Four Strategies to Help You Master Contract Negotiations
Part 5: Take expert advice to make payer negotiations less of an endurance test and improve the final outcome.
By Marcia Brauchler, MPH, CPC, CPC-H, CPC-I, CPHQ
Negotiating is a difficult skill to master. To help with your next payer negotiation, I’ve compiled lessons learned the hard way and condensed them into simple strategies. This advice is for contract negotiators who have no legal expertise. Consult a lawyer for final input on all contract language before executing an agreement.
Strategy No. 1: Get Organized
Preparation can be intimidating, but it’s worth the effort: When you are better organized and prepared than your counter-negotiator, you have the upper hand.
Be organized. Label everything. Put the contract in order (using a three-ring binder) as if you’re a lawyer preparing for trial. On cross-examination, you’ll need quick access to the facts. You’ll be surprised how voluminous the binder becomes after a few meetings and drafts.
Organization is a good foundation for whatever comes next. If you’re disorganized, the shear volume of paper will discourage you. Here are some tips for organizing your binder:
- Color-code your binder. If one contract negotiation requires multiple binders, keeping one contract in the same colored binder helps to identify it more easily.
- Use a manila folder for working documents (but quickly move them behind a tab in your binder). Use chronological order behind labeled tabs, with the most current information on the top.
- Don’t throw anything away. Years from when you finish the negotiations, you may need to refer to something that came up in the negotiations. You’ll want to have documented evidence to support your statements.
- Write everything down, with names and dates attributed to verbal statements. This will ensure promises made in negotiations make it into the final draft of the contract. It’s also useful for your side if later the payer tries to commit you to something they claim you said in negotiations.
Strategy No. 2:
Assess Your Position and the Payer’s
Size up the competition through research. Determine all of the reasons why this contract is (or isn’t) necessary to you. You don’t want to spend the same amount of time and attention on a contract for services you don’t intend to use as you would for services you intend to use 80 percent of each day.
With regard to the payer’s operations, try to identify (or ask up front):
- Does the payer have fully-insured business, or only administer self-insured business?
- Is the payer really just a rental network of providers?
- Who are the payer’s major group accounts?
- Does the payer market heavily to individuals and seniors?
- Does the payer have a Medicare Advantage contract?
- Does the payer have a Medicaid health maintenance organization (HMO) contract?
- Which products does the payer offer, such as HMO, preferred provider organization (PPO), federal employee program (FEP), etc.?
- How many insured members does the payer have in your state?
- What does the existing payer network look like in regard to hospitals that are in-network, other physicians, and ancillary networks (such as lab, vision, imaging, behavioral health, etc.)?
- What local coverage determinations, preauthorization procedures, or formulary restrictions of the payer affect your practice?
- What quality indicators does the payer track for your specialty?
Strategy No. 3:
Make a Checklist of Key Terms
Create a checklist of relevant points you want to touch on before you read the contract. For example, what do you expect the contract to cover and what do you want it to say? Document this by category (such as payment, term, penalties, etc.).
A sample checklist of questions and points to review in the contract, and information you need to know about the health plan during negotiations, might include:
Type of Agreement:
- Will this be a group or an individual agreement?
- What product lines are to be contracted (e.g., HMO, PPO, EPO, Medicaid, Medicare Advantage, Workers’ Comp, etc.)?
- Does the contract allow for simple notification if documents are modified, or is a written agreement required for each modification?
Term, Termination, and Renewal:
- Is there an initial term during which you can’t terminate your participation?
- Is there “without cause” termination? Are the requirements for notice the same for both parties?
- Does a term take effect after 90 days (or other period), or upon the renewal date?
- Does the contract require providers to perform services after the contract terminates?
- What is the term of the contract? Is there an automatic renewal clause?
Claim Filing and Payment:
- What is the timely filing limit for you to submit claims after the patient’s date of service?
- Does the contract reference your state’s prompt payment law?
- Is there a time limit for the plan to recoup or offset?
- How does the plan compensate physicians (fee-for-service, per case, capitation, etc.)?
- Are there annual dues, credentialing fees, or other upfront physician costs?
- If physicians are paid using a multiple of resource-based relative value scale, on which year are payments based? When does the year, conversion factor, or relative value units change?
- How are non-Medicare-valued services (such as preventive exams, some labs, injections, and immunizations) paid?
Strategy No. 4: Skim the Contract
I’m convinced the recitals and definitions are put at the beginning of the agreement to wear out unsuspecting readers. The reimbursement is always an attachment at the very back of the agreement. Skim the agreement the first time through, locating the key data that you outlined in your checklist. Focus on what matters most, and don’t get lost in the verbiage.
If the reimbursement is totally out of line, don’t read the agreement. I suspect sometimes the other party hides the reimbursement, hoping that after you’ve invested hours in reading the entire agreement you’ll agree to the reimbursement only so the whole process wasn’t a waste of time. Don’t let this happen to you!
