Transcript Slide 1

Blueprint for Success
Effectively Negotiating Third
Party Physician Payer
Agreements
Session 3
SWOT / Proposal Letter Preparation
and Contract Negotiations
1
Objectives
By the end of Session 3 participants will be able to:
• Perform a SWOT analysis of your practice to identify strengths,
weaknesses, opportunities and threats to your practice in your
market with each payer
• Apply findings of SWOT and prepare persuasive payer proposal
letter that highlights their strengths and opportunities to bring
added value to the payer network
• Conduct contract negotiations
 How to handle various payer responses
 Learn how to handle payer objections and shut downs
• Handle escalations and other options
2
AGENDA
• Review Class 2 responses to quiz
• Learn how to prepare a highly impactful proposal letter
• Learn how to negotiate and handle payer objections,
including shut downs during negotiations
• Learn how to escalate and consider other options (If shut
down)
3
Negotiations Process
• Data Analysis
• Proposal Letter
• Make Initial
Contact with Payer
• Analyze Counter
• Negotiate until
agreement is
reached
• Escalate to Sr.
Level Manager
• Consider Out of
Network Option
• Monitor Claims
• Renegotiate
Phase 1:
Phase 2:
Phase 3:
Phase 4:
Preparation
Negotiate
Escalate and consider
options
Monitor and Renegotiate
Negotiations
Completed
4
S.W.O.T. – Identify Saleable Solutions and
Potential Obstacles to Getting an Increase
Strength
Opportunities
• Location
• Practice
Patterns
• Referral
Network
• Practice
Collaborations
• Employer
Groups
• New Services
Weakness
Threats
• Competing
Practices
• Payer
Reimbursement
Policy
• Mergers
• Payer initiated
ACOs
• Out of Network
Reimbursement
Policy
5
Healthcents Quadrant Payer Analysis
Pay High
Conservative
15%-25%
5%-15%
Ultra Aggressive
Aggressive
35%-45%+
Pay Low
Ultra-Conservative
Open to Negotiate
25%-35%
Not open to negotiate
6
Examples…
•
Payer A: We are negotiating with a very large commercial payer who is
rarely agreeing to increases, very difficult to negotiation with. We want
to stay in Network. The agreement is, overall, reimbursed “mediumhigh”, around 140% of Medicare in our locality
•
Payer B: This is a small payer, our reimbursement is very low, <100%
of Medicare overall. We have assessed our out of network position
using Healthcents’ RevolutionSoftware and we would need a 40%
increase to break even in network based on our out of network
modeling assumptions. This payer is often easy to negotiate with and,
even if they aren’t we are comfortable going “out of network” if we don’t
get an increase
What do we ask for using the Healthcents’ Quadrant Analysis as a
guide?
7
Healthcents Quadrant Payer Analysis
Pay High
Conservative
15%-25%
Ultra-Conservative
5%-15%
Payer A
Ultra Aggressive
35%-45%+
Pay Low
Aggressive
25%-35%
Payer B
Open to Negotiate
Not open to negotiate
8
Proposal Letter
“If you don’t know where you are going, any road will get you there”.
– Lewis Carroll
• A well prepared proposal letter sets the table for negotiations
– Three Sections:
• Letter Body – the narrative that makes the case for your practice’s value to the
payer network.
• Appendix A: Fee Schedule Proposal – the result of your analysis that details
your requested reimbursement rates for your new fee schedule
• Appendix B: List of Physicians and Specialties and Sub-specialties
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Putting the Proposal Letter Together
• State the purpose and rationale
• Address Payer Concerns
• Close the “sale” and get the payer on the hook
• Package a fee schedule amendment to your
letter
• Deliver and evaluate
10
State the purpose and rationale
• State the reason for contact and a clear
rationale in the opening paragraph:
I am contacting you on behalf of PRACTICE
NAME to initiate a renegotiation of their
current fee schedule. PRACTICE epitomizes
“patient centered care” and has been doing
so for the past XX years. In the past 12
months, their YY physicians provided care to
ZZ PAYER covered lives, receiving $$$ for
rendered services.
11
Address Payer Concerns
• Network coverage, specialties, clinical
efficiency = lower cost, administrative
efficiency = lower cost
PRACTICE is the largest, most comprehensive urological
practice in the greater CITY/COUNTY area. They are the
only practice that provides SPECIAL PROCEDURES.
