Top Challenges Number 9: Negotiating better contracts

December 19, 2019

Medical Economics counts down the top challenges facing physicians in 2020.

It has never been such a challenging time to be a physician. Every physician, whether they own their own practice or are employed by a hospital or larger health system, must navigate a host of obstacles each and every day: Payment hassles, staffing issues, patient communication obstacles, technology burdens, long hours and burnout, and much more. 

Each December, Medical Economics presents its list of the top challenges facing physicians going into the next year. This year we focused not only on the challenges, but also practical tips physicians can start using right away to make practicing easier.

Challenge 9: Negotiating better contracts

Physicians need good contracts to survive in practice today. Whether its contracts with payers or an employment contract, many physicians do not negotiate the way they should, or sometimes even know what’s negotiable and what’s not.

Here are tips for physicians to improve their contract negotiation skills in 2020.

Payer contracts

Commercial payers don’t automatically reward physicians for being loyal members of their networks. Physicians need to ask for higher payment rates, says Marcia Brauchler, MPH, CPC, president and founder of Physicians’ Ally Inc., a healthcare consulting company in Littleton, Colo.

Brauchler provides these five suggestions to help practices negotiate more favorable commercial payer contracts:

1. Focus on payers that consistently pay below the Medicare fee schedule amount.
Have some commercial payment rates remained the same over time despite increases in the Medicare fee schedule?

If so, this could be leverage for negotiating higher payment rates, says Brauchler, who poses this hypothetical question: If a payer paid 100 percent of Medicare five years ago, why wouldn’t it pay 100 percent today when that rate is higher?

“If you were worth it then, why aren’t you worth it today?” she says. “Letting contracts live in perpetuity without negotiating year over year ends up costing your practice.”

2. Create a value proposition.
Has your practice opened an additional office location, and seeing more patients because of it? If so, ask for more money, says Brauchler. Are you reporting favorable quality data for HEDIS measures?

If so, ask for higher reimbursement rates because this data ultimately reflects well on the payer and helps it gain customers, she notes. Items for consideration include the volume of patients seen annually (especially if volumes have increased over time), your practice location (especially if the practice is located near a large insured group, such as a school), or has extended hours or weekend clinics that help avoid costly emergency department visits, she says.

3. At a minimum, ask for a cost-of-doing-business increase.
If you can show that your medical malpractice premium went up, for example, you may be able to negotiate a higher rate, says Brauchler.

“It’s hard for payers to argue against a rate increase if you can tell them that your malpractice premium just went up 12 percent,” she says. And don’t stop there. Look at your rent, staff health insurance, and staff salaries. Over time, have they gone up as well?

4. Don’t forget ancillary services.
These include labs, x-rays, and HCPCS codes (e.g., durable medical equipment, supplies, and injectables).

“If a contract pays 120 percent of Medicare, that’s awesome, but it doesn’t affect any of these services,” says Brauchler. “If you haven’t negotiated the value of your labs, you’re probably paid at the default 42 percent of Medicare by most of your payers. It’s pretty easy to get payers to agree that having a lab done at the time of service is worth at least 100 percent of Medicare.”

5. Involve your coders.
Coders can easily identify common payer-specific barriers to getting paid so you can solve these problems proactively through your contract. For example, does the payer refuse to reimburse for an unlisted code? If so, advocate for payment when negotiating your contract, says Brauchler.

Employment contracts

As more physicians become employed, learning how to successfully negotiate an employment contract becomes a crucial skill to learn. But many physicians don’t negotiate, and just sign what’s put in front of them, says Michael S. Sinha, MD, JD, a Fellow at the Harvard-MIT Center for Regulatory Science.

Sinha talked with Medical Economics to discuss some of the key aspects of negotiation vital for physicians to learn.

The most common contracting mistake

Often, physicians will eagerly sign a binding letter of intent or agree to terms of a contract with little or no negotiation-in some cases, they aren’t even aware of what can be negotiated.

Get professional help

Consult a healthcare lawyer early in the process. Find someone who specializes in physician employment contracts in that state. They will have a lot more insight as to what can, and should, be negotiated. “If you don’t negotiate, you’re only cheating yourself,” Sinha says.

Key contract areas to focus on

These include:

·      Clearly define the duties and responsibilities in the contract.

·      Get any promises that are important to you in writing. Only when those details have been hammered out can you get an estimate of your true market value.

·      Determine the salary structure that works best for you. Perhaps you have a lot of administrative responsibilities that would cut into meeting pre-defined relative value unit (RVU) thresholds-this may mean you’ll miss out on bonuses under an incentive-based contract, and a fixed salary would make more sense.

·      Flexibility and vacation time may also be up for negotiation, but at the expense of your base pay. Here, an incentive-based contract may mean that, as long as you’ve hit appropriate metrics, you’ll have more time off with no salary repercussions.

·      Be sure that you have access to the performance reviews or quality metrics that are being used to determine bonuses.

What to know about non-competes

State-level legal expertise is particularly important here, Sinha says. An attorney should know the standard for a particular area and can push for compromises in duration and geographic distance.

“That distance can be very important,” Sinha says. “For instance, a 20-mile restrictive covenant may be reasonable in rural Tennessee but would be unreasonable in New York City. Negotiate favorable terms for a restrictive covenant prior to signing the contract; if you don’t, disputes over restrictive covenants could take years and several thousand dollars in litigation fees to resolve.”

Overlooked items

Don’t forgot to negotiate student loan repayment, Sinha says. Some newly-minted physicians are coming out of residency with $200,000 to $300,000 in student loan debt. There are usually ways to get the hospital to pay some of it off. They may be reluctant to pay a lump sum directly to you, but may be happy to write a check straight to the lender. They’re also less likely to pay any of it up front, but may agree to annual installments, payable after each year of service.