Insurance Contract Negotiations

A few months ago, Chip from PCC responded to a blog post I wrote about negotiating with insurance companies. In my post, I was questioning if a small practice (like ours) could go up against a giant like BCBS which represents more than

Photo credit: bram_app

30% of our patient panel. Chip’s comments were very insightful. The fact of the matter is most people have to pay to gain this type of insight. But Chip prefered to generously share some great pointers. So here it is. By the way, I wrote the post in a Q/A format for better context.
Brandon: Let’s say I want to renegotiate our contract with BCBS, I look at the data and find out they are 30% of our patient mix. What is the first step I should take in this process?

Chip: 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.

Brandon: If one walks a way from a contract, one will lose all those patients, right? What is your response to people that have that concern?

Chip: 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 [time of service] discounts to people who pay in full, making it often a break-even endeavor for your patients to see you out-of-network.

Brandon: You’ve been advising practices for a long time. In your experience, how many patients will a practice lose if they drop a plan?

Chip: The bottom line is that the industry expects most practices to keep somewhere between 30-70% of 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 [I mentioned] 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.

Brandon: I’m sure you have lots of real-world examples, can you share one?

Chip: 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.

Brandon: It sounds like one can potentially come out ahead? Is that right?

Chip: 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?

Brandon: So, you’re saying anybody can do this… big or small?

Chip: 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.

Thoughts?

After reading Chip’s comment I concluded that you can absolutely walk away from a giant like BCBS just as long as you do your homework, understand the downside and be prepared to make up the loss (if any) by proactively filling the gap.

You can find more of Chip’s valuable insight at http://www.pedsource.com/chipsblog