i.e., someone who has experience dissecting legal documents and is naturally persuasive, engaging, and well-spoken), it might behoove you to delegate payer contract duties to him or her. According to this Medical Economics article, who you choose as your negotiator “depends on who in the office is the most confident and has the most experience with complex negotiations. Many physicians hire consultants or attorneys because they lack the time to talk to payers themselves.” And even if you elect to do your own negotiating, it’s probably a good idea to let someone with a trained legal eye take a look at the contract before you give it your John Hancock. “There are always risks involved in negotiating contracts, and the doctors feel caught between their ability to keep their practices open and contracts that are unreasonable,” medical consultant Melody Irvine says in the above-cited article. “I always feel it’s good for a healthcare attorney to view the language of the contract.”

4. Be prepared to compromise.

In my last blog post, I mentioned that you should go into each payer negotiation meeting with optimum, minimum, and target goals for raising reimbursement rates. The optimum is your starting point—in other words, your “high”—and the minimum is the lowest offer you would accept before dropping the contract altogether. And, as you might have guessed, the target lies somewhere in between. While you should start by asking for your optimum, remember that in reality, you’re shooting for your target. The idea is that through compromise, you and your payer will eventually meet somewhere in the middle. “Negotiating with payers doesn’t always have to be a David-versus-Goliath showdown,” the previously cited Medical Economics article explains. “You are instrumental in showing the payer how changes in your contract can lower the overall cost of healthcare for them as well.” Naturally, payers will be willing to give you more if there’s something in it for them—and that’s why it’s so important for you to track your outcomes. If you can produce objective proof that the care you provide is both high-quality and cost-effective, you can use it as leverage in your quest for better rates.

5. Discuss the non-financial details.

Payer contracts contain more than just fee schedules—a lot more. By focusing solely on dollars and cents, you could miss out on additional opportunities for bargaining. So, when you’re negotiating a contract, don’t forget to consider the following factors, adapted from the Journal of Oncology article mentioned above:

• Treatment authorization process
• Length of claim submission period
• Length of denied claim appeal period
• Definition of “timely payment”
• Interest accrual for late payments
• Requirements for adding new services or providers to the plan
• Advance notice required for proposing changes to the contract
• Cancellation requirements and associated penalties

6. Know when to walk away.

Negotiating can only get you so far, and in some cases, the contract you’re left with might not be worth your signature. For example, if the payer can’t get you above the break-even point I discussed in my previous post, then it might be best to cut your losses and walk away. This can be tough to do, but if you're losing money with a particular rate schedule, you can’t realistically make up all the losses by increasing volume (nor should you).

Still, the decision to forgo a contract with a certain payer isn’t always so cut-and-dried. For example, you might feel obligated to accept a way-less-than-ideal contract because rejecting it would result in “disruption of ongoing care for some patients, decrease in the number of new patients, interference in established referral patterns, and loss of income,” the Journal of Oncology article explains. So, before you draw a line in the sand, be sure to consider the whole picture. As Brad Duke, MBA, MHA, and chief operating officer of Newport Pacific Medical Associates says in the same article, “A health care plan's terms may not be optimal, but accepting the lower rates from that plan may mean your referring physician will also refer patients from the good plans. You have to look at the consequences of dropping a plan from all angles before you walk away.”

What strategies have you used in payer contract negotiations? Were they successful? Share your thoughts in the comment section below.