Seven Steps to Successful Insurance Contract Negotiations
Negotiating with insurance companies represents such a horrible prospect for most pediatricians they simply avoid doing it at all. The result, more often than not, is a practice that not only suffers from a bad insurance contract, but doesn't even know what's in the contract. Believe it or not, this situation is easy to change. As long as what you are asking from your insurance companies is reasonable, and you follow and understand the steps below, you can join the PCC clients who have found sudden financial or administrative bounty by negotiating properly.
Step One: Do Your Homework
Determine which insurance company first needs your attention. We are going to focus specifically on those insurance companies that do not cover your costs, but you may want to focus on some other untenable aspect of your insurance contract.
First you need to identify which insurance contract needs renegotiating by calculating your Revenue Per Visit. Using your computer system, calculate the total dollars you received for your work over the previous twelve months and then divide that by the total number of visits. This provides you with the average dollars your practice deposited each time a patient checked out of your practice, whether they are capitated, Medicaid, Fee For Service, etc. It's your most important practice benchmark.
PCC clients can use the srs reports tailor-made for this purpose.
Next, make the same calculation for each insurance company. In other words, you should end up with data that looks something like this:
| Ins Group | # of Visits | Avg Dep./Visit |
| 11,558 | $70.58 | |
| Medicaid | 1,568 | $52.29 |
| BCBS | 1,827 | $68.54 |
| HealthCare | 1,324 | $52.45 |
| Tourists | 1,330 | $74.87 |
| AmeriCare | 727 | $74.65 |
Step Two: Find the Culprits
With your list of the average revenue generated by insurance in hand, spot the insurance company causing you the most financial grief. In most practices, the problem companies will jump right out.
Why do we focus on Revenue Per Visit and not, say, the fee schedule of your most important codes? For one very simple reason: Focusing on the fees for specific procedure codes plays right into the shell game the insurance companies love to play with you.
We know too many practices lured in by "high" sick visit reimbursement or the fact that the insurance company pays for after- hours codes. Meanwhile, the insurance has lower reimbursement for stacks of less frequently used codes, and those codes add up. Remember, the insurance companies make their money in little pieces: 5% here, 10% there. The only way to properly judge your reimbursement from an insurance company is to look at all the codes that you do.
The bottom line: calculating your Revenue Per Visit tells you exactly what you were actually paid for your work. You can compare capitated plans to FFS, private pay to participating insurance. No guessing required.
Note that determining the insurance company that costs you the most may be subjective. In the example above, the practice averages $70.58 across all patients, but "only" $52.29 from Medicaid. Perhaps this practice has a firm committment to treating Medicaid patients. Or, although BCBS is paying very nearly the average for the rest of the insurance companies, perhaps their administrative overhead (constantly rejecting or losing claims, extra referral paperwork, etc.) makes them much more costly.
One way or the other, pick one. In this instance, we'll choose the "HealthCare" insurance company.
Step Three: Read Your Contracts
Go into the drawer of your office that holds all of your insurance contracts. Find the one for HealthCare. Read it carefully. In addition to taking the time to familiarize yourself with its contents (perhaps for the first time), you are looking specifically for language pertaining to cancelling your contract. Nearly all contracts limit your ability to cancel the contract whenever you wish, so you need to understand what your obligations are. While contracts vary from practice to practice, let's assume that the HealthCare contract is renewed automatically every year on July 1 and your window for cancelling their contract is April 1-15. You can easily adjust all the directions below as necessary.
Step Four: Arrange Your Meeting
Arrange for a meeting in your office with the rep from HealthCare. Tell him or her, specifically, that you want to discuss the terms of your contract and a personal appearance is necessary. As you know, the insurance companies like to play the waiting and delay game. Don't put up with it.
Well before the meeting, you have some more homework: Prepare and print two stacks of letters (your computer system should make this process quite easy):
- Letter one: A pre-dated letter prepared for each of your
HealthCare patients. The letter indicates that, as of July 1, you
will no longer accept HealthCare Insurance. (PCC has a sample
Insurance Termination
\letter for your use.)
