Insurance Negotiation and Reimbursement Analysis

Commercial payers, Medicare, and Medicaid are the driving force behind your clinic’s ability to generate revenue. Most patients are not in the financial position to pay the full cost of medical visits out-of-pocket. It is prudent for patients to have health insurance coverage for routine visits and unexpected emergencies. As a result, insurance payments typically represent more than 75% (compared to patient payments) of total medical practice revenue.

For many independent physicians, engaging in insurance negotiations with commercial payers is a daunting task. Fee schedules and contract terms are unnecessarily opaque and complex. Some practices we speak to were not even aware that you can negotiate your reimbursement rates (Spoiler Alert: YOU CAN AND SHOULD!). On top of this, it is unnerving to argue with an entity that has significant control over your revenue.

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To make matters worse, the MGMA conducted a study that discovered insurers were routinely underpaying 7-11% of claims on average. That means you could be losing out on about 10% of your revenue without even knowing it!

As profit margins for medical practices continue to compress, it is critical that you are not underpaid and receive competitive reimbursement rates for your geographic area. The difference is a profitable, flourishing medical practice and a practice that is struggling to stay afloat.

Fortunately, it is possible to negotiate with insurers for higher reimbursement rates, so you can maximize profits and grow your practice.

Prepare: Do Your Homework

Before you enter negotiations, there is some prep work to perform.

You will want to make the case to the payer that your practice is essential to them, provides better patient outcomes (HINT: emphasize data from your MIPS scorecard), and lowers the cost of healthcare for patients within the payer’s network.

These qualitative data points provide you with negotiating ammunition and strengthen your argument. We recommend gaining a deep understanding of your position and the value your practice adds to the payer by remaining in-network. 

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Pull Together All CPT Codes

First, generate a list of all your CPT codes. 

Alongside each CPT code, note the volume for each procedural code over the past 12 months.

If your practice uses medical billing software, you can quickly run a report of your billable CPT codes and volume over any period you specify.

Otherwise, your staff should maintain a list of CPT codes billed on every claim. Use three of your busiest months, as more of your CPT codes will populate this way. You can then build an Excel spreadsheet with this data.

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Gather All Your Payer Data 

The next step is to gather contract and reimbursement rates for all your payers into one place for easy analysis.

There are several types of payers that you will want to negotiate with:
Commercial payers – Insurers like Aetna, Blue Cross Blue Shield, Cigna, Humana, and other commercial insurance companies.

The government – You will not technically have “contracts” with either Medicare or Medicaid have contracts, but you want to obtain their fee schedules to understand how commercial rates compare to CMS that adjusts annually (HINT: your commercial contracts should reimburse at least 110% of current year Medicare).
Medicare Advantage Organizations (MAO) and Medicaid Managed Care Organizations (MCO)

Once again, you can probably run a report on your billing software to determine all your payers. If not, you will have to look through your records manually.

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Determine the Payers to Prioritize

In theory, you should negotiate with all payers. However, with limited time available, prioritize specific payers to maximize your return on investment.

Start with payers that represent a large volume of claims and consider when the contract renews. It is helpful to have at least 90 days before your contract expires to perform the analysis and negotiate.

Another consideration is how much a payer is underpaying. If two payers currently provide a similar level of revenue for your practice, one payer could be underpaying more than the other. The underpaying payer can result in a more significant opportunity for negotiation.

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How to Negotiate Payer Contracts

Now that you have prepared supporting evidence for your case, it is time to head to the negotiating table.

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Analyze Each Contract for Notice Terms and Termination Provisions

Before you get to the negotiating table, gather terms and termination provisions for each contract you plan to negotiate.

 

It is helpful to create a sense of urgency during your negotiation. Force the counter party to adhere to your timeline. Understand the required notice to terminate without cause and when the contract renews. Doing so will help determine the appropriate time to engage and how to plan your negotiating strategy accordingly.

As for why you should know the termination provisions, we are not aware of any contracts that contain a “renegotiation” clause. Thus, you want to renegotiate near the termination date so you can terminate the contract if you do not reach a new agreement with the payer. It is also critical to understand your best alternative to a negotiated agreement, often referred to as “BATNA.” In negotiation theory, the BATNA is the most advantageous alternative course of action a party can take if negotiations fail and you do not reach an agreement. BATNA is the key focus and driving force behind a successful negotiator. A party should not accept a worse resolution than its BATNA.

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Always Follow Up 

Your money is at stake here, so drive the negotiation timeline.

 Payers are not eager to increase your reimbursement rates and decrease the revenue they earn from your practice. Always follow up with payers once you send them notice that you would like to renegotiate their contract. If you fail to do so, you will not get a quick response if you get one at all.

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Negotiate Each Fee Individually

Unless you are at the top of your market, most payers will not give you a fee increase across the board.

Instead, focus on the codes that are most applicable to your practice, and negotiate each fee individually. You will have a stronger case for each fee because you can quantify the underpayments by using data from your analysis.

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Negotiate With Your Highest Priority Payers First

Negotiating with every payer at once will leave you stretched thin, taking valuable time away from growing your practice.

Prioritize payers by the revenue each represents and how much the payer is underpaying you. Go after one or two payers at a time, starting with the ones that will result in the most substantial revenue gains.

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Great Lakes Advisory Can Boost Your Reimbursement

Negotiating with payers is key to minimizing underpayments and boosting your revenue, but gathering the data, preparing for the negotiations, and negotiating with each payer takes time away from growing your practice in other ways.

Let Great Lakes Advisory get you the reimbursement you deserve. Using our advanced insurance negotiation and reimbursement analysis software, we can upload insurance fee schedules and instantly compare them to the claims that you bill so that we can spot underpayments.

But it does not stop there. Our software also assists us in negotiating with your payers, helping you to recover more revenue into your practice.

Ready to earn the reimbursement that you deserve?

Remember, maintaining the status quo is no longer enough to stay afloat as an independent medical practice in today’s complex healthcare environment.

Contact us today to schedule your free consultation!

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