Negotiating fee schedules
When negotiating with private payers, knowing your worth can pay off.
Feature
By Ruth Carol, contributing writer, November 1, 2020
If you think medical school and residency were difficult, wait until you try to negotiate a higher fee schedule with a payer.
“My experience has been that, by and large, insurers are not going to unilaterally offer you an increase in your fee schedule,” said Brent Moody, MD, chair of the AADA Patient Access and Payer Relations Committee. It takes a lot of time and effort to negotiate a fee schedule. At best, the result is an increase of a few percentage points. “The worst thing that can happen is the payer says ‘no,’” he added.
In general, payers do not typically engage in a lot of negotiations, stated Wes Cleveland, JD, a senior attorney in the Advocacy Resource Center at the American Medical Association. “It’s ‘take it or leave it.’” However, when the health plan needs the practice in its network to maintain coverage in a specific region, it may be more willing to make concessions, he said.“
"The biggest hurdle is getting the payers to talk,” said David Pariser, MD, of Pariser Dermatology Specialists, which has seven locations in southeast Virginia. “In the last couple of years, payers seem increasingly less interested in doing any negotiating at all…at least in my town,” he noted. If you can get past that hurdle and the payer is willing to spend some time, make it worthwhile by being prepared with your current contract numbers, being able to justify a fee increase, and highlighting your practice’s value.
Know your numbers
Four months prior to contract renewal, gather your contracts and fee schedules to create a revenue model, advised Andrew Harding, vice president of customer success at Rivet Health. This timeframe allows 60 days for negotiation and 60 days to meet the change notification period and exercise the right to terminate the contract if there is no agreement, he said. You can create the model yourself or hire a revenue cycle management company to do it. Payer portals often allow you to pull a full fee schedule or you can review your claims history.
The revenue model can be as simple as a spreadsheet listing the amount all the payers are reimbursing the practice for its top CPTTM codes in both volume and revenue, Dr. Moody said. Use Medicare as the baseline because it is a public fee schedule. Be sure to de-identify the payers’ names as fee schedules are confidential.
The spreadsheet will not only show which payers are at the high and low ends, but also confirm that the practice is being paid its contractual allowance, Dr. Moody said. Sometimes, the numbers have not been updated. “More commonly, insurers are choosing to ignore conventional coding guidelines and make up their own rules,” he noted. For example, a lot of insurers are ignoring modifier 25, and either not paying for an office visit when a procedure is done, or cutting the office visit payment in half when it is combined with a procedure. Neither of these payment options are legitimate by CPT code or Medicare standards, Dr. Moody added.
Another option is to aggregate the commercial payers to get an average payment, Harding said. Then, you can single out the payer in terms of what percentile the payer fits in. When comparing across payers, be sure to compare the same type of products to each other (i.e., PPOs to PPOs vs. HMOs to HMOs), he added.
Because fee schedules are proprietary, it would be difficult to determine what other dermatologists in the market are being paid. However, some clearinghouses offer market pricing data, Harding noted. Agencies, such as Fair Health and HealthCare Cost Institute sell bulk data for a fee, but also have free consumer-facing solutions that produce an average or a range of reimbursement for specific CPT codes by zip code or region, he explained.
It may be beneficial to assess practice costs including staff, technology, supplies, etc., Cleveland said. Expenses could be broken down by CPT code. The office manager or a practice consultant can help determine expenses. Organizations, such as the American Medical Association, Medical Group Management Association, and Paycom also offer resources to help determine that information, he said. Dr. Pariser noted that his practice negotiates contracts with suppliers to keep costs down.
Justify a higher fee schedule
Harding recommended creating a proposal with a quantitative and qualitative component. For the quantitative part, set a few different thresholds: a minimally acceptable threshold of a 2-3% increase, and an optimistic outcome. “That way, you know your upper and lower bounds and you’ll know the anticipated revenue impact,” he said.
“If you go in thinking you’re going to get a 50% increase, you will almost definitely be let down. You’re more likely than not getting a single-digit increase.”
─ Andrew Harding
It’s OK to have a specific percentage payment increase/net revenue in mind. Just be realistic, Harding said. “If you go in thinking you’re going to get a 50% increase, you will almost definitely be let down,” he said. “You’re more likely than not getting a single-digit increase.”
Be aware that going into negotiations with a specific figure in mind could underestimate your value, Dr. Moody said. “But if you’re comfortable with making the first offer and what you’re asking for is reasonable for your time, expertise, and skills, then ask for a specific amount. If you get it, consider it a victory,” he added.
