Payer negotiating tips for small practices

Negotiating with payers is one of the necessary evils that independent physician practices must endure. Numerous books and articles have been published about successful physician-payer contract negotiations, including one in the August 10, 2015, issue of Medical Economics, “Improving practice-payer collaboration.”

Despite the useful information these sources offer, many doctors in solo and small practices continue to believe that they have no power when it comes to negotiating, and that they must accept whatever terms the payer offers. I disagree. Regardless of your practice size, you can get a fair-or at least livable-contract from even the largest payers, as long as you are prepared and go into the negotiation with the right attitude. I know, because I’ve done it.

I’ve owned and directed a solo family practice in the rural town of Randolph, Wisconsin since 2001. With the assistance of two other providers-a nurse practitioner and physician assistant-my clinic cares for a panel of about 6,000 patients. Just over half of our patients are covered by commercial insurers, and their reimbursements account for approximately 80% of our net collections. Apart from medical seminars and journal articles, I have no formal training in business or contracting. Nevertheless, our practice has managed to stay financially viable.

Related:How physicians should negotiate with payers

Earlier this year I negotiated a new contract for my practice with one of the five largest national health insurance payers. It was the third time I’d negotiated with that payer, and this was by far the most successful. Our new contract reimburses us about 10% more than our previous one, largely because of a higher Medicare multiplier for preventive health services, which account for the highest volume of services we provide. In addition, this contract includes a feature that neither of my previous contracts with this payer had, an “accelerator”-an annual cost-of-living raise.

What made this contract negotiation different? Like any other skill, negotiation gets better with practice, and I have learned some valuable lessons over time. Here are the basic strategies I use when approaching a payer negotiation:

Do your homework

Before I notified the payer that I wanted to renegotiate, I gathered meaningful data, including how much they were paying us as a percentage of our charges and how that compared to our other commercial payers.

Many of you probably have been told by a payer that the reimbursement increase you’ve requested is out of line, that “nobody gets that amount”-whatever it is. I looked at our charges and reimbursements and discovered that this payer was actually our lowest contracted payer, and I calculated by what percentage they were the lowest. Sharing this data with them gave me powerful ammunition, and the confidence to call their bluff.

Tell them what makes your practice special

To a giant commercial insurer, your small practice is just one of many they contract with. They are not going to know what makes you special-and why they should pay you more-unless you show them.

I told this payer about their sponsored quality initiatives in which we participate. I emphasized the specific recognitions we had received for quality care from their organization and the fact that we are the only family practice in a 15-mile radius that is an in-network provider for their product.

In addition, I took what may have been perceived as negotiating weaknesses-our size and location-and tried to turn them into advantages. I pointed out that small, rural practices like mine are important to employers outside of major metropolitan areas, and these employers often have strong loyalty to their community and local physician practices. Treating my clinic well creates a favorable impression among those employers and increases business for the payer.

 

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