Reed Tinsley, CPA

Negotiation tip - Try to find out what the payer is interested in

The best negotiation is a win-win scenario for both of the parties to the negotiation, one where each party walks away from the negotiation table knowing something was won. To bring this off, find out what issues the payer is most interested in from a contracting point of view. Your goal is to deliver these issues to the payer in exchange for what you want to achieve as part of the negotiation process. In other words, try to create a “you scratch my back and I’ll scratch yours” situation. This is one way to you find your leverage.

Most payers are primarily concerned about what they pay out for medical costs. So, as an example, think about the cost drivers for your own medical specialty. Put yourself in the payer’s shoes and ask: How can all related costs be reduced for this medical specialty? The following are a few examples:

1. The cardiology group that worked with and taught the emergency room physicians how to properly diagnose real situations of cardiac arrest. This reduced the number of unnecessary treatment costs and admissions.

2. The primary care physician who, in conjunction with medical specialists, developed treatment protocols for specific clinical situations. This reduced the number of unnecessary referrals for specialty care. This, in turn, might reduce related costs for surgical and inpatient care.

3. The specialists above who participated in the development of the clinical protocols. The payer should reward these physicians in exchange for their decreased volume as a result of the protocols but, more important, for the protocols’ ability to reduce many other health care costs.

4. The radiology group that worked with the payer to identify situations where ordered radiological exams were unnecessary.

Of course there are many, more examples of these types of situations. The negotiation strategy here is clear: You will be much more successful if you make the negotiation a two-way street rather than making it a one-way, my way or no way, situation.

Leverage - The main key to physician contracting success

Leverage is a major pathway to successful negotiation of a managed care contract.  The ability to negotiate or renegotiate a managed care contract is often determined by the amount of leverage a particular practice or provider has in the marketplace. Consider the following scenario: A major managed care payer you contract with has decided to reduce the amount it will reimburse physicians for their services.  (Sound familiar?) Now answer this question: If you were to approach the payer in an attempt to renegotiate their proposed rate change, how do you think the payer would react to you? Would they listen to what you have to say or, as in most cases, would the payer simply tell you this is their policy-- take it or leave it? If the payer or payers in your service area adopt a take it or leave it stance in respect to your practice, the result may very well be future reduced physician compensation. 

Success in changing the terms of a managed care contract usually varies from locale to locale. However, success can be achieved only if the practice has the LEVERAGE to negotiate or renegotiate favorable contract rates and terms. This is the same type of negotiation that occurs when professional athletes negotiate their own contracts or in any other type of negotiation scenario. The party with the “upper hand,” whether perceived or real, will usually be the party who gets the most out of the negotiation. If a practice does not have leverage, it likely will have to accept whatever is offered by the managed care plan. More often than not, this offer will negatively impact the finances of the practice.

Define your leverage

Most physicians come to the negotiation table without a defined contract strategy.  This strategy must be developed before the negotiation process even begins. The core of the strategy is to define up front what leverage your practice or your delivery system. The failure to define leverage before negotiating has soured many physicians on the contracting process. Often this is because leverage did not exist in the first place, and the physician or physicians wasted time and resources trying to negotiate a contract they had no chance of winning. In other cases, they had leverage but nobody recognized it, resulting in a failed or unfavorable negotiation. Payers certainly are not going to bring up missed points of leverage with you.

A strategic planning self-assessment for physicians

Following is an example of our strategic planning self-assessment. The purpose of these self-assessments is to give you a concise checklist of best practices in a clinical practice. This checklist follows the Pareto Principle of focusing on the 20% of business practices that get you 80% of the results. Therefore, I don’t claim that it covers EVERYTHING. But it does cover a good percentage of the most important things.

