Managing contract negotiations is one of the most significant processes for medical practices. Rightfully so, as the business of healthcare is at stake. Learn how today’s healthcare landscape has changed the contract negotiation process between providers and payers with special guest Ron Howrigon, President and CEO of Fulcrum Strategies.
Key Takeaways:
On Tuesday, April 19th Zotec’s Client Success Officer Morten Bruhn talked with Ron on the topic of Mastering Contract Negotiations in Today’s Environment. Read below for practical advice and proven best practices shared during this discussion.
How has the contract negotiating landscape changed due to the No Surprises Act?
The quick answer is that it’s yet to be seen completely. It’s new and we’re still learning about it. Really, an ER doctor, radiologist, or anesthesiologist, can’t choose not to see you when you come to the ER. So, if they can’t negotiate an agreement with the carrier on how much the labor or the services they provide are worth, there’s now an external entity that’s going to decide for them. It is really going to change the landscape of negotiating contracts, because now a failure of negotiation reverts to something that neither side controls.
What are new tactics that providers should explore to close the deal with payers?
We need to do more proving and showing our value. One thing that I think physicians are guilty of is focusing so much on the care that they provide, that they really haven’t done a good job of explaining their value and what that really is. The other piece, especially with the No Surprises Act, is to understand the law. The people who understand the law and position themselves well for that negotiation, are going to do just fine in this environment.
What specific approaches should practices tailor based on their distinctive conditions?
What I tell physicians is “you wouldn’t prescribe the same medication to every patient. You should approach negotiations the same way.” First, you have to get very introspective and honest. What’s your position in the marketplace? Are you in the dominant position in your specialty or are you small? What does your quality look like? What does your service look like? What are the things you have that others don’t? Really evaluate what you can leverage, and that will lead you to the diagnosis and treatment plan of what works for you. It’s different for every group and every situation.
How should providers evaluate contract effectiveness?
First, it’s continuous, and you’re never going to be done. By the time you get things renegotiated, you probably must go back and take a look at the ones you did last year or the year before. You should look at contracts every year, measure them against each other, and measure them against Medicare. How much does each contract pay as a weighted average percentage of Medicare? How do they compare with each other? If you are a very busy practice, you’re full to overflowing, and a small carrier is paying you 20% less than everyone else, then it’s time to negotiate.
What can providers do to improve relationships with payers?
In talking about how to improve the relationship, first, you’ll have to understand the relationship. This is business. You are a vendor, and they are a purchaser. The best way to improve that relationship is to be their best vendor. That may be by doing things better, cheaper, faster, or making sure you’re doing things that are important to them. Make yourself an invaluable vendor and they’ll treat you that way.
How will the shift from fee-for-service to value-based reimbursement impact negotiations?
I think it will impact it a great deal. If done right, this should benefit the better groups out there, because value-based reimbursement should reward better medicine. The providers who are better at getting definitive answers save enormous amounts of money. That should be rewarded, and value-based can do that. From a negotiations standpoint things become much more complex, because it’s no longer negotiating a number, it’s trying to negotiate and understand what the value. Quality is hard to define, so complexity will go up. If done right, it should be very rewarding for the better physicians.
How does the negotiation process impact patients?
If it’s really done right, it should be behind the scenes. Unfortunately, way too often patients get involved. This usually happens if a negotiation fails. If there’s a termination and someone leaves the network, that means somewhere a patient must break a physician relationship, and sometimes there’s no place for them to go. Or, they must think about if they want to keep the relationship they’ve built with their physician, and if they want to pay more out-of-pocket.
In your book, Flatlining: How Healthcare Could Kill the U.S. Economy, you said that physicians and hospitals need to prepare for the “tectonic shift” in how they get paid. Has this shift happened?
The tectonic shift is instead of being paid for everything you do; you’re going to get paid more on a value-basis or on the health-status of the patient. For the most part the doctor controls what procedures and services the patient receives, which is the fee for service inflationary shift. That shift is going to change, and it’s starting to, but it will take a while. Doctors who get ahead of it will do very well.
What are the suggested metrics to evaluate contract performance?
I like to take all of the contracts and compare them as a weighted average of Medicare. Then you can see where they sit, and it gives you a sense of who is your lowest payor. I tell people to go after the lowest one first, because they know they’re the lowest, so it’s easier to negotiate them up to the rest. It’s all based on comparing the contracts on an apples-to-apples basis.
What are your topmost tips for staying in control of the negotiation process?
Be persistent. Be direct. Be definitive. When you’re in a meeting or negotiation, ask for what the return response is going to be. If they miss that deadline, follow up. Too many people lose control just by getting tired and giving up.
Do you have any final thoughts to share?
I personally believe that the independent practice of medicine is the most valuable thing we have in this country. The fact that the patient walks into an office and that doctor works for that patient, that’s independent practice of medicine. If we lose that, I think we’re going to lose something valuable. Part of the way to maintain the independent practice is for them to maintain financial viability.
Additional Resources:
For further information on this topic, Ron can be reached at r.howrigon@fsdoc.com or visit fsdoc.com.
Learn more about what Zotec Partners has to offer here.
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