Published 8/1/2010
Susan E. Charkin, MPH

Implementing contract negotiations: Let the games begin

Once you know the rules, you’re positioned to win

Editor’s note: This is the final article in a series devoted to examining various aspects of negotiating payor agreements. “Negotiating contracts” (June) and “Making your pitch for higher payments” (July) are the first two articles in the series.

Once you’ve assembled the data you need and sent your proposal letter to payors, you’re ready to begin the negotiating process. The data—the charge master analysis, competitive information, comparable fee schedules, and your geographic and patient leverage—will give you a solid bargaining advantage. Your proposal letter introduces your practice, makes the request for a rate increase, and outlines the reasons for the proposed increase.

Now that you know what you should ask for and how to ask for it, it’s time to implement actual negotiations.

Promote the big picture
Payors who are evaluating your need for a new contract or for increased reimbursement may be striving to achieve their individual department goals rather than organization goals. Don’t hesitate to point out the advantages of retaining your business to their company in the overall, long-term scheme of things.

Payors are powered by revenue that is directly rooted in the satisfaction of their employer groups and covered patients and the quality of the health care provided to them. If you can point convincingly to factors that will affect patient/employer satisfaction and, in the process, save the company aggregate dollars through preventive care or procedures that will favorably impact their long-term payout picture, make your case and stand by it.

Dollars and cents talk. If you have a large book of business and a satisfied patient base, remind the payor of what is at stake for them.

The rules of the game
Every contract negotiation operates under rules. But negotiations may also be seen as a game, with assigned roles and specific steps. Knowing what they are can increase your chances of success.

Don’t play leapfrog. You’ve already prepared your proposal letter and sent it to the payor’s first-level contract negotiator. Tempting as it might be to seek a way to leapfrog over first- and even second-level contacts and attempt to streamline the process by going directly to the top-level contracting decision-maker, don’t. Resist this temptation. Although a first- or second-level negotiator has little decision-making authority, violating the chain of command can be perceived as a serious offense by many payors. If you do so, they may ignore your request or resist it.

Play the waiting game carefully. In many cases, your proposal must be reviewed and analyzed by several internal payor departments such as actuarial and sales before the payor issues a counterproposal. This process can take several weeks.

Be patient, but remember the adage about the “squeaky wheel.” Continue to follow up in a timely and courteous manner with your first-level negotiator, preferably by e-mail, so that you have written documentation in case you need it as you get further into your negotiations. First-level contracts personnel often send a quick e-mail but do not follow up via other methods of correspondence such as phone or standard mail.

Take it to the top for the win. In many cases, it is advantageous to have your billing director or practice manager begin negotiations with the payor. As negotiations progress, however, higher levels of management may need to be involved.

If the results of the first-level negotiation (usually at least two counterproposals) are not what you need to close the deal, take it up a level. Let the first-level negotiator know that you are dissatisfied and that you will be contacting his or her manager or director to complete your negotiations as they are individuals with the power and decision-making authority to understand your needs and how your practice benefits their organization.

If the payor’s senior management is part of the final negotiations, your practice should be represented by a physician advocate who can strongly and clearly represent the practice’s needs from an owner/shareholder perspective. This person can often help turn the tide in the practice’s favor and close the deal. This is where teamwork and leveraging the personnel in your practice helps.

Finalizing the contract
When the contract arrives for your signature, check to verify that it includes the agreed-upon reimbursement rates and terms. In some cases, the payor will inadvertently send you an outdated or incorrect agreement.

Once you sign the agreement, send it certified mail, return receipt requested, to ensure delivery and document receipt.

Just because you have signed and submitted the agreement, there’s no guarantee that the payor will implement it. Staff changes, mergers, acquisitions, or even a change of heart by someone in the payor’s senior management (unfortunately, despite the ethical considerations, this does happen occasionally) can sometimes allow your contract to fall into the payor’s “black hole.” To avoid this pitfall, have your staff follow up regularly with the payor to ensure your receipt of a fully executed agreement (signed by both parties).

After a payor mails you the fully executed agreement, the contract is sent to claims or provider services to load the new rates and terms. When you’ve received the fully executed agreement, contact the general number for provider relations and verify that the correct rates are now in their systems.

There is nothing worse than going through this entire process only to learn that you are still being paid under the old agreement. If that happens, you not only have the problem of getting the contract loaded properly, but the headache of having to retrospectively collect the correct payments on incorrectly paid claims.

Tips to remember
In summary, take the following steps:

    • Leverage the facts from your information gathering and proposal letter.

    • Send your proposal letter to the correct first-level contract negotiator.

    • Work through the payor’s chain of command.

    • Leverage your personnel.

    • Don’t take “no” for an answer. “No” just means you haven’t gotten to the right person yet. Persevere.

Susan E. Charkin, MPH, is president of Healthcents, Inc., a physician contracting, consulting, and software firm. She can be reached at charkin@healthcents.com