Strategic Planning Checklist

 We do a strategic planning process at least annually.
 This process gathers input from key stakeholders and data about our practice and marketplace.
 We review our mission and vision for the practice.
 We assess the size and growth of the market for our services.
 We compare our own “penetration” to the size of the market.
 We assess trends in managed care and payments and analyze our contracts.
 We evaluate competitors’ strengths and weaknesses, and how we can gain an edge.
 We assess the strengths and weaknesses of our referral network.
 We evaluate the depth and breadth of our overall service offerings. We assess the strengths and weaknesses of our marketing.
 We assess our payers, including our payer mix.
 We evaluate our clinical utilization rates and quality or care outcomes.
 We evaluate our internal controls.
 We evaluate our cost structure and financial ratios.
 We review our technology.
 We take a hard look at the patient’s experience, and how to improve it.
 We assess the capabilities of our clinicians and staff and identify any gaps to fill.
 We review physician and staff compensation.
 We assess our risks, compliance, and malpractice insurance.
 We evaluate our relationship with local hospital(s).
 We analyze our financial strength, including capacity for debt, days receivables, trends in aging of receivables, collection ratios, and profitability by services.
 We assess our facility and location, including whether we are located in the optimal zip code/area to serve our desired patient base.
 We do an overall “Strength, Weaknesses, Opportunities, and Threats” or SWOT analysis about our practice.
 We determine which services and programs to expand, which to defend, and which to exit.
 We identify the top issues we need to address, and then identify key priorities to address these issues, achieve our vision, and be more competitive and profitable.
 We set annual performance/financial goals for our practice and develop a plan to achieve those goals.
 We assign specific accountability to achieve these initiatives, and a communication plan to follow up on them.

 

Are you finding those payer underpayments?

Did you know that payment accuracy rates among insurance companies have dipped as low as 77 percent according to the American Medical Association's Health Insurance Report Card, a survey published annually by the AMA. The results are, arguably, alarming. It's simply not healthy for your practice's bottom line if nearly one in four insurance payments – or even one in ten – is wrong. Spending a little time now to improve tracking and management of payments pays off down the line.

So do you know what you should get paid? It’s impossible to identify underpayments if you don’t know what you deserve to be paid. Ask all insurance companies with which you participate to provide a current fee schedule. They may balk or delay in providing you with their rates for all 7,000-plus CPT codes, but that’s ok. All you really need is a list of your top 25 CPT codes (including modifiers). Compile the list and request that the payer lists its fees for each one.
 
However, some payers may ignore your request or drag their feet when asked about payment allowables. The good news is that Medicare reimbursements are publically available; the Centers for Medicare and Medicaid Services (CMS) offer a fast and easy online look-up tool for Medicare. So if your contact is based on a percentage of Medicare, use this site to get an idea of what you should be getting paid.

http://www.cms.gov/apps/physician-fee-schedule/overview.aspx

Steps to Assess How the ICD-10 Transition Will Affect Your Physician Practice

Although the final rule on the proposed ICD-10 deadline change has yet to be published, it is important to continue planning for the transition to ICD-10. The switch to the new code set will affect every aspect of how your medical practice provides care, from registration and referrals to software/hardware upgrades and clinical documentation.

A critical step in planning for the transition is to conduct an impact assessment of how the new code sets will affect your organization. Your impact assessment should include the following:

Documentation Changes: You will need to consider the increased specificity of ICD-10 codes compared to ICD-9-CM codes and ensure that patient encounters are documented with appropriately comprehensive clinical descriptions. You should:

• Train staff to accommodate the substantial increase and specificity in code sets.
• Consider physician workflow and patient volume changes.
• Revise forms, documents and encounter forms to reflect ICD-10 codes.
• Evaluate processes for ordering and reporting lab/diagnostic services to health plans.

Reimbursement Structures: You should coordinate with payers on contract negotiations and new policies that reflect the expanded code sets since they can affect reimbursement schedules.

Systems and Vendor Contracts: Ensure your vendors can accommodate your ICD-10 needs. Find out how and when your vendor plans to update your existing systems. You will need to review existing and new vendor contracts and evaluate vendor offerings and capabilities against your organization's expectations. Work with your vendors to draft a schedule for needed tasks.

