This article was updated as of August 2, 2022.
Managing contracts with insurance companies and payers can seem intimidating, but renegotiations are a powerful way to impact your bottom line. Unfortunately, many physicians wait for payers to make the first move, potentially sacrificing revenue. To help you feel more confident, we’re sharing best practices for the renegotiating process and contract management.
To start the renegotiation process, revisit your practice’s marketing position, or create one if you have not yet:
Market your medical practice’s best qualities. Know the local competition and how to position yourself against them. Think about what the payers want—higher quality for lower cost—and show them how you are doing that.
Notify payers if your practice has any expanded hours outside of the typical 8-5 patient timeslots. The added hours could help you negotiate a custom fee schedule that better reflects your practice’s value.
Additionally, consider asking for increased overhead due to added expenses for PPE and staff wage increases. With clear communication and a competitive presentation, part of the negotiation could include increasing the top 30 procedure fees rather than all fees.
While many providers write letters to payers, whether a letter in the mail or via email, the most effective way to renegotiate contracts is to start the process off in person. If you don’t have the contracting representative’s contact information, contact the provider representative to get it.
Aldrich’s Advice: Request an in-person meeting with payers to demonstrate credibility and build a relationship.
When renegotiating with an existing payer, pull all claims-based data for that payer for the past 12 months, or at least compile the top 25-50 codes. Look at volumes, charges, and current allowables at the line-item code level to clearly understand current reimbursement rates.
Model the proposed rates and project how much money the new rates would bring in, assuming volumes and services will be relatively the same in the following year. If cost data is available, ensure costs are covered for each service line. Do not accept rates under the break-even point unless there is a strategic reason.
In addition to claims data, it is also helpful to pull data for the payer’s denial rates, days in accounts receivable, underpayment issues, and coding/bundling issues. You can use this information to evaluate how much time and energy different payers require.
Aldrich’s Advice: Update your payer mix to understand how vital different payers are to your practice. Compile critical data points before your meeting to create your renegotiation strategy, including:
Payers also pull this data when negotiating, so it is imperative you do, too. The more data you have, the better your renegotiation strategy.
If payers propose first, never take the first offer. Sometimes payers will insist you propose first, so always inflate your goal desired rates slightly. However, be reasonable and do not propose so high that it is entirely out of the question for the payer.
Setting the proposal at higher rates allows the use of the common negotiation tactic of “bracketing,” which creates a range in which there is potential agreement. Typically, this process leads to a middle ground from which the parties can split the difference to agree.
If payers are not willing to increase your rates, think about what processes burden your staff. Review your base agreement, amendments, and exhibits to evaluate any language or other requirements that could be changed to provide your practice value, even if it is not monetary.
Aldrich’s Advice: Renegotiating a process that saves your staff time can be just as beneficial as a higher rate.
At the end of the day, if you don’t ask, you’ll never receive. Payers are more willing to work with you than you think, so be proactive about finding ways for you both to win.
Managing a practice requires medical and business acumen. If you have questions about renegotiating contracts or improving your practice’s bottom line, reach out to your Aldrich Advisor.
Contact us to speak with one of our advisors.
"*" indicates required fields
