Be prepared to ask for changes in contracts
August 1, 2008 3 minutes read
Be prepared to ask for changes in contracts
Know costs, volumes, market to support requests
(Editor's note: In this first part of a two-part series on contract negotiations, we tell you what to do when your contract is up for renewal. In next month's issue, we give you tips for handling contract renewals, and we tell you how to identify the best potential contracts.)
A 4% annual increase for the life of the facility is not a typical offer from a payer negotiating a contract with an outpatient surgery facility, but that is exactly what was offered to, and quickly accepted by, one facility.
"A 4% increase can be great or not so great, depending on the volume of patients for that particular payer and the reimbursement prior to your negotiations," points out Sharon Hohlfeld, contract manager for Physicians Endoscopy, a Doylestown, PA-based ASC development and management company. Although it makes sense to negotiate automatic annual increases for multiyear contracts, not all payers agree to them, and not all payers offer a set increase for a lengthy term, she points out.
While 4% might sound good now, it is hard to predict if it will be enough well into the future, and it might not be right for all facilities, Hohlfeld warns. "If the consumer price index increases by 8%, then 4% isn't so great," she says. "I can't provide the details to validate this as a great negotiation, nor can I predict that it won't be. What I can tell you is that we are locked in at 4%. Only time will tell."
Asking for annual increases for multiyear contracts is one tactic for successful negotiations, but there are several issues that should be addressed to protect the financial health of your facility, suggests Hohlfeld. "I have a lot of payers tell me that they are surprised by some of the requested changes; that no one asks for this or for that," she says. "My guess is that a lot of facility representatives are accepting the contracts presented to them either because they believe they have to accept it, or because they haven't read them thoroughly."
You must read the proposed contract carefully, and be prepared to ask for changes, says Hohlfeld. Even if you are a small facility and you are negotiating with a large, national payer, the worst that can happen if you ask for a change is that they say "no," she points out. "Then, be prepared to make a corporate decision about accepting the contract without the change," she adds. You do not want to put yourself in a situation that is not financially beneficial for your program, she says.
When reading your contract, be sure to look for more than reimbursement figures, Hohlfeld says.
When a contract requires notification of changes within the facility, be sure the request is reasonable, Hohlfeld says.
Typically, a payer wants to be notified if fees are changed, if a new owner is added, or if there is an address change for the facility, she says. One notification requirement that Hohlfeld asks to be deleted is a requirement to notify the payer if a new physician comes into the practice. "The physician has already gone through the process of negotiating for physician fees with the payer, so the payer knows everything about the physician," she says. Another letter from the facility is just extra work, Hohlfeld points out.
Pay close attention to amendments to the contract and how they are handled, suggests Hohlfeld. "Payers will have language in the contract that states that they have 60 days to notify providers of changes or amendments to the contract, then the provider has 30 days to oppose the change," she explains. If the facility does not notify the payer within 30 days to contest the amendment or request changes, it automatically goes into effect, Hohlfeld says. "We try to get this language taken out of every contract so that the payer has to send an amendment for review that requires signatures and states an effective date," she says. This reduces the risk that the initial notification is not acted upon in a timely manner due to mail delays, vacations, or getting mixed in with other paperwork, Hohlfeld explains.
Be sure to read every page and every detail of the contract, says Hohlfeld. "We deal with large payers that operate in many states, and we can't assume that a payer's contract in Michigan is the same as their contract in Texas," she says.
A spreadsheet with contacts, phone numbers, important dates, special clauses, and other important information is helpful, sources suggest.
A 4% annual increase for the life of the facility is not a typical offer from a payer negotiating a contract with an outpatient surgery facility, but that is exactly what was offered to, and quickly accepted by, one facility.You have reached your article limit for the month. Subscribe now to access this article plus other member-only content.
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