Business Practices: Once you have implemented ICD-10, you will need to determine how the new codes affect your processes for referrals, authorizations/precertifications, patient intake, physician orders and patient encounters.

Testing: Work with your vendors to determine the amount of time needed for testing and schedule accordingly.
 
ICD-10 will affect nearly all areas of your practice, but with a thorough impact assessment, you can keep your day-to-day activities running smoothly while you transition to ICD-10.

Keep Up to Date on ICD-10

Please visit the ICD-10 Web site  for the latest news and resources to help you prepare:

http://www.cms.gov/Medicare/Coding/ICD10/index.html

 

Should you terminate your physician provider managed care relationship?

A medical practice should determine whether it makes sense for the practice to continue its participation in the plan by answering the following questions; this should be done on an annual basis:

• Is the volume of patients higher than expected? If yes, evaluate the potential effects on other aspects of the practice. Determine if the practice’s payer mix is shifting dramatically to managed care.
• Is the volume of patients too small to warrant continued participation in the plan?
  Review the payor’s reimbursements and assess the level of fee discounts. Are such discounts acceptable to the practice?
• If applicable, is the withhold reasonable? If not, and the practice has not received any reimbursement of the withhold, take this into account when evaluating the fee discounts.
• Assess any administrative burdens placed on the practice by the plan. Do these burdens interrupt the efficiency of the practice?
• Is the plan adding competing physicians in the area of the practice’s medical specialty? If so, assess the potential impact on the practice’s future revenue.
• Evaluate the profit or loss on capitated contracts, if applicable.
• Evaluate how quickly the plan pays the claims submitted by the practice.

Now is also a good time to assess each major managed care payor of your physician practice and determine if it makes sense to either (1) Continue participation in the plan or (2) Renegotiate the contract. Now is also the time to develop a managed care strategy for your practice. As managed care grows in a particular area, exactly how does the practice intend to deal with it? Those that are prepared and proactive are usually the ones who are successful dealing with managed care.

Where are your physician's managed care provider agreements?

After a managed care contract is signed, it is important to make sure the office handles these payors correctly, handles their patients correctly, and makes sure the office continues to operate efficiently. As managed care continues to dominate a physician’s revenue stream, many practices find their offices become inefficient due mainly to all of the administrative burdens placed on it by managed care and lose revenues as a result of these inefficiencies. After signing managed care agreements, it is important to monitor practice compliance with them. First, the office should place all of their managed care information in to notebooks for easy access so that the office can effectively monitor these relationships.

For each managed care payor, the notebook should contain:

• A copy of the executed managed care contract;
• Reimbursement schedule for the practice’s most commonly utilized services;
• Any of the payor’s specialized forms, such as provider referral forms, and patient authorization forms.

Always remember that you should compare its managed care reimbursements to the agreed upon reimbursement schedule included in the managed care notebook for each payor. Payors do make mistakes reimbursing providers, often many more times than doctors realize.

Many practices find that in certain instances, what was approved for payment is different than the reimbursement schedule. This is why it is so important to monitor managed care reimbursements.  Therefore, each week take a sample of managed care EOBs (Explanation of Benefits) and compare the reimbursement to the amount shown on the reimbursement sheet in the managed care notebook. Differences should be appealed immediately. Of course many practice management systems today can be set up to monitor incorrectly payor reimbursement.

Top 10 tips for employers (physician medical practices)

These are excellent tips to employers provided by the Texas Workforce Commission; I think these practical tips apply to any physician medical practice no matter what state you practice in:

1. Hire for fit - train for skills - promote, transfer, discipline, or fire for documented cause.

2. Do yourself a favor - do not try to avoid payroll taxes, new hire paperwork, or unemployment claims by classifying temporary workers as "contract labor". That will only be a tax audit waiting to happen. Instead, consider hiring such workers through temporary staffing firms - that way, those firms get the unemployment claims.

