Negotiate insurance company contracts

April 25, 2011

Ensure better reimbursement through negotiation.

Q: How do I best negotiate my contracts with insurance companies and ensure better reimbursements?

A: When trying to negotiate a better rate with a payer, many providers neglect to use an important set of data that, oddly enough, is right at their fingertips. Utilization data, which collectively reflects a provider's clinical efficiency and the value you bring to a payer's provider network, is one tool that is rarely used during contract negotiations.

You should be able to get a fair rate based on what you bring to the table. However, there has always been a big problem with paying all physicians the same rate when they don't drive costs the same. High-cost providers almost always get paid the same as low-cost providers with the same clinical outcomes, and that's inherently unfair. The low-cost providers are making that payer more money (that is, profit). When was the last time a payer said to a provider, "Thanks for doing a good job. Here's a raise"?

Ask for some kind of utilization report card. Ask the payer to tell you how your practice is doing with regard to the related cost drivers. Ask for a comparison to your peers about various criteria such as lengths of stay in the hospital, pharmacy costs, ancillary costs, costs per patient, and cost per particular diagnosis code, just to name a few. Rest assured, even though the payer may not want to share the utilization data with you, it has it. So if you can't get any kind of utilization report card from the payer, you have to be ready with your own information.

First and foremost, create and monitor your own quality measures, such as cost per patient by leading diagnosis codes, inpatient lengths of stays, and referrals to specialists, just to name a few. Create a program to gather these data and analyze them, and then meet with the payer and ask, "Why are we getting paid the same as our competitors when we're making you money?"

Think about how you drive healthcare costs. What decision-making do you do that could lead to efficient healthcare or costly healthcare?

Next, look to your own medical practice billing and electronic health record system. Ideally, you can pull out data for a specific payer and calculate valuable utilization data, such as cost per patient. Before using any other physicians' clinical data, get their input on whether the data look right. Doing so promotes a system of checks and balances to make sure the data are complete and accurate.

Once you conduct this analysis, meet with the payer and present this utilization data and convey to him or her that you believe you drive costs lower than competitors in your network and in turn believe that you deserve some kind of reimbursement increase.

Unfortunately, although the data may spell out your efficiency in black and white, some payers still will refuse to give you an increase.

If any payer agrees with you that you are more efficient clinically and as a result drive lower healthcare costs, but maintains, "We're not going to give you a rate increase," then that payer is basically looking you in the eye and saying to your practice, to employers, to consumers, to the companies that buy their insurance, and to competitors that it doesn't care about quality healthcare.

Gathering utilization data may mean adding another task to your already full plate, but the time spent getting this information together for contract negotiations can produce rewards in the long run.

Send your practice management questions to medec@advanstar.com
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