PRACTICE also provides extensive Female Urology
services. Their professional specialties include LIST SUB
OR SPECIFIC SPECIALTIES. They also provide the
following in-office special procedures (LIST AVAILABLE
OFFICE BASED PROCEDURES, avoiding ASC and
hospital expenses to your members).
12
Close the “Sale”
• Closing statement – restate the purpose of
the letter
Following a review of the existing fee schedule,
PRACTICE has found that the reimbursement from your
organization is not competitive and does not sufficiently
reimburse the practice for the high-quality, coordinated
care provided to your members. PRACTICE is committed
to remaining in PAYER network and must do so at rates
that make good business sense. To this end, PRACTICE
has included, in Appendix A, a reasonable fee schedule
proposal commensurate with the cost and value that
PRACTICE provides to your members and to your
network.
13
Close the “Sale” (continued)
• Closing statement – call to action
I look forward to reaching a mutually acceptable fee
schedule agreement. Your written reply to this proposal is
requested by no later than DATE (3 weeks from date of
proposal). In the meantime, if you have any questions
about the practice or the attached proposal, please do not
hesitate to contact me. I will be in touch this week to be
sure that you received this letter and to answer any
questions that you may have
• Note, In an appendix B (Appendix A is the fee
schedule appendix), List all Physicians in the
practices and their specialties / sub-specialties
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“Across the board request” Appendix A Example
Appendix A, Fee Proposal
Specific CPT Code Reimbursement: All CPT codes listed in Payer 1 ‘s fee
schedule to be reimbursed at the current payer1 fee schedule for practice X plus
30% for year 1. For years 2 and 3, a 5% cost of living increase shall be added to
all CPT codes.
Unlisted Codes:
80% of Billed charges
Pathology, Radiology, Imaging Services, Anesthesia Services, Supplies and
Medications: during both surgery and post op visits shall be reimbursed at 80% of
billed charges.
Implants and high cost supplies:
Reimbursed at (Cost + Shipping Cost) + 10%.
15
“Define your fee schedule” Appendix A example
Appendix A, Fee Proposal
Specific CPT Code Reimbursement:
CPT Code
36415
51600
51700
51728
51741
51784
51797
51798
……
Payer Allowable
$7.20
$422.41
$197.00
$653.34
$270.00
$450.14
$309.99
$41.69
Other Listed Codes:
Unlisted Codes:
Location
O
O
O
O
O
O
O
O
80% of Billed charges
80% of Billed charges
Pathology, Radiology, Imaging Services, Anesthesia Services, Supplies and
Medications: during both surgery and post op visits shall be reimbursed at 80% of
billed charges.
Implants and high cost supplies:
Reimbursed at (Cost + Shipping Cost) + 10%.
16
Initiate Contact and Follow Up
• Initiate Contact with the Payer
– Identify individual at payer to communicate with (Must
be in the contracting department)
– If you are required to make contact through a general
number/mailbox you will need to follow up weekly to
get to an individual who you can work with to
negotiate.
• It is not uncommon for payers to take up to 12 weeks or
more to reply to a proposal. During that time, it is
important to follow up on a regular basis (weekly) to keep
your proposal front in their mind.
17
Consider this…
• What do physicians need and want from
payers?
• What do payers want from physicians and
employers?
• What do employers want from physicians and
payers?
18
What’s important?, “The 3 legged stool”?
• Physicians: practice the art of medicine and
maximize reimbursement while doing so
• Employers / Patients: value, control of costs,
provision of wellness services, great medical
outcomes
• Payers: reduction in overall claims costs,
reduction in medical costs, performance
standards. Maximize profit and maximize
profits on premium payments.
19
Finding Common Ground
• Positive Outcomes
• Metrics, Efficiency, Effectiveness, Quality of
Care
• Relationships
• Respect (Don’t take it personally.)
Value Based Contracting Example, part of Finding Common Ground:
Efficiency
(2% if >70
points)
Generic Drug
Utilization
>90%: 75 pts
88 - 89%: 60 pts
86 - 87%: 45 pts
Preferred Drug
Utilization
>90%: 25 pts.
