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Practice Perfect: Coding & Reimbursement
Contracts: From Protocols to Fee Schedules
By Michael J. Parshall

When HMOs and other payers give you a contract to sign, there is a widely held belief that this is a “take it or leave it” proposition. But with enough preparation and data (see “Be the Expert”), you can push for improved terms.

Under Check the “Fine Print”

When crafting a contract, a payer is unlikely to have your best interests in mind. So as you review the provisions of a payer’s proposed contract, questions that you should keep in mind include:

  • How does the contract define “payer”? Many contracts define payer as “Xyz insurance company, its affiliates, those companies that are self-funding their insurance but use Xyz as their third-party administrator, and anybody else who has an agreement with Xyz.” This broad definition allows the payer to sell your discounted rate schedule to any other party.

    To avoid this, you should limit the definition of payer to “Xyz” and its affiliates, meaning those parties that are part of its subsidiary network.

  • How promptly must the payer pay? Before you start questioning this provision of the contract, find out whether your state legislature has ruled on the issue. Several states have imposed minimum standards of promptness.
  • What are the requirements for timely filing of claims and refunds? Payers often propose contracts that hold you to a tight deadline for when you must submit your claims, but that have virtually no restrictions on how far back in time the payer can go to recoup money from you for alleged overpayments. Expect some tough negotiations if you raise these issues.
  • Can the payer unilaterally change the terms of the contract? In many contracts, if you don’t respond to a payer’s letter notifying you of a change in terms, you are assumed to assent to that change. Worse yet, you won’t have an option to reject an individual change—in other words, you must either accept the change or else reject the whole contract. You should do your best to spot and eliminate such provisions.

    You should also be wary of terms where the payer “incorporates by reference” its “policies,” “procedures” or “protocols.” Such terms might provide the payer with a backdoor way of changing its policies without needing your permission. Suppose, for instance, the contract stated that all payments are final after 180 days; the payer could potentially extend that to 24 months by tweaking its protocols.

    You should try to close that “backdoor” by including a term that states the provisions of the contract trump the provisions of any such protocols.

  • Is it an “evergreen” contract? The trouble with such a contract—with “evergreen” meaning that it is automatically renewed each time it reaches its expiration date—arises if you don’t have appropriate, periodic increases built into it. You might struggle to get out from underneath it.
  • How difficult is it for you to terminate the contract? Suppose the contract is due for renewal after two years. An option, at that point, for your practice to terminate it with 60 days notice would help you to grab the payer’s attention if you want to renegotiate any of the contract's terms.


Discussing Fee Schedules

If a contract is up for renegotiation, this provides an opportunity to improve the fee schedule.

Which fee schedule? Many payers, particularly those that operate nationally, have developed a variety of fee schedules for different regions—this is why some schedules have a number attached. Will they offer you the most favorable of those schedules right off the bat? Not likely.

Suppose they offer 140 percent of Medicare across the board? For some codes, this may be an improvement, but there may be other CPT codes where you’re already getting paid more than that rate. It is critical that you know your numbers.

Do you know your bellwether codes? These are the CPT codes that are most important for your practice. You may want to negotiate the rates for these separately while accepting a nominal increase in the other codes.

Think through the “what if” scenarios. How would it impact your negotiating decisions if, for instance, you were to change utilization or were to unbundle services and be paid for CPT codes that are now considered “incidental to” a primary service. Thinking through such scenarios will help you to develop your negotiating strategy.


Under Negotiation

Don’t let the payer define your position. Experienced negotiators may try to rephrase what you say in a way that redefines your position.

What do their proposed terms really mean? After you’ve explained what you want, they may tell you, “Yes, I think we can come up with some language that responds to your concerns,” but don’t take their word for it. Although the terms they come up with may sound like what you had in mind, the legal interpretation of those terms may be completely different. If you negotiate any changes, your attorney needs to check that the language is airtight.

Create a paper trail. Suppose you and the payer have verbally agreed that the fees for the E&M codes should be increased by 12 percent. Then you should send them a written statement describing that agreement. If they subsequently send you a contract that doesn’t include the increase, you will have documentation to back up your version of events.

Where can you afford to make mistakes? If you decide to conduct the negotiations yourself, keep in mind that there can be a steep learning curve; and if you’re going to be learning by your mistakes, you should start with those plans that are least important to your practice.

Get some face time. Try to meet in person with the payer’s representative. This can help you establish enough of a relationship that it becomes difficult for that person to treat you and your practice in a shabby fashion.

Stick to your word. If you expect somebody to do a deal with you, your word has to count.

Should you consider an agent? As well as bringing experience to the negotiating table, an agent can put some distance between you and the payer. This can help you and the payer maintain a good working relationship despite any confrontations that may have arisen during negotiations.

Mr. Parshall is principal at Michael J. Parshall Healthcare Consulting, a consultancy based in Schwenksville, Pa. For the consultancy’s contact information, visit the AAOE Consultant Directory at www.aao.org/aaoe.


BE THE EXPERT: Marshall the Facts

You know more than the payer about your practice, about how the services are rendered, about the costs that are involved and about the patients’ impressions. From the payer’s perspective, the money is in specialties like orthopedics, obstetrics and cardiology—so it is likely to focus its efforts on researching those specialties, not ophthalmology.

This gives you the opportunity to outprepare the payer, and—since knowledge is power—negotiate from a position of strength.

Know the payer. Does the payer put a priority on promoting its public image? Show them the results of your patient satisfaction surveys, and explain why your proposed terms are necessary for keeping their plan members happy.

What business principles does the payer publicly espouse? Explain how the terms that you propose will help them to achieve those principles.

Have the payer’s premiums and profitability increased in recent years? What’s the history of its fee schedule? If it paid 105 percent of Medicare in 2002 but just 78 percent in 2007, challenge it to bring that schedule up to par. Similarly, see how its fee schedule compares with those of other payers.

Is the payer’s market share going up or down? If it has fallen precipitously, then you can feel less nervous about walking away from the payer’s contract—and this will strengthen your hand in any negotiations.

For information on your payer, see Interstudy’s Web site at home.healthleaders-interstudy.com. Your state may also list payer data online; check its Web site for pages devoted to insurance or health care statistics.

Know your community. If your community is growing, that makes it a marketplace that is likely to become increasingly important to your payer—and that could strengthen your hand at the negotiating table. For demographic information, visit www.census.gov or contact your local government. Some city and county governments have planning departments that publish population projections. The published data will probably take a city- or countywide perspective on growth, but you may be able to get Zip code–level information if you put a call in to the department’s data person. Some metropolitan areas also will have a transportation planning organization that has similar data.

Know your practice. How many of the payer’s patients do you see, and what services do you provide to them? List the CPT codes that your practice uses and determine, for each payer, how often each code is utilized, how much you’re paid, where the copay is going, and how the payment compares with what Medicare would pay. Can you provide the payer with examples of how you’re saving it money—such as low complication rates, low utilization rates and compliance with its business procedures? For your practice to negotiate a contract effectively, you need to analyze as much of the data as possible so you’ll be in a position to understand the impact of any options that you’re offered.


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