- Make sure you fulfill any contractual obligations spelled out in your insurance contract. That may mean including excluding certain information from the letter.
- Depending on the aforementioned obligations, you may wish to actually tell your patients why you are leaving the plan. Believe it or not, most of your patients will understand you when you explain that HealthCare is not willing to negotiate a contract that puts them on a par with the other insurance companies you accept.
- Again, make it clear to your patients that you will continue to treat them without hesitation and that your goal is to prepare them for a potential change. If possible, recommend another practice. Don't forget: You and your patients are a team.
- Letter two: a pre-dated letter to the H/R departments of
each of the major employers who use HealthCare Insurance. You
may only need to focus on a handful of employers. This
letter should be more personalized and personally signed by the
OM or even the doctors. The crux of the message is simple:
You are trying valiantly to renegotiate your contract with
HealthCare Insurance but the negotiations may fail. You'd like to let the H/R departments know
about this for two reasons:
- The insurance they've chosen for their employees is not delivering the quality care they expected due to [whatever reasons you are negotiating over]
- As pediatricians, you know that the search for a new doctor is a difficult endeavor; the H/R department should be prepared for the lives of its employees to be disrupted for at least a brief period—again, because of the behavior of HealthCare Insurance.
At the meeting, make sure to bring both stacks of letters. When the insurance rep sits down, explain your position. Use the data generated by your computer system to show them where they are failing to pay you appropriately. And then make a statement along these lines:
"According to my contract, I have from April 1 to April 15 to cancel my contract. Unless you present me with a new contract that fulfills the following needs of our practice (in this instance, raising the average per-visit reimbursement to $70), I am going to send out the following letters."
Then, show an example of the first letter. Then, show an example of the second letter. Plop them right out on the table. Offer to make sample copies.
Then, invite the insurance rep to ask any questions before showing him or her the door.
Step Five: Wait
Now, you wait. If you want to be nice, you can check in periodically.
Our clients report that the responses from the insurance company might sound intimidating: "Oh, we can't possibly do that"; "We have one fee schedule for all providers, you can't get a special one." These statements are, as a rule, simply not true. You're likely to note that, as the deadline grows nearer, some of the previously impossible things, are now possible. Keep waiting and do not waver or compromise. You know what you need for your practice and your patients. Don't settle for something less.
Step Six: Send Your Letters
On April 1, you have but one choice: Send the letters. Our clients have told us that it's wisest just to send them in small batches—start with the A's on Monday, then send the B's, etc. As one PCC client described her success with this process effectively: "The company wouldn't even discuss a new contract, so I sent out letters to the first batch of patients. I was in the middle of folding the 'Bs' two days later when I got the call that they were ready to meet!"
Sending the letters means that you have crossed the bridge. You are dropping the insurance company unless they send a last-minute olive branch. This is important because many successful negotiations do not happen until AFTER you say NO to the insurance company and cancel the contract. As noted in the example above, the insurance companies are delighted to "play chicken" with you. They can't believe a pediatrician would say no to them, and they depend on your being soft. Saying "No" is exactly the message you need to send to them.
Step Seven: Followup and Recall
If you have sent your letters, and the response from your patients and their employers was not enough to bring the insurance company to the table, you have still gained considerable ground. Now, for the next twelve months, you need to focus on bringing in those children who are on the insurance companies with whom you participate. PCC knows that a typical pediatric practice has hundreds, if not thousands, of potentially active patients who have not had their AAP-scheduled physicals. Get those kids in and, in the words of one PCC client, "...fill in your schedule with the people who DO pay." Again, your computer system should make the process of identifying the proper patients a snap (PCC clients can run the recaller or call support for help).
Prepare to be surprised by how many of your patients come to see you "out of network." Generally, it's expected that 50-75% of your patients will continue to see you!
