Working with fewer payers can pay off
In the right market, select contracting works
This year’s round of managed care contract negotiations is running quite differently for the Murfreesboro (TN) Medical Clinic. The 100-physician multispecialty clinic expects to contract with five managed care partners a sharp drop from the more than 30 relationships it had two years ago.
Murfreesboro Medical isn’t alone. Many physician groups in secondary markets are being more selective in the number of payers they contract with. And they’re using that selectivity as a bargaining chip to negotiate for stronger reimbursements.
Play ball but not with everybody
"Providers in secondary markets are beginning to use their leverage," says Donald Lloyd, FACMPE, executive director/CEO of Murfreesboro Medical Clinic. "You can’t boycott [MCOs], because that has antitrust implications. You’ve gotta play ball with somebody but not everybody."
"We’re probably signing 75% fewer [managed care] contracts than we were two years ago," echoes Angie Lewis, director of business development for The Harbin Clinic, a multispecialty group in Rome, GA. "Our old mode was to contract defensively and sign up with everyone. It became an administrative nightmare to keep up with processing different claim forms for carriers. We decided to change in conjunction with a new direction of wanting to share in the risks and rewards, to have true partnerships."
Lewis and others from the Harbin Clinic are in the process of meeting with major carriers they want to continue doing business with. In many of those negotiations, they plan to ask for services or reimbursement in exchange for the winnowing down of its payer relationships. In some cases, the practice would like to receive a bonus for cost savings and reductions in hospital utilization among its patients who receive benefits from a particular payer. In another case, Harbin Clinic fought for and won delegated credentialing for its physicians. Although the practice will continue to document credentialing of its physicians, it no longer has to submit paperwork proving the credentialing process is being followed. Although the payer has the right to examine Harbin Clinic’s credentialing files, the clinic no longer has to devote staff time to copying documents and filling out forms.
Lloyd’s contract negotiations with MCOs have proven just as productive. Last year, Murfreesboro Medical changed its withhold arrangement with one of the managed care organizations it does business with, Prudential HealthCare. The new arrangement gives Murfreesboro Medical Clinic a say in the criteria used to judge physician performance under the withhold agreement.
Clinic formed IPA to retain risk dollars
More significantly, the practice switched the risk mechanism from Prudential to an independent practice association (IPA) the clinic formed to act as a central unit for the withhold funds. Although these dollars must be refunded to Prudential if the practice does not meet the withhold agreement’s performance expectations, the IPA so far has not had to refund any withhold dollars to Prudential.
If your practice is considering taking the path that Lloyd and Lewis successfully traveled, you may want to consider these tips:
1. Examine the patient volume you are getting from each managed care organization you contract with. Although there is no magic cutoff number, you need to weigh the patient volume each contract brings you, particularly if it’s a contract that has delivered minimal growth in the last three years, says Richard Gold, a consultant with Towers Perrin Integrated HealthSystems in San Francisco.
2. Have the information systems and other infrastructure in place to track various managed care contracts. It’s essential to be able to track patient volume from a particular MCO and have the software in place to handle different billing systems, Lewis says.
3. Realize you have negotiating power. Things to negotiate for include reimbursement floors and ceilings, utilization management duties, and reimbursement and claims processing, Gold says.
4. Play up your selectivity to payers. Both Lewis and Lloyd say they essentially turned the tables on MCOs by explaining their selective contracting strategy to payers and playing up the patient loyalty that goes along with that. Murfreesboro Medical Clinic, for example, worked with Prudential HealthCare to convince Middle Tennessee State University, which employs about 2,500 people, to switch health plans because Prudential’s network includes Murfreesboro Medical Clinic. The college’s employees previously had to drive to Nashville for access to in-network providers under its old benefit contract.
5. Network with local employers. Lewis has developed relationships with benefit managers at area companies, and talks with these people regularly. This allows her to find out which carriers major employers are doing business with.
Is this kind of select contracting in the future for other markets? Gold believes the trend will be for MCOs to offer several different products, each with exclusive payer arrangements. For example, employers in a given market might choose from a Prudential-Columbia/HCA product or a Prudential product featuring a PHO network.
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