88 - 89%: 20 pts
86 - 87%: 15 pts
Qualitative
(2% if >70
points)
Follows Best
Practices Guidelines
50 pts
Active E-Prescriber:
25 pts
Quantitative
(1% if >70
points)
In network referrals
only
>2.5:
75 pts
2.25 - 2.49: 60 pts
2.0 - 2.24: 45 pts
Patient Satisfaction
3 stars: 25 pts
2 stars: 20 pts
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Case Study
Your practice is a six physician urology specialty
group, located in a suburb of a metropolitan city.
Your group logs around 13,230 encounters a year
from Payer 1, receiving around $1.62M per year.
Payer 1 represents 30% of your total book of
commercial business. Your current weighted
average of reimbursement compared to 2012
Medicare is 106%.
You did your home work and wrote a proposal
requesting an across the board increase of 30% on
all services (Payer is in the bottom right quadrant,
low payment, hard to negotiate with)
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Healthcents Quadrant Payer Analysis
Pay High
Conservative
15%-25%
Ultra-Conservative
5%-15%
This Payer
Ultra Aggressive
35%-45%+
Pay Low
Open to Negotiate
Aggressive
25%-35%
Not open to negotiate
23
Case Study 1 (continued)
More information about your Fee Schedule:
•Weighted Averages of 2012 CMS by service category
Service
Category
Revenue
Volume
(rounded)
Payer 1 Wt.
Average of
2012 CMS
Regional
Average
Percentage
of 2012 CMS
Surgery
$500,000
2800
116%
139%
Radiology
$550,000
3000
103%
120%
E&M
$450,000
5800
102%
110%
Lab/Path
$100,000
1400
56%
110%
Medicine /
Other
$20,000
230
86%
100%
$1,620,000
13,230
106%*
116%**
TOTALS
* = Weighted Average, ** Average
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Case Study (continued)
You just received a response saying that the
payer cannot accommodate your request.
Dear Provider,
Thank you for contacting us. In today’s economy, everyone is working to
keep the cost of healthcare and health insurance down. We appreciate
your participation in our network, but cannot accommodate a 30% increase
in reimbursement to any provider.
Our data indicates that our rates are competitive. We review available rate
data on a regular basis and make adjustments when necessary to ensure
fair payment to our providers.
Thank you, again. We hope that you will continue to provide valued
services to our members.
25
Case Study (continued)
Also Consider…
This is a typical first response. The payer is
counting on you giving up. Remain persistent.
What is your plan for engaging the payer in an
actual negotiation?
What is your next step?
26
What Were the Payer’s Objections?
• In current economy they cannot
accommodate a 30% increase.
• Working to keep cost of insurance down.
• Payer 1 feels their rates are competitive.
27
S.W.O.T. – Identify Solutions to Payer’s
Objections : Economy, Cost, Competitive Rates
Strength
Opportunities
Weakness
Threats
28
Class Discussion
29
Case Study 1 (continued)
More information about your Fee Schedule:
•Weighted Averages of 2012 CMS by service category
Service
Category
Revenue
Volume
(rounded)
Payer 1 Wt.
Average of
2012 CMS
Regional
Average
Percentage
of 2012 CMS
Surgery
$500,000
2800
116%
139%
Radiology
$550,000
3000
103%
120%
E&M
$450,000
5800
102%
110%
Lab/Path
$100,000
1400
56%
110%
Medicine /
Other
$20,000
230
86%
100%
$1,620,000
13,230
106%*
116%**
TOTALS
* = Weighted Average, ** Average
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1st Counter offer to Payer 1
Appendix A
•
Fee Schedule Proposal:
–
Office Based Surgical Procedures
• 150% of 2012 CMS Medicare rates
(vs. 116% Medicare current and 139% Regional, high revenue)
–
Facility Based Surgical Procedures
• 150% of 2012 CMS Medicare rates
(vs. 116% Medicare current and 139% Regional, high revenue)
–
Radiology
• 110% of 2012 CMS Medicare rates
(vs. 103% current and 120% Regional, high revenue)
–
Evaluation & Management
• 120% of 2012 CMS Medicare rates
(vs. 102% current and 110% Regional, high revenue)
–
Lab/Pathology
• 100% of 2012 CMS Medicare rates
• (vs. 56% current and 110% Regional, lower revenue by comparison)
–
Medicine / Other (Leave it out for now, very low revenue, $20,000 vs. over $1.5M total commercial
revenue)
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Outcome of Analysis of 1st Counter Offer to Payer 1
Category
Revenue/Year
Our Proposal Revenue
Surgery (116%150%)
$500,000
$646,552
Radiology
(103%110%%)
$550,000
$587,379
E&M
(102% 120%)
$450,000
$529,412
Lab and Path
(56% 100%)
$100,000
$178,571
Medicine / Other
$20,000
$20,000
$1,620,000
$1,961,914
TOTAL REVENUE
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1st Counter Offer to Payer 1 Analysis
• Analysis Summary:
• By grouping our codes and focusing on a combination of
codes that are low in reimbursement and high in revenue,
we move up our revenue by over 20% by incrementally
improving reimbursement on these codes
• We leverage value to the payer and our practice by using an
in office suite incentive
• We hold back a suggestion for COLA increases and value
based bonuses, can use these if we get stuck later or could
have used if we thought this was our best play now
33
Our 1st Counter Proposal to Payer 1
Dear Payer 1,
We received your response and are committed to
continuing to work with Payer 1 to provide superlative
care to your members. We share your desire to keep
costs down and utilize administrative systems and
clinical protocols designed to provide the most
efficient care possible. As such, we are submitting
the revised proposal for your consideration. We
respectfully request your reply by October 5, 2013.