The qualitative component of a proposal involves developing justifications for the higher fee schedule. There are things that make a difference to a payer and now is the time to highlight them, Harding said, adding, “It’s time to put your ‘brag sheet’ out there.”
Are you a low-cost physician? Demonstrate how you save the payer money by offering in-office services rather than having to do a procedure in a surgical center or hospital, Harding said.
Do you offer unique services? Offering services, such as Mohs surgery, brings value to the community you practice in, Dr. Moody said.
Are you available/accessible to patients? Demonstrate your availability by offering weekend or evening hours, Harding recommended. For health plans that require referrals be seen within a specified timeframe, meet or exceed the payer’s expectations, Dr. Pariser said.
Are your patient reviews overwhelmingly positive? Having positive patient reviews on consumer-facing websites (i.e., Google, Healthgrades, ZocDoc, Vitals) show that patients value you as a physician. Many insurers also solicit patient feedback, offering more opportunities to show that you provide positive patient experiences.
Do you have high-quality outcomes? Earning high scores in the Merit-based Incentive Payment System (MIPS), a payer’s quality program, or a data registry are all ways to demonstrate that you provide high-quality patient care. A practice can also internally track its utilization, outcomes, or adherence to best practices, Cleveland added.
Leverage assets
“It’s important to know your strengths and understand if you have any leverage at all,” Dr. Pariser said.
Among the myriad factors that influence a practice’s ability to negotiate a more favorable fee schedule are size and market saturation, Dr. Moody said. The larger the practice, the more leverage it has. The payer may need your large practice to have enough physicians per patient capita to support the network, Harding said. “If you threaten to leave the network, it could be detrimental to the payer’s ability to operate in that area,” he added. Being part of an integrated health system where referrals can occur relatively seamlessly could also be an asset in some markets, Dr. Pariser noted.
Who should handle negotiations?
The person who handles the negotiations for a fee schedule depends largely on the size of the practice.
In a practice with fewer than 10 physicians, the negotiator should be familiar with the practice’s revenue cycle and reimbursement structure, Harding said. Assuming the practice does not employ a contract manager, then a physician executive or leader would be a good candidate. The individual should understand financial data and be comfortable working with a financial model and manipulating the data to be able to assess a new fee schedule quickly, he added.
In a 40- to 50-physician group practice, a contract manager or managed care coordinator should negotiate the contract.
No matter who negotiates the fee schedule, they should be speaking with someone on the payer end who can authorize and approve negotiations, Harding stressed.
At Pariser Dermatology, Dr. Pariser, who is the managing partner, is involved in all the practice’s business dealings along with the practice manager and chief financial officer.
In a crowded metropolitan area, insurers have more dermatologists willing to take whatever they offer, Dr. Moody said. “If you are a dominant player in the marketplace, have a significant percentage of the market share, or provide a full range of services, the payers may want to talk to you,” Dr. Pariser said. In contrast, a practice located in a smaller community with fewer dermatologists may be equally as successful at negotiating better payments, Dr. Moody added. Cleveland recommended looking at the plan’s provider directory to understand the local market. The state medical society and professional organizations can also help determine demand.
Several years ago, Dr. Pariser attempted to negotiate a new contract with a payer. After a few weeks of failed attempts to get the payer to respond, the practice sent a registered return receipt letter saying that it will not be renewing the contract. “The next day, there were three guys in suits asking what it will take to keep us,” said Dr. Pariser, whose practice currently has 25 physicians and providers at seven locations, spanning from Virginia Beach to Williamsburg, Virginia. He had the same situation with another payer that accepted the practice’s choice to terminate the contract.
“The single biggest piece of leverage a dermatology practice has is its willingness to walk away.”
─ David Pariser, MD
“The single biggest piece of leverage a dermatology practice has is its willingness to walk away,” Dr. Pariser said. “But you have to be sure that is what you want and that it’s not the payer’s goal. A lot of payers would prefer to have a smaller network that they can manage and control better,” he added.
Additionally, insurers may be open to a practice that is willing to accept alternative forms of reimbursement, Dr. Moody said. “If you’re willing to take a less-desirable product, the insurer may be willing to give you a concession on a different product,” he added. In the 1990s, when managed care was introduced, Pariser Dermatology accepted capitation for a brief period. It has since implemented an electronic health record and more recently, a patient portal. “The payers got to know that we were flexible and innovative,” Dr. Pariser said.
