I hear consultants suggest all the time that practices need to negotiate with health insurance companies in order to be fairly reimbursed for their services. I’ll be the first to admit I’ve always been very skeptical of this suggestion. Especially when one is a small practice. I mean, what is the incentive for a big health insurance company like BCBS (which is about 30% of our patient mix) to sit down and negotiate with our practice? Would they really lose business if our practice decided to walk away from the contract? If anything, we’d lose 30% of our business.
Chip Hart from PCC posted a note he received from someone on his blog recounting their negotiation results with a health insurance company. Below are some of the things I found most interesting from the note.
“The resultant offer improves E&M codes by 40-75% and preventive care by 90-140%, by virtue of and change from a defacto 50% of 2008 rates to 100% of 2009 Medicare…”
“For many vaccines they pay essentially cost (100% of CDC), for some vaccines, especially the pricier ones, these amounts are enhanced by 5-11%.
“It’s apparent after a few negotiations that is it easier to get a custom fee schedule than to have a policy altered for an individual practice.”
“If the current fee schedule had been in effect for 1/1/07 to date, our revenue would have been enhanced by a 31%, which I would project as the enhanced value of the new contract.”
Apparently, it worked out really well for this practice. I can’t argue against a 31% increase. So I guess it can be done. You can check out Chip’s entire post by clicking here.
If you’ve had an experience negotiating contracts, I’d love to hear about it. Maybe you can help me come around.
@PediatricInc
I'm a practice administrator at a Pediatric office located in the western suburbs of Chicago. I write mostly about running a small business that happens to be a medical practice.
PediatricInc 
Am I allowed to comment? :-)
I’d like to correct one stated implication in your comments as a starting point…
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Taking heart from Chip’s remarks, I discovered that one of the networks that we were contracted with (an arrangement we “had”to make because a local employer had gone with them) was now paying 50% of charges. They had changed name several times with mergers etc., and were very difficult to actually find some one to talk to. I indicated that we would have to drop them if they did not offer us a better rate. No reply. Sent a registered letter with a sample letter informing patients that we could no longer participate and named a date when we would send it out. we got the signature card back, but no answer. Made a phone call and were told that there was nothing to negotiate. Sent another sample letter, this time telling the patients that we were disconsolate that their insurance co not only would not cover their children adequetely, but refused to talk to us. We were promised a new fee schedule to look at , but it did not come in a month. So one last email telling them Sayonara, and we got back a contract offering 135% of medicare. What do you think, Chip?
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What do I think? This is a song I’ve heard many, many times.
135% of Medicare? In rural Vermont? I assume you’re pretty happy. I think I’m going to steal your story for my blog! :-)
Presuming this is the one and only Thomas Moseley I know, this is yet more proof that you don’t need to be a massive practice to get results. Maybe it helps to have some good karma though – congrats, you’ve earned it many times over I’m sure!
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Chip,
Feel free to use Thomas’ story on your blog. Unless we start getting the word out, people won’t know that this can be done.
I think another post about contract negotiations is in order after reading this testimonial.
Brandon
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Thomas,
What a great story. This is the type of stuff we need to start getting out so others can see it is possible.
I’ve confessed before that I didn’t think it was possible for a small office to negotiate a contract and win. But I’ve done a 180, thanks to Chip and comments like yours.
I’d be willing to put a friendly wager down that there are a lot of people out there that believe it can’t be done, they are too small or don’t have the leverage. But with stories like these, one can show them it is possible.
Brandon
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Hey Chip,
Glad you stopped by. What do you mean can you comment? You are welcome here any time my friend.
Brandon
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Let’s take a look at your example above and see why I am usually more confident when negotiating than the initial numbers may support.
Start with your patient volume. If your BCBS (or any payer) is “30% of your patient mix” you should get a sense of how much of your *revenue* mix they are. If they pay you 10% less than all the other commercial payers, for example, then they really only represent 27% of your business. And, often, the bad payers are closer to 20% less.
