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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


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




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


There is no “Best Way” or “Right Answer”The data tells us how

to argue


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


If we pull this off,

We’ll eat like

kings


QUESTIONS

Randy Cook

AmpliPHY Physician Services

[email protected]

615.500.1959


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