Over the last month, I have had three practices ask me about multi-year contracts. What do I think of them?
Multi-year contracts can be great. Why not? It's one less contract to worry about for 2-3 years. Presuming you do it properly, of course. Sometimes, the payors are willing to give price increases over time that you could never get going year-to-year. In addition to all of the normal contracting issues to consider, here is my general advice when a multi-year contract is on the table:
I've ranted about how "getting big" is not an automatic recipe for success when negotiating with insurance companies. It's rare, in my experience, that the cost of merging offices is outweighed on the contract end.
Here's an email I got just before the weekend. This isn't a 15-20-40-80 doctor practice. This isn't the only pediatric office in town. This is a 5-provider group in the northeast with probably more pediatricians per-square mile than anywhere else in the country.
What is their secret? They said no. I'll let you read for yourself:
Chip--Just wanted to let you know that I have just agreed to a new contract with [national payor] for their capitated plans which includes what I think are significant increases for us, in ALL [naional payor] plans for years 2 and 3 (see details below.)
I have to admit just how right you are. Nothing happened in over a year of discussion until we notified our patients 7 months in advance that we would be dropping the plans--and really nothing happened until there were less than two months until the drop date. Plus, I kept rejecting their offers, with the statement that we would just proceed with our original plans to drop, and they kept enriching the offers.
Those practices learning this lesson are waking up to substantial increases in their bottom lines. Sadly, I still hear from too many practices who are still to afraid. I'm going to keep posting these stories until everyone gets it.
I'm busy writing another piece for the SOAPM newsletter and it's really taking up my time. I'm truly honored to be given the opportunity to provide them comment but, whew, it takes a lot of work. That is, it's one thing to ramble on in a blog (this is a good example), but it's a different thing entirely to actually construct a 500-1000 word piece that really needs to be articulate, concise, and compelling. It's certainly a good exercise.
Oh, back to the topic: I know three different offices in different states in the northeast who have recently renegotiated their Aetna contracts with considerable success. It's enough of a convergence that I find it worth mentioning - perhaps it's a good time to give your rep a call. Aetna is on the upswing, take advantage. Negotiating now? Push harder. Considering a conversation? Do it now.
I took another “We Think We Need To Merge!” call today from a thoughtful practice on the east coast. A couple small groups, aimed at getting a more fair piece of the pie. Can’t say I blame their intent.
Practice mergers are like tattoos - they sound good when you and all your friends have had a few drinks. They even look good on a few people. “Just picture it: 70 of us, fighting UnitedHealthCare!” sounds suspiciously like, “Just picture it: a rose, right there, where no one can see it!” Face it, can you come up with a tattoo design that will look good on you 10 years from now?
The inspiration to to record this conversation came from one comment in the middle. Apparently, there’s a trustworthy lawyer in the mix (they exist) who has stated, unequivocally, that he believes the practices need to merge in order to negotiate with insurance companies. I wonder if this lawyer has ever actually negotiated a primary care insurance contract? Do you think he sees tens of thousands of dollars in fees making this happen, risk free? I sure do - whenever I see a lawyer pushing for groups to merge, I throw a GIANT RED FLAG. If the plan succeeds, he’s a genius. If it fails, there are 1001 reasons for the failure besides his insistence. And if it neither succeeds nor fails, but rides in the middle for a decade or more…you become one his favorite clients!
I’ll save the long lectures for future posts, but our experience with group mergers (which is significant) has identified a few of the myths of practice mergers:
This sounds reactive, I realize, but for every merger success I’ve seen, there have been a half-dozen failures. Perhaps I’ll provide real examples of these items above to act like warning signs for anyone following the merger footsteps.
It’s not that we think they are a bad idea, we just think they are usually done poorly and for the wrong reasons.
Or, more succinctly: groups merging simply to stick it to the insurance companies will fail. FTC issues aside, you’d better have a lot more in common than hatred for managed care or it’s never going to fly and only the lawyers will get wealthy.
