Prepare early. Gather data. Develop a plan. Know your market. Consider termination. Hire a lawyer. These are some tips experts suggest physicians and physician groups keep in mind when negotiating contractual arrangements with insurance companies. For most professionals wanting to focus on their craft, managing the business side of that craft can be distracting at best and, more often, just plain onerous. But becoming familiar with key aspects of contract negotiations offers a way to engage more thoughtfully, and potentially successfully, with a negotiating partner—the payer—who often holds the stronger hand.
“Don’t be afraid to stand up to payers who are difficult to deal with or those who don’t pay market rates,” said Eugene G. Brown III, MD, RPh, president and CEO of Charleston ENT and Allergy in South Carolina. “Be intentional with how you construct your practice to maximize your value to patients and payers and use that value to leverage your negotiation.”
Embedded within these quotes are several critical aspects for negotiating with payers: Be bold and don’t assume a passive stance when negotiating, gather data to ensure you have the best and most updated evidence about market rates on which to base negotiations, create a plan or strategy laying out what your end goal is in negotiating and what you are willing to concede or not, and maximize your leverage by knowing what unique value you add to the payer’s network in your market.
Don’t be afraid to stand up to payers who are difficult to deal with or those who don’t pay market rates.” — Eugene G. Brown III, MD, RPh
This last point—how to leverage your value based on what you offer payers—is essentially the architecture on which the art of negotiation rests. Understand your value to a payer, and convince them of it, and your leverage goes up. “If you are not vital to the payer, then it will be difficult to leverage any negotiation strength,” said Dr. Brown.
Increasing your leverage is fundamentally about increasing payer dependence on your practice, he said. For Dr. Brown and his colleagues, that meant building the size of their practice, broadening access to care, and offering lower-cost services. Today, Charleston ENT and Allergy is the largest ENT private practice in South Carolina and stretches from Hilton Head through Charleston and into Columbia, including many suburbs in between. Offices in each location offer patients a one-stop-shop approach to receiving comprehensive care under one roof, including ENT, allergy, hearing/balance testing, hearing aids, allergy shots, allergy testing, imaging, and pharmacy. Services provided by the practice are usually cheaper, as tests and procedures are performed at lower-cost sites of service. Surgeries are done in ambulatory surgery centers, imaging is completed using cone beam scanners within offices, and specialty pharmacy services are set at fair prices. By establishing themselves as a key provider of ENT services in the area, with patient demand high based on convenience and access to services and cost containment at fair market pricing, the group offers a premium value to patients that allows them to achieve more leverage with payers in their market.
Based on his experience, Dr. Brown offers some best practices for raising your success level when negotiating with payers.
- Take advantage of every opportunity to negotiate contracts. Insurance contracts are typically termed agreements. Know when a contract expires and use the window of opportunity before it expires to renegotiate new contractual terms. If that window is missed, the contract auto-renews at the old rate.
- Designate a team to handle contracts. The team could include support staff to handle contracts that are due to expire, as well as skilled billing and collections staff to review contracts and identify non-rate line items that can be negotiated for the good of the practice and to ease administrative burdens for staff. A person with negotiating expertise, high emotional intelligence, and a sincere interest in the process is critical to lead negotiations.
- Negotiate all commercial payers on a regular schedule, regardless of payer size. Make sure all contracts are at or above market rates. Large payers want their insurance product to be competitive in the marketplace, and if your cost to one of their competitors is lower, it allows that smaller payer to lower the price of their insurance product and to grow their market share. Large payers do not view this favorably, and it will affect your ultimate success in negotiation.
- Don’t be afraid to terminate or drop a payer. Consider dropping a poorly reimbursing payer to improve profit margins or one that is difficult to deal with administratively (e.g., slow payer, poorly responsive, audits, pre-certifications).
- Be calculating, be rational. Be prepared to explain and justify what you are asking for. Use comparative rates and objective data, when possible, to make your case.
