How to Negotiate Higher Physician Reimbursement Rates

by | Mar 23, 2020 | Blog, Insurance Negotiation & Reimbursement

Patient volume and reimbursement rates are the two driving forces in generating revenue at your medical practice. Patient volume relies on referrals, word of mouth, and marketing. However, more patients require a more extensive infrastructure to service. Today, we are going to discuss how to increase your medical practice’s revenue through analysis, due diligence, and finesse. The result is an increase in revenue without compromising the current infrastructure in place. 

Regularly reviewing your reimbursement rates and negotiating with the lowest payers can help uncover opportunities to fuel growth for your medical practice. It is crucial to examine each payer’s reimbursement rates to confirm how they compare relative to other payers in your network. 

Negotiating higher reimbursement rates with payers is a daunting task. Fee schedules and contracts are complex, and engaging with an entity with extensive control over your revenue stream is intimidating. 

Smaller practices face an additional challenge, as they have less negotiating power than hospitals and larger medical groups.

With trends of value-based care across the industry, insurance payers now place more weight on practice/physician MIPS scores. As an independent practice, you must make every effort to score in the top percentile in each MIPS metric within your geographic area. Additionally, you need to demonstrate to payers why the relationships they have with your practice are vital for them to maintain.

When negotiating, you must leverage the qualitative benefits your practice provides to your payers. You may have to employ tactics, such as establishing alternative options, if the negotiations do not go as planned. Doing so is more likely to compel a payer to raise your reimbursement and avoid losing their relationship with you.

Consequently, significant preparation is necessary to succeed in persuading payers to increase reimbursement. The following is the preparatory work you should complete to strengthen your position in negotiations.

Prioritize Your Payers

Prioritizing your top payers and frequency of CPT codes can save time on preparation and help focus your efforts.

First, create an excel spreadsheet summarizing your top ten payers and top 25 CPT codes by collections and volume. Annual data is preferred, but the last three months is sufficient to determine your most lucrative CPT codes.

Note the lowest three payers for each CPT code and highlight them in red. These are the payers to prioritize for each CPT code. Likewise, identify your top three payers and highlight them in green. These payers serve as your negotiation targets for your bottom three payers.

After completing the steps above, download Medicare’s fee schedule. Copy and paste Medicare’s rates in another tab within the workbook for reference. Medicare’s rates will serve as your benchmark. Within the Medicare tab, use a VLOOKUP formula (alternatively, you can manually add your payer’s rates) to pull in rates for each payer in your analysis. For your comparison purposes, it is helpful to understand where your in-network payers are as a percentage of the Medicare rate. Add a column next to each payer and divide the payer’s rate by Medicare’s rate for each CPT code.

(HINT: Develop proficiency of the VLOOKUP Excel formula, filter, data sort, conditional formatting, and Pivot Tables to reduce the time spent on an analysis)

Now, you can identify which payers are underpaying the most by comparing their reimbursement rates for each code to the Medicare rate.

Finally, calculate the difference in rates between your “green” and “red” payers. Multiply the difference by the volume of your “red” payer to quantify the potential increase in revenue.

Set Optimum, Minimum, and Target Goals for Each Payer

It is beneficial to determine optimum, minimum, and target goals to navigate the negotiation. 

Your optimum goal is an ideal goal that serves as a starting point in your negotiations. In many cases, presenting the first offer in a negotiation can result in a better deal for you, so do not hesitate to lead with this goal. Use your “green” figures from your payer prioritization spreadsheets to set optimum goals. 

Your minimum goal is the lowest reimbursement increase you will accept. Remain firm and do not settle below this goal. No matter the circumstance.

Set a target goal between your optimum and minimum goals. Your target goal is where you want to arrive at the end of negotiations.

While setting your goals, prepare a best alternative to a negotiated agreement, known as BATNA. In certain circumstances, a BATNA may involve leaving the payer if you cannot reach an agreement.

Perform a SWOT Analysis For Your Practice

SWOT analysis studies your medical practice’s strengths, weaknesses, opportunities, and threats. Performing a SWOT analysis equips you with leverage for your negotiations. Additionally, a SWOT analysis reveals threats and weaknesses to plan around. 

Strengths are the competitive advantages of your clinic. Your practice’s strengths may consist of specialized services, clinical expertise, considerable market share, or favorable patient satisfaction data.

Opportunities are external factors that may help achieve your goals. Often, you can identify opportunities by analyzing your strengths. For example, if patients consistently leave satisfied with their visit, you have the chance to gather testimonials for marketing purposes.

Weaknesses and threats are also essential to investigate. Weaknesses are the reasons a patient becomes a new patient of your competitor instead of your medical practice. Common deficiencies include the limited number of physicians, high staff turnover, and long wait times of a clinic. It is best to prepare to address these weaknesses to alleviate reservations a payer may have.

Similarly, consider any threats to your practice and plan to combat or mitigate them. Risks could include legal changes, increased competition, and technological advancements that render your equipment obsolete. If weaknesses are significant enough to jeopardize your practice, you could also categorize them as threats.

Gather Data

Quantify the value you provide to payers by remaining in-network.

Gather satisfaction data from your patients and compose a compelling narrative to demonstrate your importance to the payer. Use data that accurately reflects the current state of the practice. If data is outdated, consider administering a new survey before you enter negotiations.

Lean on glowing marks contained in your MIPS score. If your practice ranks above a 90% percentile ranking for a heavily weighted measurement, emphasize this accomplishment. Payers are more receptive to increase reimbursement rates for high-quality (based on MIPS standards) physicians. 

Similarly, certifications from healthcare quality organizations, such as the National Association for Healthcare Quality, can boost your case.

Internal quality data is not as objective, but you can use it in conjunction with external data to display your dedication to excellence. You may have a high rate of patient compliance with your care plans, for example, which could demonstrate your commitment to patient care and positive outcomes.

Be Confident in Your Negotiations

Negotiating with a counterparty responsible for a significant percentage of your revenue is unnerving. Perform sufficient preparation to justify your case and gain comfort before your discussion. You can instill confidence by providing an abundance of evidence demonstrating your value to payers. Confidence itself is a powerful asset to possess when negotiating.

Remember to remain friendly but firm in negotiations. Avoid an adversarial attitude, but do not waiver from your goals. Enter the negotiations with a mindset of finding common ground and reaching an agreement that will benefit both parties.

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