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INCREASING LEVERAGE IN PAYER NEGOTIATIONS. MGMA National Conference October 2013. Learning Objectives. List the three elements that drive leverage in payer contracting Determine their cost to establish a pricing policy Use a reimbursement analysis to establish a contracting strategy.

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increasing leverage in payer negotiations

INCREASING LEVERAGE IN PAYER NEGOTIATIONS

MGMA National Conference

October 2013

learning objectives
Learning Objectives
  • List the three elements that drive leverage in payer contracting
  • Determine their cost to establish a pricing policy
  • Use a reimbursement analysis to establish a contracting strategy
central message
Central Message

You have more leverage than you think

and

More than payers will acknowledge

leverage is market power
Leverage is Market Power
  • Compels the payer to do what they are not already inclined to do
  • Increasing leverage can be accomplished by any practice
  • Improving Market Power is a strategic issue
    • It is not a task that can be completed a few days before the big meeting
  • There is a resistance to hope
the 1st leverage element
The 1st Leverage Element

Market Position

  • Three Parts –
    • Competition
    • Primary Care Orientation &
    • Geographic Isolation
  • Need to know, but little influence
competition
Competition
  • How many physicians are providing the same services vs. how many does the market need?
  • The population is being treated now, who is doing the work?
  • Can you take that business / are they taking yours?
  • Examine communities with similar populations.
these elements work together
These Elements Work Together

Geographic Isolation

Primary Care Orientation

improving market position
Improving Market Position
  • Primary Care Orientation
    • Increase name recognition
    • Raise consumer demand
    • Improve customer service
    • Increase consumer directed services
  • Geographic Isolation
    • Increase specialization
    • Focus on sub/micro markets
    • Provide some exclusive services
the 2 nd element is capacity
The 2nd Element Is Capacity
  • Capacity and Demand
    • Excess demand = a full practice
    • Excess capacity = insufficient demand
managing capacity is strategic
Managing Capacity is Strategic
  • We don’t think about capacity this way
  • Usually more capacity is assumed to be a good thing
  • Gets confused with growth
  • You have more control over capacity than demand
managing capacity is strategic1
Managing Capacity is Strategic
  • We don’t think about capacity this way
  • Usually more capacity is assumed to be a good thing
  • Gets confused with growth
  • You have more control over capacity than demand

Position your practice to have slightly more demand than capacity

assess demand
Assess Demand
  • New patient visits to all visits
  • Look at payer mix over time
  • Survey patients that request records
  • Monitor appointment wait times
  • Compare the number of physicians to similar markets
slide17

The Power of Excess Demand

Avg. Comm. Rate

Cost

the power of excess demand
The Power of Excess Demand
  • Manage payer mix
  • Identify and reduce the lowest paying payers
  • Manage the appointment schedule as an alternative to cancelation
  • The best solution is to renegotiate
    • This data documents why your rate request is appropriate
    • The data helps change the conversation
referral dependence
Referral Dependence
  • Most practices are not as referral dependent as they believe
    • Don’t let it become an excuse for inaction
  • Classify referral sources with a Referral Margin Analysis
  • Talk to your referral customers
    • “We will treat your patients”
    • Help them understand
3 rd element is using data
3rd Element is Using Data
  • You are the source of the data
  • Use the data to know what to ask for
  • Strengthen resolve by knowing the facts
  • The facts tell us what to negotiate
slide23

Avg. Comm. Rate

23% Increase

Cost

can you walk away
Can you walk away?

Excess Demand

Assume all RVUs replaced at Avg. Comm. rate

($47.42 - $38.46) x 7,000 = $62,727

Using Data To Make Your Case

Svcs

% MC

Rate

Value

Divided

7,000

103%

$

38.46

$

269,203

Cost

113%

$

42.19

Average Commercial Rate

127%

$

47.42

can you walk away1
Can you walk away?

Excess Demand

Assume all RVUs replaced at Avg. Comm. rate

($47.42 - $38.46) x 7,000 = $62,727

Using Data To Make Your Case

Svcs

% MC

Rate

Value

Divided

7,000

103%

$

38.46

$

269,203

Cost

113%

$

42.19

(23% improvement)

Average Commercial Rate

127%

$

47.42

use data to prepare yourself
Use data to prepare yourself
  • Increase confidence
  • Build internal support
  • Give you something to go back to in the heat of battle
  • Test and measure challenges to your plan
make a compelling argument
Make a compelling argument
  • Communicate through someone to decision makers
  • Reduce emotion
  • Take control over the discussion
  • Let the facts speak for you
useful tools data
Useful Tools - Data
  • Walk-away calculation
  • Reimbursement Analysis
  • Cost analysis (with commercial minimum)
  • Silent PPO Enforcement Strategy
  • Fee Schedule Analyzer
  • Contract Analysis
  • Benchmark Comparison
  • Service/Margin Analysis
invest in reporting
Invest In Reporting
  • Reporting off your Practice Management System (Crystal reports, BI vendors or similar)
  • Training (Excel, RBRVS, data transfer)
  • Off the shelf help (Win-Zip, Adobe, Monarch)
to increase leverage to maximum
To Increase Leverage to Maximum
  • Manage capacity to less than demand
  • Do all that can be done to improve Market Position
  • Analyze data to know the facts and to form your argument
  • Use data to demonstrate your “Correct” position to payers
  • Sometimes your maximum leverage is not enough – but is always more
slide32

If we pull this off,

We’ll eat like

kings

slide33

Call Me:

QUESTIONS

Randy Cook

AmpliPHY Physician Services

[email protected]

615.500.1959

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