Negotiating payer contracts annually—or more often, if you can—is critical to the financial health of your practice. Granted, it’s not something most practices relish doing. Unless you have staff dedicated to the process, it can be a very time-consuming endeavor. Nevertheless, it’s the only way to ensure that you’re not leaving hard-earned dollars on the table as codes, relative value units (RVUs) and payer policies change.
As with most things, good contract negotiations start with solid preparation. All too often, however, I talk with practices that don’t even have copies of their current contracts and fee schedules. The very first step to prepare for negotiation is to make sure you have these two vitally important documents on hand. An electronic copy of your fee schedule is preferable, because it allows you to more easily compile essential reports.
Now, I’ll bet I know what many of you are thinking: Bette, the reason we don’t have that information is because our payers refuse to give it to us! I know that’s especially true when it comes to fee schedules. But the good news is that over the years many states have attempted to address this long-standing issue.
Most states have some sort of regulation on the books requiring payers to provide you with their fees—at least per the contract, specialty and codes you typically bill. A solid understanding of your state laws is actually an excellent resource at the negotiating table. State medical societies often can provide the information you need regarding state fee schedule regulations, prompt pay laws, and other important rules that protect your practice. Use them, if necessary, to get the data you need.
Once you have contract and fee schedule in hand, the next step is to bring good reporting to the table. You want your reports to tell you four things:
1) How much you were reimbursed in the past for each service
2) How much the payer’s competition is paying for each service
3) What the bundling policies are for procedural services frequently used
4) Which reimbursement the payer is denying
Denial reports can be interesting. Obviously, you’ll want to review those claims that were not paid at all. In addition, run reports to see whether you actually were paid the full allowed amount for each service. This will require you to build all of your allowed amounts into all of your IT systems, but it will help you pinpoint areas of financial loss. Look for variance by code and by payer—something some clearinghouses can help you do in real-time.
Conduct your reimbursement review by payer, by code, by volume, and by dollar amount. Then, finally, check to be sure that your rates are based on the current Resource-Based Relative Value Scale (RBRVS) or the year specified in your contract. Some payers don’t base their fees on RBRVS, of course, but the vast majority do. Evaluate how any potential changes to the overall conversion factor or individual RVUs will affect your payments—either upward or downward. Be prepared to negotiate over any services affected negatively. You may want to consider negotiating a carve out on procedural services frequently billed to secure a set payment rate per code.
Fully prepared with this complete financial picture of your practice, you’ll be able to step to the negotiating table with knowledge, power and confidence.