More Strategies to Help You Master Contract Negotiations
By Marcia Brauchler, MPH, CPC, CPC-H, CPC-I, CPHQ
Because negotiating is a difficult skill to master, I’ve compiled 10 lessons I learned the hard way and condensed them into simple strategies. Last month in “Four Strategies to Help You Master Contract Negotiations” (pages 44-47), we focused on strategies one through four. We’ll continue this month strategies five through 10. Use them well and you’ll have an extra edge during your next payer contract negotiation.
Strategy No. 5: Read the Contract in Detail
If you’ve skimmed the draft contract and the proposed rates are sufficient to continue discussion about that version of the agreement, you’re ready to read every word of the contract. If the rates are unacceptable, however, forget about the language until you get a rate exhibit that makes reading the contract worth your time and effort.
To stay focused on what you established as important initially, be sure to use the checklist of relevant points you created (Strategy No. 3: Make a Checklist of Key Terms). Don’t get carried away on words or definitions that you originally decided weren’t important.
List your areas of concern with the agreement. If you don’t understand a phrase or the concept being conveyed by a section, note it. Do not make an assumption. Question everything until it’s resolved to your satisfaction, and so you can interpret the phrase in layperson terminology for other staff to understand. If you’re negotiating on behalf of another party, they’ll expect you to know the meaning behind each phrase in the agreement.
Strategy No. 6: Prioritize Your Needs (Contract Language Changes)
Ask yourself these questions as you prepare for negotiations:
- What facts must be verified?
- What are the deadlines and timeframes for the negotiations?
- What are the deadlines and timeframes for the contract implementation? If you are opening a new practice, you are in no position to insist on new rates; you need any agreement in place by the effective date. If this is the case, your negotiation strategy might be to agree to a short-term agreement (e.g., 90 days). You can take the time to finalize better terms after the practice opens.
- Which terms and clauses in the contract need to be clarified?
- Which terms are negotiable and which are non-negotiable?
- What are the personalities of their negotiators?
- What do they want?
- What are your acceptable ranges on rates? What are, most likely, their ranges?
- What are the counteroffers that can be anticipated?
- How can we support our arguments? (For example, consider these arguments to support a pure cost-of-living increase: rent increases, malpractice premium increases, or your own health insurance premium increases with that payer since the contract went into effect originally.)
- What items do you agree with before the negotiations begin?
- Should a physician or an executive be at the negotiation? If so, should he or she be present for the whole negotiation, or just the beginning or end?
- Who will record the terms of agreement during the negotiation? It’s OK to have a “parking lot” of issues you don’t agree on. The “scribe” should simply write the issue(s) down, so the negotiations can move on. If it’s documented well, you can return to the topic when passions cool.
- Does our negotiator have limited or full authority to bind our organization?
- Does their negotiator have limited or full authority to bind their organization?
- Who needs to ratify the terms of the agreement at the practice and for the payer?
Strategy No. 7: Ask for Everything
Create an agenda for the negotiation. The person or party who offers the agenda controls the negotiation. Timing is the most important element in the negotiation process. To capitalize on time management, you must have your own deadlines and understand the other party’s deadlines. Bad decisions are made in haste at the 11th hour, which can be to your advantage or disadvantage.
An agenda might include:
- Introduce both parties’ representatives.
- Request basic payer introduction information (Strategy No. 2: Assess Your Position and the Payer’s).
- Present your practice’s data, referring to your Health Plan Proposal letter (see “Contracts: Write Health Plan Proposal Letters with Value,” AAPC Cutting Edge, May 2013, p. 52-53).
- Ask for what you want.
- Listen to the payer’s response and explore all options.
- Document interaction, tasks, and assigned due dates, and determine who is responsible.
- Summarize what was discussed.
Strategy No. 8: Endure the Negotiation Process
Keep your stakeholders apprised of the negotiations. You run a huge risk if your stakeholders are not in the loop. Some health plans attempt to derail negotiations by going around you to the party you represent.
This derailment can actually help you if your party is educated about the deal points and the status of negotiations—it will show you are united in your beliefs, even when caught off guard—or it could work against you, if you are unsuspecting and ill-prepared. The person contacted may be flattered to be perceived as the “real” decision-maker, and may succumb to making a deal without knowledge of all points being considered.
Strategy No. 9: Finalize the Contract
After negotiations are complete and a final version of the agreement is issued for signature, compare the final draft to the exact text you desire. Never assume the redlined agreement contains all of the changes agreed on up to that point. You have no recourse after the contract is signed, so be sure all changes are in the final draft and that no “new,” last-minute changes were made to advantage the other party.
Initial each page, including attachments, so no one can claim to have not seen a page of the agreement. For example, a health plan once claimed the third page of the exhibit containing reimbursement information was not part of their version of the final contract. The signer’s initials were absent on the copy of that last page, so we could not prove otherwise. The terms of that page would have significantly advantaged our party, but our only recourse was to renegotiate the issue. In the end, we had to compromise our position to get the deal finalized.
It is customary to have two copies of the agreement for signature. After each party has executed the agreement, each will have an original version. Retain your copy in an easy-to-find location, in a folder or file that is well marked so anyone can easily identify the agreement.
Strategy No. 10: Know When to Walk Away
If you must terminate a payer agreement, the best time to get the most effect would be before open enrollment, which begins Oct. 1 for most employer groups. A termination notice to the payer in April through August will be noticed. Most terminations require a 90-day notice, which starts the clock ticking for a renegotiation. For your practice to be included in the payer’s in-network directory, you’ll need to be contracted with the insurer by Oct. 1. If you terminate at any other time, you’ll be considered out-of-network. This is bad news for your patients, who will more than likely be unable to change insurance plans so they may continue seeing your physician in-network until the next open enrollment, and will be charged more for seeing an out-of-network physician.
Next installment: We will discuss ways to monitor the implementation of the new agreement terms to make sure your work is translating into real rate improvements for the practice.
Marcia Brauchler, MPH, CPC, CPC-H, CPC-I, CPHQ, is the founder and president of Physicians’ Ally, Inc., a healthcare consulting firm and concierge billing company for specialty physician practices. She works with physicians on managed care contracts, reimbursement, and practice administration. Her experience includes hospital, health plan, and independent practice association administration. Her firm sells updated HIPAA Policies and Procedures and online staff training. She is a published researcher and a frequent public speaker.
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