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Dancing with the Devil. How to Negotiate with Managed Care Companies. Ron Howrigon – President, Fulcrum Strategies. Dancing With the Devil. The Process, Tactics, and Techniques for Negotiating Contracts with Managed Care Companies.

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dancing with the devil

Dancing with the Devil

How to Negotiate with

Managed Care Companies

Ron Howrigon – President, Fulcrum Strategies

dancing with the devil1
Dancing With the Devil

The Process, Tactics, and Techniques for Negotiating Contracts with

Managed Care Companies

slide4
Percent Annual Increase in National Health Expenditures (NHE) per Capita vs. Increase in Consumer Price Index (CPI), 1980-2008

Source: Kaiser Family Foundation calculations using NHE data from Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group, at http://www.cms.hhs.gov/NationalHealthExpendData/ (see Historical; NHE summary including share of GDP, CY 1960-2008; file nhegdp08.zip), and CPI data from Bureau of Labor Statistics at ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt (All Urban Consumers, All Items, 1982-1984=100, Not Seasonally Adjusted, U.S. city average).

distribution of national health expenditures by type of service 1998 and 2008
Distribution of National Health Expenditures, by Type of Service, 1998 and 2008

Hospital Care

Physician/ Clinical Services

Prescription Drugs

Nursing Home Care

Home Health Care

Other Personal Health Care

Other Health Spending

Notes: Percentages may not total 100% due to rounding. Other Personal Health Care includes, for example, dental and other professional health services, durable medical equipment, etc. Other Health Spending includes, for example, administration and net cost of private health insurance, public health activity, research, and structures and equipment, etc.

Source: Kaiser Family Foundation calculations using NHE data from Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group, at http://www.cms.hhs.gov/NationalHealthExpendData/ (see Historical; National Health Expenditures by type of service and source of funds, CY 1960-2008; file nhe2008.zip).

annual percentage change in national spending for selected health services 1998 2008
Annual Percentage Change in National Spending for Selected Health Services, 1998-2008

Source: Kaiser Family Foundation calculations using NHE data from Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group, at http://www.cms.hhs.gov/NationalHealthExpendData/ (see Historical; National Health Expenditures by type of service and source of funds, CY 1960-2008; file nhe2008.zip).

slide7
In the past three years (2006 – 2008),

the five largest insurance companies

(Wellpoint/Anthem, United, CIGNA,

Humana and Aetna)

have…

insurance companies
Insurance Companies

Increased Revenue by

10% to $170.8 Billion

insurance companies1
Insurance Companies

Decreased Pre-tax Profits by

23% to $10.4 Billion

physicians
Physicians

Over One Third of all Physicians report working more than 60 hours per week

physicians1
Physicians

The average Physician income has decreased by 5% when adjusted

for inflation

physicians2
Physicians

All other Professional/Technical workers have experienced a 3.5% increase in income after inflation adjustments

slide14
Insurance Companies are growing but making less money

Physicians are working harder and making less money

agenda
Agenda
  • Why are Managed Care negotiations critical to your business success
  • The negotiation process
  • Position evaluation
  • Goal setting
  • Strategy development and examples
  • Negotiation tactics and examples
  • Finalize agreement and contract language
  • Evaluate and measure results
why negotiate
Why Negotiate?
  • Health Care Reform means insurance companies are going to get more aggressive
  • Medicare is still going broke
  • Insurance companies profit declines
  • Managed Care is targeting physician expenses
  • Reverse the trend of the last 5 years
  • Protect your future
why is the fight between physicians and managed care
Why is the Fight Between Physicians and Managed Care?
  • Physicians – 30%
  • Hospitals – 30%
  • Pharmacy – 19%
  • Other – 7%
  • Administration – 11%
  • Profit – 3%
profit opportunity example
Profit Opportunity Example
  • Physician’s make up 30% of the total health care premium.
  • A 5% reduction in physician expense would equate to a 1.5% increase in profit for the managed care company.
  • This would be viewed by Wall Street as a 50% increase in total profits!
managed care vs physicians
Managed Care vs. Physicians
  • Physicians are poorly organized
  • FTC support of IPA destruction
  • Competition among physicians
  • Physicians are typically not skilled negotiators
  • No marketing budget
  • Poor job of public relations
evaluate your position
Evaluate your Position
  • Market position
  • Sub-Specialty expertise
  • Referral physician relationship
  • Payer mix
  • Payer fee schedules
  • Competitor capacity
evaluate your opposition
Evaluate your Opposition
  • Market Share
  • Competition
  • Current Performance
  • Leverage
  • Weakness
  • Intangibles
set goals
Set Goals
  • Reimbursement
  • Contract Term & Termination
  • Language
  • Walk Away Points
  • Opening Position
  • Negotiation Points
develop strategy
Develop Strategy
  • Negotiation is all about leverage!
  • “Let us never negotiate out of fear. But let us never fear to negotiate.” John F. Kennedy
strategies tactics general
Strategies & Tactics - General
  • Use numbers to your advantage
  • Limit of authority
  • Good Cop – Bad Cop
  • Only respond to offers not questions
  • Never negotiate against yourself
  • If you can’t get the whole lunch at least get a sandwich
strategies tactics general1
Strategies & Tactics - General
  • Split the difference
  • Negotiate the person in addition to the contract
  • The garage sale
  • Buy Low – Sell High
  • The ultimatum
managed care strategies
Managed Care Strategies
  • Delay – “our lady of perpetual negotiations”
  • Limit of authority – “corporate, legal, budget, etc.”
  • Two steps forward and three steps back
  • Funny math
  • The run around
managed care strategies1
Managed Care Strategies
  • Divide and conquer – hospital vs. physicians
  • All products or no products
  • Indifference
  • Employer communications
  • Termination language and dates
strategies tactics physicians
Strategies & TacticsPhysicians
  • Musical chairs
  • Health Plan report cards
  • Patient donation
  • Patient communication
  • Service location
  • Sell a termination
  • Termination
negotiation points to remember
Negotiation – Points to Remember
  • “The best battle plan rarely survives the first contact with the enemy.”
  • Adapt, Adjust and Overcome
  • Everything is negotiable
  • I can’t vs. I won’t
close the deal
Close the Deal
  • Be prepared to trade
  • Meet in the middle
  • Be creative
  • Don’t get hung up on small language issues
  • Understand which language issues are big
contract language negotiations
Contract Language Negotiations
  • If you don’t understand the language it will probably be used against you
  • These agreements are drafted by managed care companies, for managed care companies. Don’t expect fairness

