MGMA 2022: Preparation is key when negotiating payer contracts

Payer contract negotiations can be a fraughtfor medical practices, but with the right preparation a negotiation can go your way.

Doral Jacobsen, MBA, FACMPE, CEO of Prosper Beyond VBC Inc., gave helpful strategies for how to approach preparation for payer negotiations in her session “Payer contracting 101 – strategies that work” as part of the Medical Group Management Association’s Medical Practice Excellence Leaders Conference in Boston.

She says the first the first, important step in preparing for payer negotiations is analyzing the payer mix, which is a breakdown of a practice’s charges by payer. Next should come an analysis of gross collections which is the payments received minus the charges by the payer. Then an analysis of administrative burden which allows the practice to quantify the financial impact of the burden. And finally analyzing reimbursement and cost per visit/procedure.

All of these analyses should be folded into the practice’s proposal development by reviewing them and identifying the practice’s payer targets. The practice should also determine whether their relationship is direct or through another entity.

“Then probably one of the most challenging parts of negotiations or starting negotiations is finding the representative,” Jacobsen said.

Once the practice identifies its representative, that individual should supply all executed agreements, production participation list, full fee schedules by CPT code for all products, and the renewal date.

“You’ve got to ask the payer if they have a renewal date that you need to be mindful of,” she explained. “Because if you don't, you might start a negotiation, but it won't be effective for another year because of this renewal date.”

The next step in preparing for negotiations is to model. Jacobsen says her company compares the payment per CPT codes to Medicare.

Next the practice should survey the market.

“This is really important because you’re preparing to talk to them,” she said. “So, you need to know what's going on. Are they rolling out a new product? What are they selling in the marketplace?”

Jacobsen says that she is often asked whether a practice should negotiate with a new payer in the market. She says this is the best time to negotiate.

“They're looking to create a network adequacy,” she says. “That means when they want to sell a product, they have to have a certain amount of OBGYN ,and a certain amount of family practice, a certain amount of orthopedics; and you are part of that equation. So, you're in a position of power whenever when a product is trying to emerge in your market.”

With this information, the practice should be prepared to start crafting their proposal to begin the negotiation.