Contracting tips — How to succeed
By Stephen W. Earnhart, MS
CEO
Earnhart & Associates
Austin, TX
If you have ever been to a yard sale, bought something on eBay, or have children, you can negotiate your own managed care contracts. Unless you paid full price for the exercise equipment, didn’t actually bid on the eBay product, or let your kids run your home, you are qualified.
Up until a number of years ago, I used to subcontract managed care contracting for my facilities. "Leave it to the experts" was my thought. However, I got angry about the price I was being charged by one of these companies, and I decided to deal with the insurance companies myself.
For the hospital folks, chances are you are not the person doing these contract negotiations. You should, however, be included in the process.
Ask the people who do this if you can participate. It is enlightening, and it gives you a better dimension on the ABCs of health care.
One thing is important to remember: The insurance companies are in the business of making a profit. Did you know you can negotiate your phone rates, bank interest on savings accounts, and interest rate on car payments as well?
Understanding the science of negotiating
Life is a compromise. After all those negotiations, the insurance companies are relatively easy to handle. Insurance negotiating is a science, not an art.
So where do you start? You’ll need to know your case costs and implant costs. Then, you need to get in the right mind frame to deal with the insurance companies, so get angry!
You are getting ripped off with every contract you have, no matter what it is. You and your staff work your butts off for little reimbursement or gratitude.
Call every one of your insurance providers and tell them you need to begin re-negotiate your contract with them, NOW! Even if you have just contracted with them and have a year to go on the agreement, you want to start the process for the next term now.
Most contractors pay a percentage of Medicare groupers. See, right away you are starting to sweat. A grouper simply is one of nine groups of payment that all CPT codes (Current Procedural Terminology) fall into. Every surgical procedure has a unique CPT code. They are categorized based upon (supposedly) the complexity of the procedure.
It isn’t important to know what falls into what grouper, because you will never be able to control that factor. These groupers are what Medicare is going to pay us — nothing more.
The vast majority of insurance companies use these same groupers to dictate what they will pay you. (The government came up with the groupers, so they must be accurate and above reproach!)
Some of the payers will pay you a percentage of those groupers. The ticket is to get the highest percentage. For years, we in the outpatient surgery industry have taken low percentages.
There are some payers that only pay a percentage of Medicare, below Medicare rates. Oh, come on! You want to start out somewhere around 300% of Medicare rates.
Be prepared. When you say that, the payers, at the very least, will roll their eyes and laugh at you behind your back. But you need to set the tone that you are not going to accept a bad contract.
For the most part, an acceptable rate is probably about 160% of Medicare allowable. You might do better and may have to settle for less, but that is a benchmark to shoot for.
However, it will take you a number of meetings to get to that rate. Other payers will contract a percentage of charges they will pay. They will throw out all sorts of numbers, and your goal is to get up to about 90% of charges.
You now need to negotiate the "carve-outs." This is another intimidating phrase designed to make you uncomfortable, like "carve out your heart if you don’t accept what we offer you."
A carve-out is nothing more than adding a component to the contract that deals with your implants. Your goal is to get a percentage over what you pay for them.
You don’t make any money off of them, but you do have lots of paperwork associated with dealing with them.
Your time is worth something. Five percent over what you pay is acceptable. Make sure you list EVERY implant, or it will not be counted as a carve-out.
The bottom line: You have earned the highest reimbursement possible. The insurance industry is just trying to protect its money by giving us less. You will get more respect by not accepting their initial offers and let them know that you are just doing your job.
(Editor’s note: Earnhart & Associates is an ambulatory surgery consulting firm specializing in all aspects of surgery center development and management. Do you have additional questions? Contact Earnhart at 3112 Windsor Road, Suite A-242, Austin, TX 78703. E-mail: [email protected]. Web: www.earnhart.com.)
If you have ever been to a yard sale, bought something on eBay, or have children, you can negotiate your own managed care contracts. Unless you paid full price for the exercise equipment, didnt actually bid on the eBay product, or let your kids run your home, you are qualified.You have reached your article limit for the month. Subscribe now to access this article plus other member-only content.
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