The strain of the continued COVID-19 pandemic has intensified pressure on medical practice leaders to stay financially strong despite interruptions to patient visits, increasing costs, and new coding and documentation rules.
One key area for addressing your practice’s revenue cycle is taking a close look at your payer contracts and developing an effective negotiation strategy that yields future payment models that are sustainable and appropriately reimburse your practice for care delivery.
As outlined by healthcare consultant Doral Davis-Jacobsen, MBA, FACMPE, founding partner of Prosper Beyond, understanding how to develop effective payer proposals and working through a negotiation strategy can make a major difference to a practice’s bottom line.
It starts with an understanding of where your practice is in its payer contracting journey. Davis-Jacobsen, speaking at the 2021 Medical Practice Excellence: Pathways Conference, said it all starts by developing your value proposition. “In any negotiation, this is one of the very first steps,” Davis-Jacobsen says.
- Want in-depth learning on this topic? Consider registering for the ACMPE Certificate Program: Payer Contracting. This program, consisting of three, two-hour sessions plus a closing session, is eligible for ACMPE, ACHE, CPE (live only) and CEU credit, and can help you achieve the MGMA Financial Management Certificate (FMC) credential.
Know your “vital stats” and how you compare
To tell the story of your practice, you first must articulate its vital stats, such as the overall goals/purpose of the practice, the range of services offered, your technology, access information, affiliations, patient population information (such as active patients and visits), and goals for the coming years.
Along with those data points, you should understand how your practice compares to competitors and be able to answer questions about what sets your practice apart, such as:
- How does your practice serve patients better, faster or more efficiently?
- What awards or quality designations does your practice have from independent organizations or other payers?
- How does your practice rank in areas such as social media for your area, or for staff turnover compared to national benchmarks?
- What is your practice doing to reduce costs? Does your practice participate in any alternative payment models (APMs)?
- Does your practice have specific goals for growth?
While some of these items might seem obvious to you, they are not always obvious to a payer. As Davis-Jacobsen explained, one internal medicine practice she worked with had a pharmacist who visited to help with medication reconciliation. In another example, a pediatric practice brought in mental health providers to see patients. “There are lots of things that we think the payer may know; putting them down on paper gives them an opportunity to understand” the full range of services your practice offers and the value added from them.
For independent practices, emphasizing lower costs and not being part of a larger system can be effective in distinguishing your organization from others in the market. For example: When it comes to referring out to imaging centers that were not part of the big system in an area, the cost differential per visit can range from $1,500 to $3,000. Elements of a practice such as after-hours care that can help limit emergency department utilizations also should be noted.
Understanding the payer market
Before you sit down with any payer, your ability to convey the practice’s value proposition hinges on how well you know that payer and your relationship to them. Davis-Jacobsen recommends that you:
- Define that payer’s position in the market
- Understand competitors’ network participation
- Gain an understanding of that payer’s goals and focus for the coming year
- Define whether there are new products or APMs to consider
- Develop a solid relationship with your payer representative.
The easiest first step is to check out the payer’s website to understand its goals and any new products being rolled out, especially if you don’t already have a good relationship with a payer representative.
Tell your practice’s story in an appealing and simple way
A visually interesting display of your practice’s most compelling statistics and information that can be brought to a payer then conveys all the significant offerings and value to the payer’s network.
Davis-Jacobsen said she often will work with a practice to create a placemat-sized visual value proposition, with eye-catching charts and graphs. “This is something you're giving your [payer] rep so that they can go fight this battle, to ask for an increase for you,” she said.
For example: One ophthalmology practice in North Carolina created a bar graph of a range of total costs for cataract surgery, showing a cost savings of more than $6,200 for each surgery the physicians performed versus the highest-cost practice in the market. “As you ask for an increase [in payment], you can quantify how much savings there is [for the payer],” she said.
As more price transparency becomes standard throughout the industry, Davis-Jacobsen said it’s easier to find these data points to build a compelling argument for improved rates in renegotiated contracts.
“We know we're saving dollars. … When we're asking for increases, we're really asking for a share of that shared savings that we're creating with the payer,” Davis-Jacobsen said, adding that this is especially important for practices that have created or joined accountable care organizations (ACOs). If you’ve already put in the work toward achieving certain quality metrics (e.g., reduced ED visits and hospital admissions), that needs to be part of the value proposition presentation.
“Payers … know it's more expensive when care is provided in the ER compared to a clinic. We know that fewer admissions is a better thing,” she said. If your practice is performing well in these preventive areas, “simple, graphical stories will really help your story resonate with payers.”
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