Get an electronic copy of the contract so you can make red-lined changes as you go. In the worst-case scenario, you can retype the agreement. It’s better to give your own proposed language than allow the other side to paraphrase your thoughts.
The standard layout of a contract is fairly consistent. If you are familiar with the base form agreement used by most health plans, you’ll be able to get beyond the layout and concentrate on the content.
Here’s an overview of the significant sections of a typical health plan contract for professional services:
The preamble identifies the parties of the contract, including their formal names, state of origin or residence, and other status. Often, this section includes the execution date, or the date the agreement is to become effective.
The recitals provide an explanation of the parties’ roles and the purpose for the agreement. The recitals are NOT terms and conditions. Changes to this section should be made only to restate facts, not to convey agreement terms.
The definition section is a glossary of terms used throughout the agreement. In the event a dispute arises between the parties about a particular term, the meaning of the term as it is defined in this section will take precedent over generally accepted usage. Do not overlook the importance of this section. It may contain material terms and the agreement’s conditions. You should negotiate the definitions until you are comfortable with their meaning and scope.
SERVICES/OBLIGATIONS OF PROFESSIONAL
This section states what the physician must do as a party to the contract. It’s amusing to note the number of physician obligations versus the health plan’s obligations (I’ve seen 55 professional obligations to three health plan obligations). Beware of unusual obligations that add undue burden or costs to the physician for just one payer.
SERVICES/OBLIGATIONS OF HEALTH PLAN
The health plan generally will be responsible for promotion and advertising of the plan to new enrollees, overseeing quality and utilization management, and credentialing of providers.
The agreement should set forth how the physician will be compensated. It generally covers:
(1) Fee schedule amounts;
(2) Billing and payment requirements;
(3) Adjustments to compensation, such as payment after the agreement terminates; and
(4) Coordination of benefits (COB).
COB refers to the determination of which two or more health benefit plans shall apply, either as primary or secondary coverage, for services to a patient. Such coordination is intended to preclude the provider from receiving an aggregate of more than 100 percent of covered charges.
The term of the agreement is the length of time the agreement will remain in effect. The date the agreement is signed by the parties is not always the “effective date.” Some payers determine the effective date after receiving the partially executed agreement. Some agreements provide for automatic renewal for additional years without requiring either party to do anything. In these agreements, the term of the agreement is generally defined as the “initial term.” Extended terms are later years.
COMPLIANCE WITH LAWS AND LICENSURE
The agreement may specify that both parties will comply with applicable laws, rules, and regulations in carrying out their respective obligations under the agreement.
UTILIZATION MANAGEMENT, QUALITY IMPROVEMENT
This provision usually describes the managed-care organization’s programs. It generally refers to procedures fully described in the provider manual or health plan policies and procedures. You should require advanced notice of any changes in these programs and procedures before you agree to comply with them.
Usually, this section provides an alternative to legal proceedings. Typical language requires arbitration and tries not to give an advantage to one party over the other.
ACCESS TO RECORDS
This section of an agreement usually discusses the physician’s obligation to maintain medical records in accordance with the Health Insurance Portability and Accountability Act of 1996 (HIPAA) and state law. It usually allows the payer access to records for audits during normal business hours, with advanced notice. It might cover reasonable reimbursement for copying records.
As a general rule, we recommend having the physician’s or practice’s malpractice carrier provide suggested indemnification language consistent with the coverage of your policy. For example, if the base language requires the practice to indemnify the payer but your insurance carrier won’t cover that, you could then suggest each party remain liable only for its own actions. Suggested language might be:
Indemnification/Hold Harmless. Professional shall be liable for any and all claims, costs and expenses arising from or out of any alleged negligent act or omission of Professional, its agents or employees, in the performance of its obligations under this Agreement. HEALTH PLAN shall be liable for any and all claims, costs, and expenses arising from or out of any alleged negligent act or omission of the HEALTH PLAN, its agents or employees, in the performance of its obligations under the Agreement.
Payers generally include language stating the physician may not disclose the terms of the agreement to any other party. Plans also like to list information that might be considered specifically proprietary.
Payers typically offer language that allows the payer to unilaterally amend the agreement. A non-response obligates the practice to the terms of the amendment. Instead, we recommend language enabling either party to amend the agreement only through mutual written consent. Suggested language to propose would be, “Amendment. This Agreement may be amended only by prior mutual written agreement of the parties.”
This section usually includes terms for the:
“Entire Agreement,” which means this agreement supersedes any other verbal or written agreement, such as items discussed in negotiations;
“Assignment,” which is generally written to allow the payer to assign the agreement if the payer is sold to another health plan, but prohibits the physician from doing the same;
“Governing law,” which should be the state in which you practice; and
“Notices,” which is where you add to whom and where any official notice should be directed for you and for the payer, etc.
In our next installment, we’ll provide you with more contract negotiating tips.
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. Brauchler works with physicians on managed care contracts, reimbursement, and practice administration. Her experience includes hospital, health plan, and independent practice association administration. Brauchler is a published researcher and a frequent public speaker.