Contracts: Write Health Plan Proposal Letters with Value
Part 4: Know what they are, how to write one, and why they are vital to the contracting process.
By Marcia Brauchler, MPH, CPC, CPC-H, CPC-I, CPHQ
What I call a “Health Plan Proposal” letter is an integral part of the contracting process. Drafting this letter helps you to gather your thoughts and puts you on the same page as the physician(s) and other stakeholders at your practice. It’s also highly likely that after making initial contact with your plan representative (via phone or email), you’ll be asked to send your request in writing.
Gather Demographic Info
The proposal should include your basic demographic information, including the practice’s name, the names of the phy-sicians/providers, tax identification number, office address(es), and contact information (phone, email, fax). This information might be readily available for your practice (e.g., on your website).
Make sure the above information is current. If it isn’t easy to find, start by looking in the Council for Affordable Quality Healthcare (CAQH) database to get a good overview of the providers’ education and experience, including board certifi-cations, continuing education, areas of interest, and hospital privileges. The goal is to learn about the physicians and what they do, and to pick out information that makes the providers stand out to the payers.
State Your Objective
If it’s been several years since you’ve contacted the payer, or since your contract took effect, start by stating that fact. This will emphasize that you are not a constant pest to the payer, and your request now deserves attention because you’ve let years pass without requesting anything.
List any changes since your last interaction with the payer. For example, perhaps your practice has added a new office or a new provider. If the payer has merged with another plan, reference that as something you want addressed satisfactorily under a combined agreement. If your physicians are on individual agreements and you’re interested in a group agreement, request one.
Know your goal for writing the letter to the payer and indicate that goal in the letter. If you’re happy with your rates, but just want to update demographic information, state that. If it’s been years since you’ve updated your rates, and that’s your main reason for contacting the payer, make them aware of this objective.
Stress Your Practice’s Value
Spell out the strengths your practice brings to the payer and to the market. Prepare this written communication as if you were defining your practice or specialty to someone with no knowledge of healthcare. For instance, if you are a specialty practice, define your specialty by number of board-certified specialists in the state, the types of patients you treat, procedure codes billed, and any other information to help create a picture of your practice in the minds of the health plan staff.
Do not assume the health plan contact who receives your letter knows about what makes your specialty and practice unique. Even if you are a primary care provider—which is in high demand given the national shortage—indicate how important you are to the payer’s network by stating, for instance, that you took care of “X number” of their patients in the past year.
Request Payment and Coding Needs
Explain in detail the issue(s) you want addressed, such as solutions to administrative hassles, claims bundling concerns, and an overall request for a rate improvement. For example, if your current contract is at 120 percent of current-year Medicare and you’re requesting 140 percent of a fixed year of Medicare, say as much and provide a few reasons for the rate increase.
When a payer letter is seeking a rate increase, the first thing to look at is the practice’s evaluation and management (E/M) prevalence. Even if a specialty office does surgical procedures, know the proportion of revenue/frequency count that is comprised of E/M. If a surgical specialty has 80 percent of codes in the E/M category, it’s good to point that out to a payer because it changes the average reimbursement for a code to something in the $75 range (instead of the payer presuming a rate increase would be a percentage above a surgical case fee).
Other areas that are good to include in the letter, if applicable to your practice:
- Medicine services
- In-office labs: These are convenient to patients and providers; however, the rate might default to that of the payer’s national vendors, such as LabCorp and Quest, who can afford deeply discounted pricing for their services because they perform millions of tests.
- Preventive exams: These generally are hard coded by payers who pay based on the resource-based relative value scale (RBRVS) fee schedule because Medicare does not allow them.
- Supplies (HCPCS Level II) reimbursement
- Bundling problems and underpayments
- Modifier issues
- Outstanding accounts receivable problems, if any
Because coding issues are an important part of the letter, coders are uniquely qualified to write these payer proposals. When examining rates, it makes sense to list also all codes with problems, customizing this part of the letter for each payer appropriately.
A proposal letter starts a paper trail—an important factor in the endurance test of contract negotiations. Unlike voicemail, you can confirm receipt. If the person who receives the letter isn’t the right person, he or she can easily hand off your request to the right person. And given the high rate of staff turnover at health plans, the letter is your practice’s placeholder, regardless with whom you are working. It serves as insurance so you won’t have to start all over again in the event your initial contact changes midstream.
Tips for Finalizing and Sending the Proposal
For the greatest impact, the physician(s) in the practice should sign payer letters. If you are the right person for the payers to follow up with, however, be sure the letter gives you that authority.
When the letter is signed and ready to send, make a copy. The health plan proposal should be sent certified mail, with return receipt requested. Be prepared to follow up.
As a general rule, if letters are sent to 10 different health plans, one or two might respond without you having to make a follow-up call. In the event the payer contact doesn’t receive your letter, you can quickly scan and email or fax the signed copy you made.
After the right person at the plan receives your proposal letter, consider yourself ready to start the contracting process. The letter can serve as your agenda for future discussions with the payer, prompting you to remember what your unique issues were when you started the payer contracting process.
In Part 5 of this series on contracts, we’ll provide you with some contract negotiation 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. She works with physicians on managed care contracts, reimbursement, and practice administration. Ms. Brauchler’s experience includes hospital, health plan, and independent practice association administration. Her firm sells updated HIPAA policies, procedures, and online staff training, as well as an online CPC® Exam Preparation course. Ms. Brauchler is a published researcher and a frequent public speaker.
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