34
Payer’s
st
1
Counter Offer
The payer provides the following reply to your
counter offer, good news, maybe…:
Dear Provider,
We value your participation in our network and offer
the following counter offer. If you agree, please so
advise and I will send the contract for your signature.
Payer’s 1st Counter Offer
• Payer’s Counter Offer to our offer:
Increase of 2% over current for E&M Rates in each
year of a 3 year term.
Lab services are sole sourced through 3rd party
(LabCorp), but some office based services are
allowed. Rates will remain as-is.
All other services remain as currently reimbursed.
36
Negotiations Process, we are “iterating”
• Data Analysis
• Proposal Letter
• Make Initial
Contact with Payer
• Analyze Counter
• Negotiate until
agreement is
reached
• Escalate to Sr.
Level Manager
• Consider Out of
Network Option
• Monitor Claims
• Renegotiate
Phase 1:
Phase 2:
Phase 3:
Phase 4:
Preparation
Negotiate
Escalate and consider
options
Monitor and Renegotiate
Negotiations
Completed
37
Analysis of Payer’s 1st Counter Offer
• Analysis reveals
• Less than $10K of upside, since the only movement
is E and M up 2% on a base revenue of $450K, no
other change
• This is not acceptable
• This is a large payer agreement and they fit the
profile of payer A in the following quadrant analysis
• What do we do next?
38
Healthcents Quadrant Payer Analysis
Pay High
Conservative
15%-25%
Ultra-Conservative
5%-15%
Payer A (Reposition)
Ultra Aggressive
35%-45%+
Pay Low
Open to Negotiate
Aggressive
25%-35%
Not open to negotiate
39
Class Discussion
What next, seem grim but…?
•Payer has made an offer – door is open for further discussion
•Lab and Pathology are off the table due to third party provider, but you still have
some office based labs that you can do. Request a list of allowed lab procedures
and rates.
•What else can you do?
– Fee for Service: OBPs is a most likely “win” because it saves them money
when you keep their members out of the hospital/ASC.
– Introduce COLA’s (Make this a 3 year deal and ask for 5% increases at
the beginning of years 2 and 3)
– Introduce a value based incentive proposal for each of the three years,
each year should have a minimum payout of 5% of total revenue
40
2nd Counter offer to Payer 1
Dear Payer 1,
We have carefully reviewed and considered your counter offer. We appreciate that
you value our network participation and have a few suggestions that are mutually
beneficial so that we may conclude and accept a mutually agreeable fee schedule.
1. Our providers routinely perform several surgical procedures in the
office setting rather than HOSPITAL or ASC, providing significant savings
to you and your members. In order for us to continue this practice, we
must be reimbursed an increased fee, including a facility fee, to
compensate for the added cost to the group of providing these services.
We have requested a $100 facility fee, which is reasonable and
customary in our experience and will save you substantial hospital and
other facility fees.
2. To lock in certainty for you, your members and our practice, we
propose a 3 year term with 5% across the board increases for cost of
living adjustments in year 2 and in year 3 of this agreement.
3. Attached is a performance value based metric proposal for your
review. This approach insures high quality of care and a lowering of
treatment costs based on the selected metrics.