He emphasized that to be successful in the current climate—in which practices are facing abysmal reimbursement rates from the Centers for Medicare and Medicaid Services (CMS), along with shrinking margins, challenging labor markets, and trends that threaten independent practices while fueling physician employment—physicians need to have better contracts and a more strategic and comprehensive business plan.
Develop a Strategy
Scott Ellsworth, MBA, president and founder of Ellsworth Consulting in Newport Coast, Calif., underscored the importance of developing a solid strategy when negotiating with payers. After 30 years working for several large commercial payers, and more recently as a consultant helping provider groups negotiate contractual terms with payers, he understands the psych on both sides of the table. Providers want to know how to leverage their value in a market in which payers have thestronger hand, and payers don’t want to lose business.
Don’t go into negotiations unprepared. Don’t go in without the data, without knowing, for example, how your rates compare to others in the same market.” — Scott Ellsworth, MBA
“Member retention is really important to payers,” he said, explaining that payers don’t want to lose members given the high cost of membership acquisition and the need for volume in what he said is a business that depends on scale to be competitive.
Ellsworth emphasized that, despite payers’ aversion to termination, sending termination letters to payers prior to contract renewals is worthless. “Most providers now start their negotiations with a term letter, but termination does not faze payers; they don’t even blink anymore,” he said. Instead, Ellsworth recommends physicians put together a credible proposal that details what terms to negotiate on and the leverage they have to successfully negotiate those terms.
Having a good strategy is essential and is grounded in being prepared and arming oneself with data. “Don’t go into negotiations unprepared,” he said. “Don’t go in without the data, without knowing, for example, how your rates compare to others in the same market.” He noted that even though payers by law are mandated to publish their reimbursement rates, the data is not always in a user-friendly format and can be challenging to access. He urged physicians to get the data regardless, even if they have to hire a company to do this, citing the cost of about $2,500 for a small ENT practice.
Putting sufficient time into preparing for negotiations is essential to entering negotiations with a stronger hand and more leverage. Without such preparation, he said, the likelihood of successfully negotiating higher reimbursement rates, for example, is low. “But if you’ve done the homework, have the data, put together a credible argument, your odds of success go up dramatically,” he said. Once negotiations begin, Ellsworth suggests additional strategies for physicians to keep in mind.
- Begin early. Initiate the process of contract negotiations with payers ideally 12 months before contract renewal.
- Gather data. It’s important to have accurate data on such things as reimbursement rates (how yours compares to others in your market), performance metrics, and market trends to give more leverage in negotiations.
- Make negotiations about more than rates. Make sure to consider other contractual issues, such as those related to access to services (e.g., claim denials, down-coding, unnecessary administrative burden, and cost) when negotiating terms.
- Escalate when necessary. If negotiations are at an impasse, ask to engage with the executive payer leadership.
- Understand your leverage. Know what you are willing to concede or not concede in a negotiation. Terminations may be the only option to leverage but should not be done lightly.
- Ensure provider executive leadership is aligned. This is particularly important for challenging negotiations in which terminating a contract may occur.
Ellsworth underscored that these negotiations are really hard and frustrating. “Payers count on it being too hard,” he said, adding that payers have ways to delay and stall negotiations until people give up.
“If you have a good case, don’t give up,” he said.
Not Just About Rates
From a legal perspective, Matthew B. Roberts, Esq., who leads the Health Care Practice Group at the law firm of Maynard Nexsen PC, wants physicians to remember that contracts are legal agreements that include far more provisions than just reimbursement rates. As such, he encourages physician groups, regardless of size, to know what is in a contract before negotiating with payers in order to understand what terms they will agree to or not.
Among the provisions to consider is the length of the contract. “Physicians should not agree to a long-term agreement that doesn’t include the ability to terminate a payer without cause,” he said, calling that a trap into a long-term agreement. “You want a short-term agreement, and you want a termination without cause.”