Consider offering value-added services to the health plan that not only benefit you but benefit your patients if your advice translates into better courses of treatment, Dr. Pariser said. For example, host a seminar on psoriasis for the plan’s members, serve as a dermatology advisor, or volunteer to serve on a committee. Offer to provide dermatology education for primary care physicians who are starving for this type of knowledge, he noted. Nowadays, primary care physicians are pressured to treat a lot of dermatologic conditions that they might have otherwise referred, Dr. Pariser said. Help the plan develop referral guidelines or treatment algorithms for dermatologic conditions/diseases without asking for an honorarium. It’s better than the plan adopting guidelines that are neither evidence-based nor realistic. All these actions can help build personal relationships, Dr. Pariser said.
Reach out to the payer
Some payers require you to submit a proposal electronically, Harding said. If that is the case, send all the documentation justifying a higher fee schedule. Routinely follow up to ensure the process is moving forward. If that doesn’t elicit a response, arrange to have a conversation over the telephone, Cleveland said. “If you don’t get anywhere, it might be worth trying to meet in person to go through the numbers. Ultimately, you want to meet with someone who has the authority to make changes to the fee schedule,” he added.
“Don’t wait until you’re asking for something to get to know your provider rep,” Dr. Moody said. “If you are new to the plan, call and introduce yourself,” he added.
Contract language about fee schedules to avoid and include
Certain contract language as it relates to fee schedules should be avoided or included, if possible:
The term payer’s proprietary fee schedule allows the payer to change the market fee schedule without the physician having to sign off on the changes. Avoid this by pegging your contract fees to Medicare, Harding advised.
Avoid edits and payment rules that can reduce physician compensation substantially, Cleveland said.
Beware of a penalty/lock-in clause that prohibits the practice from making any changes for three or five years, Harding said. If something drastically changes in the baseline fee schedule, it could change reimbursement significantly.
Include an amendment clause that prohibits the payer from making unilateral changes to terms of the contract without the practice signing off on those changes, Dr. Moody said. At the very least, require the insurer to notify the practice about substantial changes to the contract, providing sufficient time to review and possibly terminate the contract.
Include an inflation clause if the contract is for three years or longer, Harding said.
Include language in the contract to ensure that the insurer will follow CPT modifier guidelines or Medicare guidelines, Dr. Moody said.
Include the services covered in the contract, Dr. Pariser suggested. Otherwise, the payer could require the practice to use, for example, the payer’s dermpath lab, which happened to him. The payer eventually agreed to let the practice use its preferred dermatopathologist. “But every time the contract comes up for renewal, it excludes dermpath, so I have to remind them,” Dr. Pariser said.
Include in the contract the amount the payer will reimburse for services performed by physician extenders. Some payers discount services provided by them, Dr. Pariser said, and you should know that.
Personal relationships are always helpful, especially when trying to negotiate a higher fee schedule. “You might be able to call on the medical director of the health plan if you are having a hard time negotiating and ask for advice,” Dr. Pariser noted.
“Don’t take the first no as the final no,” Harding advised. A lot of payers give a blanket statement that there is no money in this year’s budget to offer a higher fee schedule. Reply by asking how you can be creative and flexible and think outside the box. “That’s when you bring up your value. If all goes well, the payer rep will respond with an option,” he said.
Follow-up with new fee schedule
The practice signs the new contract, followed by the payer. Request a copy of the executed contract with a "go live" date, Harding advised. “Don’t just sign, send, and forget it,” he said. Don’t assume that the payer has timely loaded negotiated changes to your fee schedule, Cleveland said. One way to check whether the payer put the changes in place is to evaluate payments through remittances or Explanation of Benefits. Payers have hundreds of thousands of providers for whom they manage reimbursement, Harding said. It is a manual process that can take a long time and clerical errors are surprisingly frequent. “We’ve seen so many times a go-live date stamped on the contract, but the payer doesn’t actually implement the new rates for several months,” he noted. If that happens, the practice can appeal those payments. Typically, payers will do a reconciliation and pay the updated rates, Harding noted.
Years ago, Dr. Moody had the wrong fee schedule uploaded for his practice. Once he figured it out, the insurance company corrected it. “But if I didn’t alert them, it would have probably gone on forever,” Dr. Moody said. “The burden is on the practice to make sure it is getting paid the correct rates.”
Negotiating a fee schedule is a really difficult task, Dr. Moody said. “For all your time and effort, you may get a few percentage points…but that’s still better than nothing.”
