Successful payer contracting is one of the many important duties for safeguarding the long-term financial stability of a hospital-based physician practice. Whether contracts are self-renewing year-to-year or contain end dates that force physicians and payers to renegotiate agreements regularly, the payer dictates the terms unless the practice is prepared for negotiations.
There are many factors to a successful negotiation – from the gathering and familiarity with practice data, thoroughly understanding existing payer agreements, to sheer persistence.
Use Experience Wisely
While many physicians may feel lost when it comes to contract negotiations, many have more experience than they know. In fact, physicians negotiate on a regular basis in their daily lives, as do most people. The confidence to negotiate is again, like most forms of confidence, rooted in preparation.
When a physician talks to a patient or another physician about a medical condition, they approach it with confidence because they have been prepared for this sort of scenario. If negotiations are approached in the same manner, success will be more likely too.
Physicians are highly educated and capable of connecting complex issues to come up with a diagnosis. Approaching a contract negotiation in the same fashion will improve the odds of success, but more importantly, being prepared instills confidence.
Seek Leverage
When approaching a negotiation, understanding what your other contracts pay, what the volumes are by payer and what the payer relationship with your hospital is, are important. If a payer is not in line with other payer rates in your market, this needs to be pointed out. Also, working with the hospital and understanding their relationship with the payer is vital. With hospital support, your chances for a good outcome are greatly enhanced.
It all boils down to having the necessary facts about your practice, existing contracts, the payers position in your market and importance to your hospital to convince payers that the rate suggested is fair and equitable.
Make Preparations
First and foremost, knowing and understanding the complex language within the contract is critical. Second, having practice data to compare rates with is an absolute must, including the ability to measure and communicate practice volumes and the ability to use other contracts as leverage, as previously discussed.
It is also important to understand that the rate paid; while clearly the most important part of any contract, are not the only important parts of a contract. How fast payments are required from the payer, the term of the agreement, how denials are handled, among other issues need to be part of any discussion.
It is important to mentally prepare. Every physician should already know at what point they will “walk away” from negotiations. While this should always be considered the last resort, it can’t be removed from the table.
At the end of the day, this is truly the only real negotiating leverage a practice has. However, using this option without hospital involvement can be perilous. The payer knows this too, so this should never be used as a threat, but only as a last resort.
Don’t Settle For Less
Payer negotiations are a process, and the real power lies with physician knowledge and involvement. It is important for physicians to keep up their guard and not get confused by payer tactics or play on numbers.
Preparation and a thorough knowledge of existing contracts can enhance a physician’s value to the practice, increase confidence in negotiations, and add to the ability to work with payers on issues.
While utilizing the skills and expertise of non-physician professionals is advisable and adds great value, the need for the personal involvement of the physician cannot be overstated. If the payer knows that the physicians themselves are knowledgeable and come prepared to the negotiations, it does add weight to the practices chances for a better outcome. Remember, confidence comes from knowledge and knowledge comes from preparation.
David A. Myrice is a senior finance manager with CBIZ – MMP.