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Increasing value when negotiating with payers

Medical Economics JournalMedical Economics March 10, 2020 edition
Volume 97
Issue 5

Negotiating with payers for increased profits

Increasingly, payers are adopting a take it or leave it approach in contracts with physicians in the value-based marketplace, putting physicians in a tough spot. What can physicians do to show their value and increase their power in negotiations?

Experts say physicians will have to get creative, by partnering with health plans to achieve common goals, and finding ways to grow market share-and leverage.

“It helps if you can position yourself as a partner versus a vendor,” says Joe Caruncho, JD, CEO of Genuine Health Group in Miami, Fla., a management company that helps physicians make the transition to value-based care.

Becoming a partner

Caruncho says that physicians can achieve that partner status and increase their value by figuring out what the health plan’s strategic initiatives and focus are, and by offering to help the health plan achieve some goals in exchange for a better rate or shared profits.

“These days they’re competing on quality measures,” Caruncho says. “It’s not about [which payer] can provide the cost for the cheapest, it’s about who can increase their four-and-a-half-star plan in the market and get the best reputation. That’s how they compete for membership.”
Then, he says, the physician and the payer can work together to share in either cost savings or added revenues that result because the physician helped the plan increase its ratings, and as a result, its physicians may be getting more money from Medicare and/or more patients.

Caruncho describes this idea of treating the physician payer partnership as “a paradigm shift” from simply expecting payers to pay money for services to one of joining forces with the payer to achieve better results, higher quality, and reduced costs.

“Having a relationship with a health plan where you share in the profits is a lot more lucrative while also practicing great medicine.”

Joe Wagner, director of BRG’s Healthcare Performance Improvement practice, in San Francisco, Calif. agrees. “One thing physicians can do is to demonstrate the ability to improve or work on quality measures that are important either to a commercial payer or to the government,” he says.
Wagner says this can be done through such means as analytics that identify through their care experience patients that are important for outreach, and patient navigation hubs that direct patients to the right services.

“Patient navigation hubs allow the provider to do outreach with identified patients, where the physician dedicates resources to the important quality measures, schedules appointments based on those measures the program deems are important to quality care of patients and then conducts those services so you actually improve the overall care that’s been delivered,” Wagner explains.

Tap existing leverage

There are other scenarios where physicians may already have greater leverage than they realize or could build leverage through redesigning their practices.

“Plans need to be compelling to their purchasers, namely individuals and employers. If a health plan is missing a provider that makes it [not] compelling, it may not be very viable in the marketplace,” says Adam Powell, Ph.D, president of Payer+Provider Syndicate, a management advisory and operational consulting firm in Boston, Mass.

In some instances a provider may have one of several advantages. First, he says, the provider may be so highly regarded in a community that it would be difficult for the payer to attract patients to their plan without that provider network.

He cites the example of Tufts Medical Center in Boston, which is so well regarded an insurer would have trouble selling its plans without keeping Tufts in network.

Second, a provider may have what Powell calls a “local monopoly,” which often happens in rural communities where there aren’t as many options, or a provider who is one of a very few offering a specialized service within a certain area.

In that case, Powell says, a health plan is likely to be compelled to contract with the provider because the payer needs to have access to their services in the domains with the monopolies.

Substantial market share gives the provider leverage, Powell says, because if that organization leaves the network due to failed negotiations with the payer, “Then all those members are going to have to change their family physicians, internists or PCPs and they’re not going to be happy,” he says.

Since not all physician practices are going to meet either of these criteria, he says, another option is to merge with another provider organization in order to obtain a larger market share.

He says that many of the small physician practices that haven’t gone out of business as a result of such pressures have been absorbed by larger entities, though the downsides are real, including loss of control over how medicine is practiced.

“If you have people merging their practices into group practices, there’s better coverage,” Powell says. “Probably more modest incomes, but also more modest expectations.”

Side hustle

Lower reimbursement amounts and tough negotiations with payers are pushing more physicians to practice differently in general, says Andria Jacobs, chief operating officer at PCG Software, which develops healthcare applications focused on cost containment, fraud and abuse detection, based in Las Vegas, Nev.

“It’s a tough environment for physicians,” she says, based on polling done by such groups as the Medical Group Management Association. “Now we have so few payers it’s an oligopoly, and the health plans have all the power. Physicians are really unhappy.”

They’re also unhappy with the demands of managed care, from the authorization process to quality improvement measures and frustrations with their electronic health records.

As a result, she’s seeing physicians either retiring or selling their practices to group practices, or having to get creative.

“My OB/GYN now offers additional services not covered by insurance to make ends meet because she wants to be in solo practice,” Jacobs says. Simply taking what insurers pay is no longer enough.

Other doctors are moving more toward direct pay and concierge options. Jacobs’ own physician has a membership program that ranges from $500 to $1500 per year that gives patients quicker and more consistent access to him.

“Otherwise he can’t stay in business,” she says. “You can’t run your practice like you did in the past where there was always enough money coming in,” Jacobs says.

Increasing direct pay services

If negotiations with payers stall or remain unsatisfying, the best option is to offer direct pay services to patients, either on the side or as part of a direct pay practice, says Paula Muto, MD, a surgeon in private practice outside Boston. Muto founded UBERDOC, a direct pay, direct access healthcare platform.

“Doctors should realize who the payer actually is. It is no longer the employer as the burden of payment has dramatically shifted to the patient because of high deductible plans. The patient is the payer,” she says.

With patients facing increasingly higher deductibles they often don’t meet in a given year, she sympathizes with their frustration at also receiving bills from their physicians. She believes that price transparency will bring an alternative to the system especially for lower cost routine care, leaving insurance for bigger, more catastrophic services.

“We need to think differently,” Muto says. “I’m very excited about bringing the doctor and the patient back together.”

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