“The following examples and for illustrative purposes and do not constitute any legal advice. The presenter is not an attorney. When entering into any legal contract you should always consult your attorney.”

contract language examples
Contract Language Examples

3.1 Payments. Payments for Covered Services will be the lesser of the billed charge or the applicable fee under Exhibit C, subject to the Payment Policies and minus any applicable Copayments, Coinsurance and Deductibles. The rates in this Agreement will be payment in full for all services furnished to Participants under this Agreement. Group and its Represented Physicians shall submit claims for Covered Services at the location identified by CIGNA and in the manner and format specified in this Agreement and the Administrative Guidelines. Claims for Covered Services must be submitted within 180 days of the date of service or, if Payor is the secondary payor, within 180 days of the date of the explanation of payment from the primary payor. Claims received after this 180 day period may be denied except as provided in the Administrative Guidelines, and Group and its Represented Physicians shall not bill CIGNA, the Payor or the Participant for those denied services. Amounts due and owing under this Agreement with respect to complete claims for Covered Services will be payable within the timeframes required by applicable law.

contract language examples1
Contract Language Examples

3.1 Payments. Payments for Covered Services will be the lesser of the billed charge or the applicable fee under Exhibit C, subject to the Payment Policies and minus any applicable Copayments, Coinsurance and Deductibles. The rates in this Agreement will be payment in full for all services furnished to Participants under this Agreement. Group and its Represented Physicians shall submit claims for Covered Services at the location identified by CIGNA and in the manner and format specified in this Agreement and the Administrative Guidelines. Claims for Covered Services must be submitted within 180 days of the date of service or, if Payor is the secondary payor, within 180 days of the date of the explanation of payment from the primary payor. Claims received after this 180 day period may be denied except as provided in the Administrative Guidelines, and Group and its Represented Physicians shall not bill CIGNA, the Payor or the Participant for those denied services. Amounts due and owing under this Agreement with respect to complete claims for Covered Services will be payable within the timeframes required by applicable law.

contract language examples2
Contract Language Examples

3.13 Excluded Services. This Agreement excludes services that CIGNA has elected to obtain under an arrangement between CIGNA or a CIGNA Affiliate and a national or regional vendor or provider or a capitated provider, except as otherwise agreed by CIGNA. Group and its Represented Physicians will not be reimbursed and will not bill Participants for any such excluded services. If CIGNA notifies Group that it no longer chooses to exclude a particular service from this Agreement, that service will no longer be excluded and those services will be reimbursed as specified in Exhibit C.

contract language examples3
Contract Language Examples

Covered Services will be reimbursed at the lesser of billed charges or the CIGNA RBRVS allowable fee, less applicable Copayments, Deductibles and Coinsurance. The CIGNA RBRVS allowable fees are updated by CIGNA periodically to reflect new information regarding RVU’s, GPCI’s, conversion factor, and the addition of new codes and services. The GPCI locality used for this agreement is North Carolina.

contract language examples4
Contract Language Examples

Covered Services will be reimbursed at the lesser of billed charges or the CIGNA RBRVS allowable fee, less applicable Copayments, Deductibles and Coinsurance. The CIGNA RBRVS allowable fees are updated by CIGNA periodically to reflect new information regarding RVU’s, GPCI’s, conversion factor, and the addition of new codes and services. The GPCI locality used for this agreement is North Carolina.

contract language example
Contract Language Example

9.2 This Agreement may be terminated by either party upon 90 days written notice effective at the end of the initial term or at the end of any renewal term.

contract language example1
Contract Language Example

9.2 This Agreement may be terminated by either party upon 90 days written notice effective at the end of the initial term or at the end of any renewal term.

evaluate and adjust
Evaluate and Adjust
  • Postmortem
  • Surprises
  • Effectiveness of strategy and tactics
  • Adjustments for the next negotiation
key points
Key Points
  • Negotiation is a process not an event!
  • You must effectively negotiate your managed care contracts to succeed.
  • Knowledge, analysis and planning are essential for a successful negotiation.
  • Contract language negotiations can be as critical as the rate negotiations.
  • Be prepared. Don’t go into a gun fight armed with a knife.
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