For anesthesia groups it is extremely important to regularly negotiate their commercial contract rates for anesthesia, associated flat fees and pain services. With most groups having a payer mix with over 50% government (Medicare, Medicaid, Workers Compensation, Tricare, etc.) and self-pay it’s crucial that commercial rates are negotiated on a consistent basis.
When a new client joins Medac, the practice management department often finds that anesthesia groups have missed a contract renewal in the past or they do not bother negotiating contracts with payers that have a small percentage of the market. This philosophy will cost the practice significant revenue in the long run and will likely increase the groups need for an additional subsidy from their facilities.
FOR EXAMPLE: The group misses a contract renegotiation opportunity with a payer that generates $1 Million of a groups’ overall revenue.
Typical increases are 3% per year so this group will lose $30,000 for next year.
($1 Million X 3% = $30,000) Correct?
INCORRECT. The following year when the group approaches the payer for an increase they typically will not agree to an increase above 3% because their stance will be they have a set budget to work with each year and it is not their problem that the group neglected to renegotiate the contract the previous year so the real loss is $30,000 per year in perpetuity. (I.e. $150,000 over 5 years, $300,000 over 10 years, etc.)
At Medac, the practice manager assigned to your account has significant insurance negotiation experience and possesses the analytical expertise to evaluate the impact of each payer contract for the practice.
Our practice managers work closely with the group to develop a plan and monitor its effectiveness.
THE FIRST STEP IN THIS PROCESS IS TO DEVELOP A PLAN FOR NEGOTIATIONS
STEP 1 – NEVER MISS A RENEWAL
The Medac managed care system and practice management department load all contract rates and terms into the KAM billing system and also provide renewal reminders with notices provisions to our clients (i.e. notice must be 120 days before contract renewal date).
STEP 2 – REVIEW MARKET DATA FOR INSURANCE PAYER RATES
Your Medac practice manager will review national and regional rate surveys to evaluate a target rate for negotiations with the payer.
STEP 3 – LOOK AT THE HISTORICAL TRENDS IN PRACTICE COSTS
The salary costs for salaries of Physicians, CRNA’s, and AA’s as well as the associated bene t cost increases that have occurred in the past will be reviewed by your practice manager so the group can make data driven points to the payer during contract negotiations.
STEP 4 – ANALYZE THE “REAL” REIMBURSEMENT RATES FOR EACH PAYER
Since the copays and deductibles for patients have soared over the last several years the patient has
a much larger responsibility for payment to the anesthesia group then in the past. If 5% of these patient balances do not get paid and are sent to the collection agency the real revenue per unit is 5% less.
For example: A payer pays $70 per unit with a high deductible plan and 5% of the patient balances are written of to collections.. The real reimbursement from this payer is $66.50 ($70 per unit less 5% written of = $66.50)
STEP 5 – REVIEW THE CLINICAL ATTRIBUTES OF THE GROUP
Anything positive regarding the group/facility should be gathered to be included in the negotiations.
For example the group works at a level 1 trauma center, recognized heart center, OB deliveries are performed there. The group employs subspecialists and the hospital and the group have high quality and patient satisfaction scores.
STEP 6 – DEVELOP A FORMAL PLAN WITH YOUR PRACTICE MANAGER
Review all the data and develop a target and negotiation strategy.
WHAT IF THE PAYER SAYS WE DON’T PAY RATES ANYWHERE CLOSE TO ASA AVERAGES WE ARE IN A DIFFERENT MARKETPLACE?
If this payer is below other contracts for the group then Medac will assist in providing a “Blinded” unit rate comparison. Meaning Medac cannot disclose payer rates from other payers in a negotiation but the can redact the information and illustrate that the group is truly being underpaid by this insurance payer.
The point of negotiating all payer rates regardless of how small the payer mix gets more valuable in this circumstance. If a payer that pays $73 per unit but represents less than 1%% of the payer mix is still included in the blinded market sample. The larger market sample that is presented improves the groups’ argument for a higher rate.
WHAT IF THE PAYER SAYS WE WILL NOT GIVE ANY INCREASE ANESTHESIOLOGISTS MAKE TOO MUCH MONEY ANYWAYS?
Over the years the argument of anesthesiologists being highly compensated is often mentioned. The simple and correct response is compensation rates are a result of market forces. If the group cannot recruit and retain qualified staff.
At Medac we promote cooperative negotiations with insurance payers but in an instance whereby a “Take it or leave it offer” is given the group may need to provide notice of nonparticipation and actually terminate the agreement. In this instance many factors will need to be analyzed such as the group’s facility contract requirements, major referral sources for a particular payer, state non par laws, etc.
The group would need to approach the facility at this time and explain the situation with the insurance payer. If the group can garner the support of the facility this may provide enough leverage to negotiate a better rate from the insurance payer.
Corporate Process for Future Negotiations
A successful contract negotiation process with Medac’s practice management team will allow your anesthesia group to deliver a consistent message to actual historic data. Medac will regularly monitor the results of the negotiations and provide expert advice to maximize the revenue for the group.