Another provision to look for is whether the payer has the ability to carve out certain services provided by the physician practice and let another provider deliver the services. He noted that he’s seen examples of physicians who learned from prior mistakes of allowing this provision into a contract, and when renewing their contract stipulated that they would not agree with the carve-out language and held out during the negotiations until they succeeded in having the provision removed. “I’ve seen physicians becoming educated and holding their ground on these sorts of one-sided issues and not agreeing to sign a contract with that provision, and ultimately the payer has relented,” he said.
Other provisions to look out for include credentialling (how long it takes payers to process a physician’s application to become in-network) and indemnification (who is responsible for which party’s actions in the event of a problem).
“Physicians need to know and understand what the provisions of a contract say, and if they don’t like it to try to get it revised,” Roberts said, adding that if they can’t get revisions on the first try, try again at contract renewal.
When counseling physicians on negotiating with payers, Roberts emphasized the need to be prepared and have goals in mind ahead of the actual negotiations. For contracts up for renewal, physicians should understand any performance issues with the payers under the agreement and any issues concerning denials. When contracting with a new payer, he suggests doing due diligence in checking out any performance issues the payer may have had with other physicians. Physicians often share their operational experiences with certain health plans via the Internet, he said.
Lessons Learned from One Success Story
In January 2021, one of the largest insurers in North Carolina instituted a policy change for the treatment of involuntary muscle movements in people with temporary nonflaccid facial paralysis, such as those with Bell’s palsy. Of the three injectable neuromodulators derived from Clostridium botulinum type A used in this setting, Botox was the most widely used with the strongest evidence base.
The policy change in January 2021 required that all patients first try treatments using either of the other two Clostridium botulinum type A products— Xeomin or Dysport—prior to using Botox. Of particular concern was the fact that patients already undergoing treatment with Botox had to switch to one of these other two brands.
Matthew Q. Miller, MD, a facial plastic and reconstructive surgeon and director of the UNC Facial Nerve Center in the department of otolaryngology–head and neck surgery at the University of North Carolina–Chapel Hill, fought the decision based on the strong evidence supporting Botox as the best treatment in this setting.
When there is something evidence-based and insurers are telling patients that they are going to change coverage or drop coverage of that evidence-based treatment, that is the type of battle to fight.” — Matthew Q. Miller, MD
He launched a multiprong plan of action to get the policy overturned, starting with writing what he called a one-page white paper, complete with references showing that Botox was the most evidence-based treatment for nonflaccid facial paralysis. Every time the insurance company denied coverage, he would send an appeal to the denial with the white paper attached.
He also enlisted the support of the North Carolina Society of Otolaryngology-Head and Neck Surgery, which reached out to the payer expressing its support for Dr. Miller’s cause. Dr. Miller thought the inclusion of both academic and private practice physicians, who comprise that Society, was important when trying to overturn the payer policy.
To ensure his white paper was being seen by people in the payer organization with decision power, he sent what he called an “Executive Inquiry” which, basically, is a letter that goes to executive leadership that mandates a response. Although Dr. Miller is uncertain if all insurance companies have an “Executive Inquiry,” he suspects they all have something along the same line.
The penultimate step he took was to file a complaint with the North Carolina Department of Insurance, which by law must appoint a state investigator to handle complaints and work with filers to negotiate with the insurance company. Finally, he enlisted the University of North Carolina Health System’s managed care leadership and asked them to get involved.
Two months after the policy change, the insurance company reversed its policy.
Saying that people need to pick their battles with insurance companies, Dr. Miller said this is the type of battle to pick, as the data supported his argument. “When there is something evidence-based and insurers are telling patients that they are going to change coverage or drop coverage of that evidence-based treatment, that is the type of battle to fight,” he said.
He urged people to consider pursuing an “Executive Inquiry” in their negotiations to make sure decision makers are involved, and he also cited the good support he received from the state’s Department of Insurance.
“If you can make sure that the people who are actually making the decisions are seeing your argument, and if you have a well-crafted argument with medical references, the insurers will see that you are being rational,” he said.
Mary Beth Nierengarten is a freelance medical writer based in Minnesota.