Next, you should not necessarily assume that you’ll actually lose *all* of those patients. A remarkable number of families have two working parents and, with adequate warning, they can switch from one payer to another. You can also offer TOS discounts to people who pay in full, making it often a break-even endeavor for your patients to see you out-of-network. The bottom line is that the industry expects most practices to keep somewhere between 30-70% of your patients when you drop a plan. My experience is that many practices keep around 50%. Even if I’m exaggerating or your practice is somehow bad at keeping patients, if you keep only 1/4 of your patients…that 27% of your patients above is now potentially down to 19-20%. The gap is even smaller when you understand that the patients you keep are actually paying you more because they are no longer covered by this poor paying plan.
Thus, in a worst-case scenario, you’re looking at replacing 1-in-5 empty slots in your appointment book in order to make the same $$ you did when you had the payer and not 1-in-3.
I just worked with a practice today in GA whose numbers for visits were $59 for an average sick visit, $193 for an average well, $100/vis overall. Wouldn’t you know that they had just under 2000 active non-Medicaid kids overdue for their physicals, so plenty of opportunity to get kids in. And with those well visits paying a 2-to-1 on an average visit or 3-to-1 on a sick…they now only have to fill in 1/2 or fewer of those “19%” empty slots to actually make more money than last year. Honestly, we’re done from missing 30% of your patients to perhaps 10%. Or less.
In other words…it’s a lot easier to replace the divot represented by a bad payer covering 30% of your patient volume than most people think.
More money, fewer visits, better patient care. Am I missing anything?
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Chip,
Thank you so much for taking the time and explaining your views. I truly value your input. I’ve been meaning to comment, however, I decided to erase my HD and reinstall everything and it has taking me this long to get back up and running.
You make a great argument for deciding whether to keep or walk away from a contract and outlined some preliminary steps one would take in this process. My point in the post was more along the lines of, could a small practice like ours go up against a payer like BCBS and negotiate better rates.
After reading your comments I’ve concluded the answer is yes. As long as you are willing to understand the consequences of walking away from the contract if a reasonable solution is not negotiated.
Thanks again for taking the time. I think your comments may even merit its own post.
Brandon
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Can a smaller practice negotiate rates? Sure – some of our smallest practice have the best rates.
But you’ve hit the nail on the head: ANYONE can do it, as long as you know what the downside is and prepare for it. But unless your practice is begging for kids now, it’s not nearly as difficult to do as people think.
One big advantage you have in being small: you should be NIMBLE. A 10-doc practice can take weeks, months, or even years to pick a course and get on it – you can do it overnight.
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Wow…this is great to read. I have been negotiating with MedCost for 3+ months and have terminated the contract with them. We are now back negotiating….or should I say, this week I am waiting to hear something from them as they review my offer. Started initial contact with UnitedHealthCare this week, and immediately went up against a “get lost” type of attitude. I feel like I am one person fighting a battle against an army. I am really getting worried that I will not be able to negotiate reimbursement rates that will cover our expenses.
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Good for you Kathleen.
Don’t get discouraged. This is exactly what they want you to do, give up. DON’T!
Brandon
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Thanks for the encouragement. Both plans are ignoring me this week – I think they love to drag this out.
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Dr. Halm:
Here’s a rhetorical question to ask yourself: if the rates you are offered don’t cover your costs, why are you negotiating with them at all? Why would you guarantee a contract that you know will fail?
I was asked that question once by a practice in CA who was being beaten up by, iirc, Pacificare. “Why would I sign a contract that I know loses money?” The answer the OM gave me in response to her own question is one I’ve shared 1000 times: “…so, I dropped the plan, filled my schedule with physicals for well paying plans, and let the other providers in town figure things out the hard way.”
And, a year later, when all the other practices dropped the plan, who came crawling back?
Keep up the hard work. They *want* to scare you.
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I would never sign a contract that I knew would not give us the revenue we need. It just makes me crazy that these plans drag me through the mud before we get to a point where the terms are ok. The whole process is so negative. I’m expecting them to be civil and they always disappoint me.
Thanks for the feedback!
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of course health insurance is very much essential for your own sake*,;
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