Negotiating Contracts with Insurance Companies
Aug 17, 2013 | Roger Fontes, MD
When a physician is asked about negotiating contracts with insurance companies a typical response might be a slump of the shoulder often with an accompanying depressed sounding sigh.
A collective sense exists among providers and practice managers that negotiating with insurance companies is frustrating, mystifying and, often, unproductive. This sentiment is probably well founded because one unfortunate truism is that the insurance companies have the more dominant negotiating position in most circumstances.
While it is true that, by its very nature, contracting with insurance companies is a competitive, often asymmetric, endeavor (David versus Goliath comes to mind), negotiations can yield results. Though this certainly varies by location and specialty across the country, in most cases the loss of a particular provider is less detrimental to the insurance company than the loss of the insurance company and its covered lives would be to the provider. In other words, a provider who bluffs with a “take it or leave it” negotiating position should be ready to have his or her bluff called.
Regina Vasquez, VP of Accounts and Operations at Healthcents, a physician contracting, consulting and software company, notes that “negotiating with insurance companies is often cyclical.” Market forces unknown to the physician may be at work that make negotiating effective at any given time so it is best to approach the negotiation as though it will succeed.
Fee schedules are typically the most obvious component of the contracting negotiation. Every provider is interested in maximizing practice revenue. One difficulty in negotiating a fee schedule is the sheer number and variety of codes that may be covered within a negotiation. Companies may make this more difficult by offering irregular payment schedules that don’t correspond to standard fee schedules like Medicare or an RVU based system. A physician should beware of companies that state average reimbursements either in terms of RVU or a Medicare fee schedule. One may find that the fee for a frequently used CPT code is well below average and CPT codes rarely billed are several multiples higher to skew the average. An effective method to counter this tactic is for the practice to submit its top 30 CPT codes by volume and have the insurance company specifically define the fee schedule for these high-volume codes.
Several aspect of contracting actually may be more amenable to negotiation even if the fee schedule is “non-negotiable.” Michael Pendleton, CEO of Desert Orthopedics Center, a 19-surgeon group in Las Vegas, says that he has several provisions that he considers very important in addition to the fee schedule.
First, is a termination provision that allows the provider and group to cancel the contract without cause. He strives for a 30-day notice but, typically, accepts 90 days. Of course, this means that the insurance company can terminate the provider without cause as well.
“Almost every contract has language and several provisions which will allow an insurance company to terminate, anyway,” he points out. “This just puts us on the same terms.”
Pendleton feels that this is an important provision because it allows him to apply the most leverage on the insurance company.
While he strives to include automatic cost-of-living-adjustments into contracts, this has rarely been successful. Even in cases where a COLA was in the contract the provider may need to “remind” the company about the increase. He feels that, especially for surgery groups, negotiating the discount insurance companies apply to multiple procedure surgeries is critical. He strives for 100% for the primary procedure and 50% for every secondary procedure and accepts nothing less than the Medicare formula for multiple procedures.
Lastly, he cautions against insurance contracts that offer one rate for multiple products. An example of this would be a company that offers a preferred provider organization (PPO) rate, but has the same rate for Workman’s Compensation care and automobile accidents. Obviously, these very different categories should each have a fee schedule that reflects the complexity of their care and any state standards, if applicable.
In additional to those already mentioned, optimizing the components of a contract listed below can also smooth cash flow and improve practice management.
All contracts should have provisions that allow the provider and the insurance company to amend submitted claims or payments retroactively. Providers should strive for parity with their insurance company so that both parties have the same period of time to seek an amendment — 60 or 90 days is typical.
Furthermore, the provider should insist that he or she has the right to contest an amendment or modification. Lastly, the provider will want the insurance company to accept a check for the refund rather than allowing the insurance company to deduct this amount from future payments.
Bundling procedures and down coding protections
The provider position that is easiest to defend is to insist that the insurance company recognize the rules and procedures of Medicare billing.
Providers who perform work in emergency rooms or have patients who they see “out of network” should be wary of this provision. This provision will allow an insurance company, often with no notice, to rent or assign the fee schedule you have agreed to, to another insurance entity or group.
These provisions should be struck from your contract if possible or, if that is not possible, the provider should receive written notice and have some right of refusal. Pendleton addresses this by insisting that the insurance logo on the patient’s insurance card is the contracted entity.
Contracting between health care provider and insurance company has always been a complex interaction of market forces, changing government regulations, and provider goals and expectations.
Vasquez believes that the impending implementation of the Affordable Care Act and, specifically, the insurance mandate and the implementation of the government-run health insurance exchanges have made both provider and insurance company more reluctant to implement major changes at this time. However, she feels that “providers are much more nimble than insurance companies” at making changes in response to market forces.
Indeed, physicians are already forming collective multi-specialty structures to better manage care, optimize patient outcomes, reduce medical redundancy and reduce cost. Yet insurance companies are often unwilling or unable to recognize and reward financially these entities because they deviate from a standard fee-for-service structure.
It is not clear how or when these evolving provider structures and systems will be rewarded or remunerated. What is clear is that there will be complex negotiation occurring in the near future as result.
Roger Fontes, MD, is a board-certified orthopaedic surgeon with Black Mountain Orthopaedics in Henderson, Nev. He specializes in diseases of the shoulder, knee and hip and problem fractures such as nonunions and malunions. Fontes is also involved in the development and production of several orthopaedic instruments and technologies.