Tips to make every payer negotiation a success

Physicians looking to negotiate reimbursement rates with payers often find themselves dealing with take-it-or-leave-it offers, leaving them feeling frustrated and powerless.

Further reading: 2017 Payer Scorecard breakdown

When asked how challenging payer negotiations are as part of  the Medical Economics Payer Scorecard, 64% of respondents rated it a four or five on a five-point scale, where five is “very challenging.” But an attitude of indifference from payers should not be taken as a final answer to negotiation attempts, experts say. Instead, think of it as the opening round in what can often be a long process to get the attention of the right person in the insurance company.

“It’s an endurance test,” says Marcia Brauchler, MPH, FACMPE, president of Physician’s Ally, a Littleton, Colorado-based consulting firm. “I think payers put up hurdles to intentionally wear down a busy practice administrator or physician who still sees patients. Probably 95% of practices go away when they are told ‘no.’”

Payers looking to standardize operations may not be interested in negotiating fee-for-service contracts, but there is interest in value-based care deals and in protecting their position in the marketplace. 

“The payers don’t want the small or independent practice to join larger groups with more leverage,” says Nathaniel Arana, owner of healthcare consulting firm NGA Healthcare in Tucson, Arizona. “For the first time, they are saying, ‘Maybe we need to look to work with smaller groups more to limit the amount of consolidation.’”

In some markets, large physician groups are starting to wield as much negotiating power as the payers because of their market dominance, hurting payer profits, he adds.

Related: Top 15 tips to improve payer/physician relationship 

Every market is different, and the extent of competition on both the payer and the provider side will affect payers’ interest in negotiating, particularly with smaller practices. Experts say successfully negotiating in any market requires a thorough understanding of what value the practice offers the payer, a dogged determination to find the right decision-maker at the payer and the ability to sell the practice’s attributes to that person.

Start with preparation

The first step to a successful negotiation is for practices to figure out what value they bring to the payer.

“It’s not about size, it’s all about the value proposition,” says Anthony D’Eredita, executive vice president of consulting for Advisory Board, a healthcare research firm. “If you deliver value, then size enhances that. But if a practice can create [something the payer values that is] unique to the market, they can negotiate well.”

Next: It's all about the data

D’Eredita says it’s all about the data. Focus on showing what impact the practice has on the patient population and how they are saving on costs. “The more data-based, the better,” he adds.

Further reading: How to navigate direct pay successfully

Things like current procedural terminology codes and frequency counts of Healthcare Common Procedure Coding System codes are important in creating a value proposition for the practice. These will help illustrate what services physicians provide and how often, says Brauchler.

Also know how much business goes to each payer and how much time the staff is spending on claims for each. “That’s so you know how important each payer is before you approach them-and if you can afford to walk away,” she says. 

And practices should avoid presenting any customer-based marketing spin to payers, because they aren’t interested in a “spa-like waiting room” or “service that comes with a smile,” notes Brauchler. “Focus on how you are helping the payer: Are you serving major employers in the area? How long have you been in network? Have you expanded hours to help keep patients out of the [ED]?”

This is also the time for a practice to collect any relevant testimonials from employers, if the practice is caring for a large number of their employees or has a good relationship with their leadership teams. D’Eredita says these business relationships are effective for convincing payers to negotiate, because healthcare costs ultimately go back to the employers. “If you can help the business control costs, they will want to work with you more and can communicate that to the payer,” he says. 

Find a decision-maker

Negotiation experts agree: To be successful, practices have to find someone at the payer who has the authority to be a decision-maker, and that person is hardly ever a customer service representative. 

Related: 2017 Payer Scorecard

“I sense that payers are becoming more centralized and that autonomy at a local level has declined,” says Lucien Roberts III, MHA, FACMPE, practice administrator for GI Specialists Inc. in Richmond, Virginia. “You have to push until you find the weak spot. It’s not as easy as it used to be, and you have to be persistent telling your story until they listen and you can make your case.”

Provider representatives, if known, can reveal who handles contracts and quality incentive programs. “If you don’t know your provider rep, find out who handles contracts by talking to colleagues at larger practices that might know who handles contracts,” says Roberts. “Try asking medical societies if they know, and get a phone number.”

Another starting point is to find out who at the payer company signed the previous contract. If that person no longer works there, Brauchler suggests calling the headquarters to find out who replaced him or her.

Next: Negotiating the best terms

Once the person is identified, reach out and start the dialogue. But don’t get discouraged if at first the payer still isn’t interested in negotiations, as it may not be the right person. “You have to be able to work through and up the chain of command,” says D’Eredita. 

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Brauchler often starts with a pitch letter of up to nine pages that outlines all the value the practice brings to the network along with a one-page executive summary. She sends this via certified mail and uses it as a starting point for a discussion that may eventually get to the level of a vice president or director in the insurance company. 

“If you take a ‘no’ before 20 attempts to negotiate, you have settled prematurely,” she says. “You have to hang in there despite the obstacles, because it will pay off for you.”

Negotiate the best terms

With thorough preparation, the negotiation process should be a data-driven exercise for the practice. If the data show quality care and solid cost containment, payers should listen and talks can progress from there. By this point the practice should also have a clear picture on how much revenue comes from the payer. This will provide a better idea of the competitiveness of an offer. 

Further reading: 88th annual Physician Report results

“All payers have their homegrown fee schedules, and they are almost always awful,” says Brauchler. But financials aren’t the only thing on the table. “If prior auths are a problem, ask for exceptions,” she says. “If late payments from the payer are a problem, that can be resolved in the contract and is good leverage.”

Some other specifics to look at include: What are the initial terms of the deal-is the practice locked into the same rate for a certain time period? What are the termination details? What happens if the payer merges with another? Each practice must prioritize what is most important and negotiate hardest on the terms that matter most, using the data gathered during the preparation phase to make its case.

But experts caution that negotiations should be kept cordial and professional. “Relationship- building is important,” says Arana. “You don’t want to bite the hand that feeds. You want to go in with an attitude of, ‘I’m willing to do whatever it takes to create some cost savings and add value, but I want a quid pro quo where we help each other out.’”