Paraphrased from a customer message on our client-only mailing list today:
I was wondering what you think of Coventry Health/Health First. I guess they have replaced old Health Care Value Management. We have been noticing that since Coventry has replaced HCVM their reimbursement has been ridiculously low… I called him and complained. Someone called back today and asked, “Why should we increase our rates if you don’t ask us to?” Anyway they are open to negotiating the rates and are offering me XXX% of the Medicare fee schedule. What do you all think?
What do I think? I think the insurance rep is right. They do run a business. And if you don’t run your practice like a business, why should they run it for you? Every day, millions of dollars go right into pockets of insurance executives from contracts that haven’t been examined, reviewed, or poked at in months or years.
For all the blame I have for insurance companies, a huge portion of the lack of proper payments for pediatricians is due to the pediatricians themselves.
God helps practices that help themselves. If you don’t demand proper payments, you won’t get them. I told this practice to sign immediately and give them the expectation that it will be reviewed every year!
The very first blog I ever wrote was about one client's fight with an HMO. Now, more than two years later, I continue the battle. Look at this funny message I received today, edited for brevity and privacy:
As promised, the outcome of my recent [HMO] "negotiations." At the risk of hearing Chip's "I told you so's" ring in my ears, the following occurred today: Nearly three months after accepting my termination, and with 5 days to go before the deadline, [HMO]
offered me a greatly improved contract...
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...
The vaccines rates are interesting. For many vaccines they pay essentially cost (100% of CDC), for some vaccines, especially the pricier ones, these amounts are enhanced by 5-11%. But... they have set the Vaccine reimbursement rates at 120% of Medicare. Thirty dollars for the first shot helps take the sting out of that a bit. And they paid so little for the nasal admin fees that the new rates are almost a 400% increase.
The after hour codes are still under review. 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. Perhaps you already knew that!
Lastly the bad news: We took a huge hit on a few procedures. 30-40% Fortunately most if not all of these codes are low volume...
The bottom line. 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.
31% increase. By asking, dropping, and negotiating. And he's not done. Anyone else want to tell me it can't be done?
Meanwhile, I posted a substantial update to our Pediatric RVU Calculator. Check out the new version - flash-based, produces CSVs, etc. Very nice.
Yet another unscripted example of a client successfully fighting the managed care companies for a better fee schedule. Verbatim:
I just followed your steps--letter to our patients with a
drop-dead date about 5-6 months ahead, encouraged them to call their
benefits people (this plan covers a lot of small unions; it's really
just a claims priocessor, so getting the union members to protest was
the key), and waited for the call from [MCO] asking what would they
have to do to keep us. I made a proposal, asking for about 130%
Medicare. They initially came back that they couldn't go that high, but
then proposed 100% of the N. NJ Medicare rates, which, as I said, are
at least 120% of ours. They could have countered with 100% of OUR
Medicare schedule, but, for some reason, they used the NJ one--to our
...we are having our front desk person call [the patients] to inform them that we are staying in the plan--and getting them
to schedule their next well visit at the same time.
I love it, especially that last line. Sure enough, the doc here ran a quick report and confirmed that it's a 75 percent fee increase and is getting the kids in ASAP.
Big, conglomorate practice? No.
Professional negotiator? No.
Willingness to say, "No!" to an MCO? Yes. That's what it takes.
Over on PartnerTalk (the PCC user mailing list), one of our clients mentioned trying to get UHC to the table three times and failing. I pointed out that the insurance companies have no motivation to pay attention to a small pediatric practice until you force them to do so - namely, by dropping them.
I sent everyone on PartnerTalk over to the awesome Pediatric Inc. blog to read a piece I wrote a few months back about the math of the dominating payer. I should probably turn my long comment (in the middle, hard to miss) into a proper blog entry for myself. Anyway, a PCC client added this comment yesterday:
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?
I can't make this stuff up! This is a small, small rural practice in Vermont! It isn't some 25 physician, multi-specialty group with a professional negotiator.
135% of Medicare in a small rural VT practice. With a few letters. How hard was that?
I believe my first series of blog posts years ago were specifically about insurance negotiation tactics. It's been a while, and John Canning sent me this link to share. Although it's a bit sp[censored], I can certainly confirm that I've seen the insurance companies use every one of these tools.
Quick read, a good reminder.