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Three Metrics to Help You Negotiate With Payers

When it comes time to negotiate fee schedules with your payers, knowledge is power. And power can mean better contracted rates for your practice. Today, I would like to explore three metrics that may give you an edge and help you get what you deserve. So that we don’t have to go into too much detail about calculations, let’s assume your clearinghouse or practice management system can provide you with all of these statistics. If they can’t, you may want to ask why not and if they will be adding these features anytime soon.

The first metric to consider is the average paid percent. We compute this by taking the sum of your payments and dividing it by the sum of your submitted charges. In an ideal world, every dollar you submit for payment would be paid 100%. However, there are many reasons why this is not the case. Some examples include claim-specific negotiated discounts, payment bundling, capitation, and previous payment discrepancies. So what can you expect overall? For an average practice, the paid percent will be between 39% and 42%. However, the higher the percentage, the better your revenue will be. With this information, you should be able to compare each individual payer to that benchmark to see if they are better or worse.

The second metric to know builds on the first. Since you know the overall paid percent for each payer, you should consider how those payers are compensating your top procedures. If at all possible, sort your payments by procedure and by payer simultaneously. This will allow you to look at the top procedures for each payer and what their paid percent is for those procedures. Now you can compare individual procedure payment rates between different payers.

And finally, you can consider each payer’s average reductions percent, which is the sum of the payer’s contractual and other reductions divided by the sum of your submitted charges. Which payers are consistently shifting more dollars than normal out of your payments and into contractual or other reductions (excluding patient responsibility)? We typically see a range of 44% to 48% for the average practice, but the lower the better. Ideally, your clearinghouse or practice management will allow you to sort claims by the amount moved to “contractual and other reductions.” If so, you can easily compare each payer to the average range and see how they are performing.

Payer negotiations can be tense. You want to get the best rates for your practice while maintaining a good working relationship with your payer representative. By using these metrics from your clearinghouse or practice management vendor, you have strong data from a neutral third-party that can help you point out areas for improvement. Use the knowledge and seize the power!