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A Proactive Approach is Needed When Negotiating Reimbursement Fees


Negotiating fees with health plans is not difficult to do, and yet, according to managed care expert John Schmitt, it's a practice that is often ignored.

You can’t fight city hall—or at least that’s the popular belief that has been expressed over time. But in fact, you can fight city hall. More importantly, you might just win a battle or two.

The same is true when it comes to negotiating fees with health plans. John Schmitt, a managed care expert with EthosPartners Healthcare Management Group, says that it’s not difficult to do, yet it’s a practice that is often ignored.

“Frequently, when we set out to help a practice renegotiate all of its contracts, we can’t even find the contracts,” Schmitt says. “It seems as though most medical groups negotiate an agreement with a payor and then, for whatever reason, just file it away. Most medical groups do not have a good, proactive methodology for negotiating for physician reimbursement.”

A new era

Schmitt says the fee negotiating environment between physicians and health plans is changing. In the past, the two parties would simply go back and forth in what often proved to be an adversarial relationship. Those days are gone. The new era, he explains, is a cooperative relationship between payors and providers where the medical group, based on a review of existing contracts, decides who it wants to be in business with, and terminates contracts with those it doesn’t.

As an example, Schmitt points to a Michigan-based orthopedic group whose contracts he helped renegotiate. He contacted the medical director of the group’s largest payor indicated the group wanted to renegotiate its contract and fee schedule, and suggested talking about a pay-for-performance arrangement. Not only was the medical director receptive, he arranged to meet with members of the orthopedic group to further discuss the arrangement.

“What used to be a poker game is now transparent,” Schmitt says. “The realization is, we all have an economic problem with respect to medical costs. But the doctors have the clinical solutions to those economic problems. Health plans are saying, ‘Let’s see if we can’t be better business partners not only for our sake, but for the sake of the patients and the community as well.’ It’s a new era of managed care, which is really what it should have been when it kicked off twenty years ago.”

Using leverage

Taylor Moorehead, a partner with Zotec Partners, a leading medical billing company, suggests there are a couple of ways physicians can begin renegotiating fees with health plans. If a physician is hospital-based, he or she has a little more leverage. For example, the physician is performing services at a hospital and being paid the health plans’ usual, customary rates for that location. The physician asks for an increase, and the health plan says no, so the physician cancels his or her contract and begins working non-contracted with the plan, knowing that the plan’s patients are going to come to the hospital regardless of whether he’s contracted with the payor or not. But now, the physician begins billing the patient for 100 percent of their fee schedule. The health plan will pay what it believes is appropriate, and the balance is owed by the patient.

“Now, the patient becomes the physician’s advocate,” Moorehead says. “The patient is subject to paying a lot more money out of pocket, which is upsetting. They complain to the hospital, the hospital complains to the doctor, and the doctor complains to the carrier. Ultimately, it ends up in the lap of the carrier. So, if you can go non-contracted for a period of time, applying the pressure to the payor, the payor will bend and give you a better rate.”

Building the business case

Negotiating is a bit more difficult for office-based physicians, who rely on the carrier to direct its members to the physician’s practice. In those circumstances, where there isn’t as much leverage, building a business case is critical. That means shifting your strategy from reactive to proactive.

“If you sit around and wait, you’re never going to get increases,” says John Haresch, MD, who runs One Family Doctor, a micropractice based in Kill Devil Hills, North Carolina. “I’ve had some success at it, but not enough to make it easy.”

Haresch begins by sending a letter to the carrier outlining his case. He points out that costs are going up while the carrier’s reimbursement level is not. More importantly, he supplies data in support of the way he runs his practice—one physician who spends more time with his patients. He tells the carrier, “If you want full, patient-centered, medical home stuff that’s being proven out in studies, here’s the level of payment I need. Now, tell me what level of service you’re prepared to pay for.”

It’s challenging, says Haresch, and sometimes frustrating. What keeps him going? “There’s the underlying, altruistic part that if we can keep the reimbursement going, keep the practice going, and keep finding ways to improve the quality of care, it’s good for people—and that’s why I originally got into all of this. It’s just the right thing to do.”

Ed Rabinowitz is a veteran healthcare writer and reporter. He welcomes comments at edwardr@frontiernet.net.

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