I look forward to your reply no later than 11/15/13. Thank You for your
consideration of this proposal and for understanding the importance of keeping this
key provider in your network.
41
Outcome of Analysis of 2st Counter Offer to Payer 1*
Category
Office Based
Surgeries
($100*1400)
COLA, 5% prior
Year
Value Based, 5%
prior year
TOTAL
Incremental
REVENUE
Year 1 Increase
Year 2
Year 3
$140,000
$140,000
$140,000
$0
$88,000
$103,800
$0
$88,000
$103,800
$140,000
$316,000
$591,400
* Assumes starting revenue of $1,620K
42
1st Counter Offer to Payer 1 Analysis
• Analysis Summary:
•
By de-emphasizing Fee for Service increases and instead emphasizing a
combination of OBP incentives, value based incentives and COLA (Cost of
Living) increases, we end up with higher reimbursement by the end of Year 3
and quickly scale up revenue years 1 and 2
•
We have picked areas of efficiency that usually motivate payers, i.e., office
based procedures and Value Based Incentives.
•
We used the COLA play to lock certainty for both our practice and for the
payer. Certainty = defined value
•
We leverage the compounding effect of the prior years’ increases (Years 2 and
3)
43
Payer’s Response to 2nd Counter
Offer
Payer responds to your counter offer as follows:
Dear Provider,
I have reviewed your counter offer with my manager and my offer
of 2% increase in each year of a three year term is the best we can
do. Our systems cannot accommodate payment of a facility fee for
office based surgical procedures. We do not recognize differing
sites of service . Payer 1 reviews utilization and applies a rate to
both facility based and non-facility based services according to
common utilization across the network. Further, we are not
prepared at this time to administer value based incentives.
We value your participation in our network and are working to keep
cost to our members down.
Please let me know if we can move forward based on my last offer.
44
Class Discussion
What next?
• Reject entirely and counter
• Escalate
• Look at out of network scenario
45
Process – Phase 3
• Escalate to Sr.
Level Manager
• Consider Out of
Network Option
You are here
Phase 3 – Escalate
& Consider Options
46
Escalating Your Request
• If possible, maintain first level negotiator as your advocate to
Sr. Management.
– Acknowledge efforts and express appreciation for work.
– Request their help to set up conference with manager and
decision maker
– Set up teleconference with both first level and Sr. Manager
– Look at out of network options (RevolutionSoftware Out of
Network Modeler)
– Work your way up the food chain, manager to regional
director to Senior VP / President
• Depending on outcome, you may have another counter from the
payer or you may take a look at your options.
47
Completing Negotiations
• Next Steps:
– Get contract and check for potential issues in contract
language that might effect reimbursement
• This will be our first topic of session 4…
48
Process – Phase 4
Assume an
agreement was
reached and you
received an increase.
• Monitor Claims
• Renegotiate
You are here
Phase 4 – Monitor
& Renegotiate
49
Summary
• We covered how evaluate strengths, weaknesses,
opportunities and threats to your practice.
• We covered how to present your practice to the payer in a
way that highlights value add and makes the case for
increased reimbursement.
• We covered how to put together a complete and impactful
proposal letter
• We covered how to negotiate and evaluate payer offers and
how to handle payer objections
• We handled how to escalate, if necessary, and other options
50
Homework (Go to Link Below)
1. Download and read “Preparing an Impactful
Proposal Letter” from the AUA class webpage link
below
2. Download the proposal letter template from the
AUA Class Webpage link below
3. Write a draft proposal letter using your experience,
the information you learned today, the reading from
the webpage and the template and send it to
[email protected]. HCI will review and
provide comments to help optimize your proposal.
Your homework assignment and downloadable
documents can be found on the class webpage at
www.healthcents.com/aua
51
If you have questions or need help…
• Class schedule/content
• Rick Rutherford, CMPE, CHA
• Director - Practice Management AUA
• Phone: 410-689-3713
• [email protected]
• RevolutionSoftware™ Questions
• Regina Vasquez, Sr. VP of Accounts – Healthcents, Inc.
• Tel: (719) 243-3845
• [email protected]
• Healthcents, Inc. Corporate
• Susan Charkin, President – Healthcents, Inc.
• [email protected]
• Steve Selbst, CEO, [email protected]
• Healthcents Inc. Tel: (800) 497-4970
• www.healthcents.com
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