The Ask MGMA program has received a number of members reaching out for advice on how to best negotiate with their payers.
An Aug 15, 2023, MGMA Stat poll asked medical group leaders how often payer contracts are reviewed. A solid majority (58%) noted they review payer contracts annually, while nearly one in 10 reported looking at them multiple times throughout the year (e.g., quarterly, semi-annually). Another 17% reported not reviewing their contracts regularly, while 16% noted “other.” The poll had 389 applicable responses.
Among those who responded “other,” most responses noted that payer contract reviews were scheduled every three years, biannually or based on the date of renewal for existing contracts, with a period of multiple months for the practice to review financial and operations data in preparation for a renegotiation.
These results align in many ways with a Jan. 5, 2021, MGMA Stat poll that found nearly half (47%) of practices audit their payer contracted rates annually, and another 28% audit rates monthly, quarterly or semi-annually.
Contract terms often dictate when a medical practice should start the negotiation conversation, but other factors — such as legislative changes, market dynamics in healthcare, reimbursement rate changes, performance metrics and quality indicators — can drive the conversation for new contract terms.
Medical practices often encounter various challenges when dealing with payers in the healthcare industry. Many have seen an increase in delayed reimbursements, possibly due to errors on the practice side or even perhaps on the payer side. Staffing constraints over the past couple of years have impacted payment, causing financial strain on practices:
- In a March 21, 2023, MGMA Stat poll, medical coders, billers and staff handling authorizations represented three-fourths (75%) of the revenue cycle roles that medical groups reported as the most difficult to recruit.
- An August 2022 MGMA Stat poll found that, among more than half (56%) of medical groups that reported time in A/R increasing that year, staffing difficulties were cited as a primary reason.
Payers often have intricate billing rules and requirements that practices must follow, leading to administrative burden and potential errors. A practice needs to know and understand what is expected in each contract.
With all these challenges it is important that a practice negotiates with the payers to improve processes and ensure fair reimbursement rates. MGMA’s member-benefit checklist can walk you through preparing for negotiation, with the assistance of a payer evaluation spreadsheet to review and compare the performance of your major payers. Make sure to allow several months for adequate time to gather and review data and negotiate prior to the termination of the current contracts.
Listen to the full discussion of this topic on our recent Ask an Advisor podcast episode:
Learn more at Leaders
- Get a preview of “Negotiation Ninja Class: Lessons from the FBI and More” from MGMA Consultant Doral Jacobsen, MBA, FACMPE, at the 2023 Leaders Conference, Oct. 22-25 in Nashville.
- Read more about developing your medical group’s value proposition to support your negotiation strategy.
Contracting action items
Jacobsen’s payer contracting checklist offers these 10 action items to build into your process:
- Complete a payer mix analysis: Calculate chargers by payer divided by total charges using one year of data.
- Complete a gross collections analysis: Calculate payments divided by charges by payer using one year of data.
- Start a contract catalogue: Obtain your executed agreements, identify products and the last negotiation date.
- Gather fee schedules: Request fee schedules (CPT®-code level) from payers and/or download, as applicable.
- Rate payer hassle factor: Grade your top payers (A to F) based on the administrative burdens your practice faces.
- Determine reimbursement per visit/procedure by payer: Identify payment rates for CPT® codes driving at least 80% of revenue for the top payers.
- Define cost per visit/procedure for providing key services.
- Craft your practice's value proposition: Create a graphic that tells the story of why your practice is valuable to the network.
- Determine proposal requests for your top three payers: Identifying appropriate rate increase requests for each of the top three payers identified in your payer mix analysis.
- Initiate negotiations: Leverage analyses completed for the top three payers and request calls ahead of submitting your proposals.
There is a lot of detail that goes into the process, so keep these five considerations in mind to help make the process smoother:
1. Prepare thoroughly
Before entering negotiations, gather comprehensive data about your practice's performance, patient demographics, services provided and associated costs. Understand your practice's value proposition and how it aligns with the payer's network. Analyze the current reimbursement by payer.
2. Set clear goals
Define your negotiation goals clearly. Determine the reimbursement rates you are aiming for, any additional benefits you seek (such as timely payments or improved administrative processes) and the contract terms that would best serve your practice. Set deadlines during negotiation process.
3. Leverage data and evidence
Present data-backed evidence of your practice's quality of care, patient outcomes and efficiency. Use benchmarks and comparisons with industry standards to demonstrate the value your practice brings to the payer's network. Data-driven arguments can strengthen your negotiation position and build trust with the payer.
4. Be prepared to compromise
Negotiations often involve give-and-take. While it's important to advocate for your practice's interests, be willing to consider compromises that can lead to a mutually beneficial agreement. Understand the payer's concerns and objectives and find areas where both parties can find common ground. For underperforming payers, you might want to include an intent-to-terminate notice if new terms are not agreed upon. If a payer refuses to negotiate, evaluate its percentage of your net revenue, factor in the extra expenses related to managing claims, and determine whether you are willing to cancel the contract. You may be able to increase revenue by seeing more patients from better-performing payers.
5. Seek legal and financial expertise
Engage legal counsel and financial experts to review the contract terms and assess the financial implications of the negotiated agreement. Watch out for terms regarding binding arbitration or other means of solving disputes.
Remember that negotiations are not just about getting the best reimbursement rates; they are also an opportunity to build a collaborative relationship with the payer. Effective communication, understanding each other's priorities and finding win-win solutions can lead to contracts that support both your practice's sustainability and the payer's network needs.
Other reasons to take a closer look
Claims may be denied or rejected due to various reasons, such as coding errors, missing information or disagreements over medical necessity. It is important to make sure the latest physician fee schedule is loaded in the EHR and that the practice has current coding changes for the year and providers are educated on appropriate documentation rules. Appealing denied claims can be a time-consuming and complex process, requiring significant administrative effort.
Pre-authorization and prior authorization rules have become a bit more cumbersome for certain procedures and treatments, leading to delays in patient care and additional administrative work. Our government affairs team has been working with legislators regarding prior authorization reform to lessen the burden on medical groups. More information regarding what they have been doing can be found in the Advocacy section of mgma.com.
Additional resources
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