How to negotiate better fees with health plans

August 21, 2009
Morgan Lewis Jr.
Morgan Lewis Jr.

If you've never tried to negotiate payment schedules with your health plans-or if you haven't had success in the past-the tide may be turning in your favor. Consider it an unexpected result of the nation's growing shortage of primary care physicians.

Key Points

A University of Missouri study last year predicted a shortfall of 44,000 primary care physicians by 2025, and state medical societies from Wisconsin to Florida are already proclaiming their lack of physicians. Meanwhile, leading healthcare reform legislation embraces primary care as the core of the nation's new system. At the same time, health plans-including Blue Cross Blue Shield in Pennsylvania and Michigan, UnitedHealthcare in Arizona, Cigna in New Hampshire, and Group Health in Seattle-have launched patient-centered medical home pilot projects that place greater responsibility on the primary care physician.

It all means that you have more influence over your practice's contracted health plans than you might think.

For J. Steven Polsley, MD, a family physician in Urbana, Ohio, recent negotiations resulted in a 5 percent fee schedule increase this year from one of the practice's major health plan contracts and a 3.5 percent raise from another.

"We're persistent," Polsley says of his approach to contract talks. "If we don't ask, they don't offer."

As long as you perform some simple calculations, concentrate on the procedure codes that matter most, and devote the time and patience, you too can achieve better rates from your contracted carriers.

DO YOUR HOMEWORK

The typical contract-negotiation timeline lasts about five to six months, but that includes a lot of time waiting for your health plans to respond. The first step to any negotiation is to locate the actual contracts and fee schedules. Don't be surprised if you can't find the schedules: Some plans choose not to include them with the contract, but you can request to see them.

In 2008, lawmakers in Polsley's state passed a "Healthcare Simplification Act," which requires health plans to share fee schedules with providers in their network. Prior to the law's passage, health plans in Ohio were reluctant to release the information, says Polsley, who can now look up some of his fee schedules online. (To learn about managed care contract legislation in other states, please see "States seek contract fairness".)

Most practices contract with 20 or more health plans, but generate more than half of their revenue from 5 or fewer of them. Concentrate on your top four or five payers, and find out what they're paying you for your top E&M/procedure codes. This information should be readily available from your practice management system.

Put together a simple spreadsheet analysis of your top health plans (see chart, above). In the far left column, enter the most frequent 20 or 30-or even 60-E&M codes for your practice from the past year, followed by how many times you performed them and what your out-of-network (cash) charge is for each code.

In the next column to the right, enter what Medicare pays you for each of those codes, and in the following four or five columns, enter what each of your top carriers reimburses you for them. You will probably notice one or two health plans that are consistently less than the others. Those are the payers with whom you should negotiate first and the carriers you might consider dropping first if they won't increase fees, have a history of claims denials, or are slow to pay. (This analysis also gives you an opportunity to see if your carriers are actually paying their contracted rates.)

"Make sure that your [out-of-network] charges are always higher than any contracted rate you have," says Penny Noyes, CEO and founder of Health Business Navigators in Bowling Green, Kentucky. She had a pediatric client that was charging $64 for an office visit code but could have received $75.04 in reimbursement from one of its top carriers. "They were leaving $11.04 on the table," she says.