Just as you would not go on an expedition without preparing carefully with a map, supplies, a lay of the land and a series of other things, you don’t want to underestimate the preparation you’ll need before you begin a negotiation with an insurance carrier. For this post, I’d like to talk about the things you may want to consider even before you decide to call an insurance company to negotiate a contract.
Before doing anything else, it is important to run several reports to understand where your practice stands.
Conduct a payer analysis that calculates what percentage you get back for every dollar you bill as well as what percentage of your practice’s income comes from each payer. Below is an example of how a report like this might look.
Not only will this report help you determine how many cents on the dollar each carrier is paying while comparing them to each other, the data lets you know with which health insurance company you should start to negotiate first.
One could start with the payer that pays you the least or the payer that is the least amount of your practice’s income. This calculation will also help you understand what is at stake if the negotiation goes sour. For example, let’s say Cigna is only 5% of your business and that 5% represents $50,000 in annual revenue. If you decide to walk away, you at least know how much you will have to make up in revenue.
Top CPT Codes
Next, search for the practice’s top CPT 25 codes and sort them by frequency. The frequency is an important number to have because the insurance company may give you a generous increase on a procedure your practice may not do that often, but then decrease payment for a code that your practice performs often.
Average Payment by Carrier (let’s not call it reimbursement, please).
You need to know where the carrier stands compared to other carriers. This is the equivalent of doing a market research of the area when you are selling your home. You want to know what others have paid for similar homes as yours so you don’t price your house outside the market.
By knowing what each carrier pays for your top CPT codes, you will know what the average payment is. The average payment for a CPT doesn’t necessarily have to be a goal, but a point of reference against which prices can be compared.
It is also important to include Medicare in the mix. Many payers pay a percentage of Medicare. For more info on how to figure out how you are being paid against Medicare, visit http://pediatricinc.com/2011/12/08/free-rbrvs-calculator-for-your-medical-practice/
When negotiating, remember not to quote actual numbers. But you can talk about percentage of Medicare. For example, let’s say one carrier says they will pay you 110% of 2010 Medicare rates. You can go back and say, “But my top 3 payers are paying 125% of 2010 Medicare.”
Keep in mind that this post doesn’t include all the steps required to negotiate. But the idea, for those that haven’t done this before, is to give you an idea of the work required before you actually start the process.
Negotiating with a payer can be a daunting task. The process is arduous and can take a very long time. After all, the insurance company really doesn’t have an incentive to pay you more. So you must do your homework and have pertinent data, clear expectations, and a patient disposition if you want to make any progress.
Brandon Betancourt is an administrator for a private pediatric practice in the suburbs of Chicago. He blogs regularly about running a small private practice at PediatricInc. You can follow Brandon on Twitter @PediatricInc. Brandon wrote recently for Getting Paid on Medical Practice Collection Letters that Work – With Samples