FP Kenneth Olds, M.D., of Greeley, Colo., has the right stuff when it comes to managing health care contracts. In fact, his keen negotiating skills resulted in a 3 percent rate increase in many of his large health plan contracts last year.
Simply put, every practice needs a partner with this skill, said Olds. "Too many family physicians think the business side of medicine is going to take care of itself, and it won't. You can't just raise your prices."
Negotiation Skills Tame Managed Care Contracts
By Sheri Porter
3/17/2006
A well-negotiated health plan contract can increase revenue and reduce insurance company hassles by clarifying issues ahead of time. Olds negotiated his first managed care contract in 1979 and handles all health plan contract reviews and negotiations for his 18-physician practice, Family Physicians of Greeley.
Review every contract every year, said Olds. "If you don't complain, the health plan is going to keep paying you the same amount of money for the next two decades." He invests a minimum of six hours reviewing each of his practice's contracts, looking for the little things that could cause aggravation later. Olds consistently deletes wording he doesn't like, such as a clause that would require his practice to cover expenses for copying records requested by a health plan for utilization review.
But contracts are about more than money, said Neil Caesar, J.D., president of The Health Law Center, in Greenville, S.C. "For every dialogue that has to do with how much you're going to get paid on a relative value unit basis, there should be five to 10 issues (discussed) that aren't directly tied to dollars and cents, but that have to do with overall profitability and convenience of the contract," he said.
"These kinds of contracts are about relationships, and the best way to have a strong relationship is to have a contract that makes sense for both parties so that once you've signed on the bottom line, all of your attention can be focused on being as good a contract partner as possible." said Caesar.
Even though health plans can be bullies, the best way to negotiate is always from the perspective of logic, fairness and need, he said. The negotiation phase is the right time to make sure a contract "is clear and thorough on all of the terms that are important," rather than halfway through the contract year.
A Web-based Academy resource, "AAFP Contract Negotiations," offers a wide range of information and tools, such as FP Assist, a clearinghouse of management consultants and attorneys for family physicians. Also listed on the Web page are links to various Family Practice Management articles and an AMA publication, Model Managed Care Contract, Fourth Edition, (PDF file: 68 pages / 857 KB. More about PDFs.) that offers an in-depth look at contracting, including definitions and red flag terms and clauses.
For starters on how to get the best deal for your practice, consider these tips from the experts.
Review every contract every year, said Olds. "If you don't complain, the health plan is going to keep paying you the same amount of money for the next two decades." He invests a minimum of six hours reviewing each of his practice's contracts, looking for the little things that could cause aggravation later. Olds consistently deletes wording he doesn't like, such as a clause that would require his practice to cover expenses for copying records requested by a health plan for utilization review.
But contracts are about more than money, said Neil Caesar, J.D., president of The Health Law Center, in Greenville, S.C. "For every dialogue that has to do with how much you're going to get paid on a relative value unit basis, there should be five to 10 issues (discussed) that aren't directly tied to dollars and cents, but that have to do with overall profitability and convenience of the contract," he said.
"These kinds of contracts are about relationships, and the best way to have a strong relationship is to have a contract that makes sense for both parties so that once you've signed on the bottom line, all of your attention can be focused on being as good a contract partner as possible." said Caesar.
Even though health plans can be bullies, the best way to negotiate is always from the perspective of logic, fairness and need, he said. The negotiation phase is the right time to make sure a contract "is clear and thorough on all of the terms that are important," rather than halfway through the contract year.
A Web-based Academy resource, "AAFP Contract Negotiations," offers a wide range of information and tools, such as FP Assist, a clearinghouse of management consultants and attorneys for family physicians. Also listed on the Web page are links to various Family Practice Management articles and an AMA publication, Model Managed Care Contract, Fourth Edition, (PDF file: 68 pages / 857 KB. More about PDFs.) that offers an in-depth look at contracting, including definitions and red flag terms and clauses.
For starters on how to get the best deal for your practice, consider these tips from the experts.
- Keep your payers balanced. "If you can, try to make sure that not more than 15 percent to 17 percent of your business is with any one insurance company," said Olds. "I can quit a company that only has 5 percent of my business, and my young partners hardly notice a thing."
- Know your territory. What percentage of patients do you have in an area? Olds said his practice takes care of thousands of patients in a town of around 80,000. "We have enough clout that they (health plans) have to pay attention," he said.
- Write a 90-day "out" into the contract. While small practices lack the leverage to do this, Olds said his sharpest tool is the termination clause. "If you find yourself in a bad contract where you're just losing money hand-over-fist, you can get out in 90 days" without cause, he said.
- Talk to the decision maker. "Oftentimes you're dealing with a lower-level person whose job is to say 'no' to everything. You've got to get past that person," said Caesar.
- Point out errors in the contract. A contract often is presented as a finished document to create the false assumption that it can't be changed, said Caesar. He recommends starting negotiations by revealing small inconsistencies you've found because it sets the stage for discussion about more controversial items.
- Maintain a professional attitude. Present logical reasons when requesting or resisting a change, said Caesar. "The physician must articulate … what the practice needs (for it) to be able to afford the requested change in terms of money, time or hassle."
- Set your practice apart. "The fact that you do a good job is why they're talking to you in the first place, but it's not why the plan is going to give you a whole lot of customized incentives in your particular document," said Caesar. Point out your practice's cutting-edge technology, its desirable geographic location, the young and healthy patient base, the depth and breadth of the practice, or the high rate of referrals coming in.
- Say no. "The single most important weapon in the physician arsenal is the word 'no.' It's also the single least used weapon in the physician arsenal," said Caesar. You have to be able to walk away. "There are lots of contracts out there, and taking a bad one doesn't help," he said.
Do you have a strategy for financial success in your practice? AAFP News Now would like to hear from you. How have you improved your practice's financial viability? Tell us your story by e-mailing ann@aafp.org.
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