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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


Increasing leverage in payer negotiations

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




Increasing leverage in payer negotiations

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


Increasing leverage in payer negotiations

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


Increasing leverage in payer negotiations

If we pull this off,

We’ll eat like

kings


Increasing leverage in payer negotiations

QUESTIONS

Randy Cook

AmpliPHY Physician Services

Rcook@AmpliPHYps.com

615.500.1959