3. Get as many company documents and required forms signed by employees at the time of hire as you can (it only gets harder after that), and report all new hires and rehires to the Attorney General’s New Hire Reporting office within 20 days of hiring.

4. Maintain a safe and healthy workplace in compliance with OSHA rules, and whether hiring, evaluating, promoting, transferring, disciplining, or discharging an employee, keep everything as job-related and consistent as possible, and never retaliate against an employee for reporting safety hazards, workplace discrimination, or other potential employment law compliance issues.

5. Have specific, written wage agreements with each employee, and get specific written authorization for any wage deductions that are not ordered by a court or required or specifically authorized by a law.

6. Unless an employee is clearly, absolutely, and undoubtedly in an overtime exemption category, do not pay on a salary basis, but rather pay an hourly or performance-based rate.

7. Never loan or advance money to an employee without getting a signed, written receipt and repayment agreement from the employee.

8. Give as much advance written notice as possible of pay and benefit changes.

9. In order to minimize the shock and disappointment factor that so often leads to unnecessary claims and lawsuits, treat employees fairly and consistently according to known, job-related rules and standards, follow stated policies as closely as possible, and avoid exceptions whenever possible.

10. In handling unemployment claims, file timely claim responses and appeals, present testimony from firsthand witnesses, and present clear documentation of warnings, policies, and other relevant facts.

Healthcare reform and a letter to my wife

When it comes to healthcare reform, depending on who you talk to, it's either the greatest thing since sliced bread or Darth Vader's evil cousin. Here, in the form of a letter my wife recently received, is some good about healthcare reform in my opinion:

Dear PAMELA TINSLEY:

This letter is to inform you that Humana Insurance Company will be rebating a portion of your health insurance premiums through your employer or group policy holder. This rebate is required by the Affordable Care Act - the health reform law.

The Affordable Care Act requires Humana Insurance Company to rebate part of the premiums it received if it does not spend at least 85 percent of the premiums Humana Insurance Company receives on health care services, such as doctors and hospital bills, and activities to improve health care quality, such as efforts to improve patient safety. No more than 15 percent of premiums may be spent on administrative costs such as salaries, sales, and advertising. This is referred to as the "Medical Loss Ratio" standard or the 85/15 rule. The 85/15 rule in the Affordable Care Act is intended to ensure that consumers get value for their health care dollars.

The Medical Loss Ratio rule is calculated on a state by state basis. In your state, Humana Insurance Company did not meet the 85/15 standard. In 2011, Humana Insurance Company spent only 83.5% of a total of $134,346,763 in premium dollars on health care and activities to improve health care quality. Since it missed the 85% target in your state by 1.5% of premium it received, Humana Insurance Company must rebate 1.5% of the total health insurance premiums paid by the employer and employees in your group health plan. We are required to send this rebate to your employer or group policyholder by August 1, 2012, or apply this rebate to the health insurance premium that is due on or after August 1, 2012. Employers or group policyholders must follow certain rules for distributing the rebate to you.

What is the 85/15 rule?

The 85/15 rule refers the ratio of the amount of premiums that an insurer collects to the amount it spends on claims. Under the PPACA, insurers are obligated to spend a minimum amount of the premium collected on medical claims or towards activities that improve health. In the case of the 85/15 rule, an insurer must spend 85% of the premium collected on medical claims on health improvement activities.

Ways in Which an Employer Can Distribute the Rebate

If a group health plan is a non-Federal governmental plan, the employer or group policyholder must distribute the rebate in one of two ways

Reducing premium for the upcoming year; or
Providing a cash rebate to employees or subscribers that were covered by the health insurance on which the rebate is based

If a group health plan is not a governmental plan or a church plan, it likely is subject to the Federal Employee Retirement Income Security Act of 1974 (ERISA). Under ERISA, the employer or the administrator of the group health plan may have fiduciary responsibilities regarding use of the Medical Loss Ratio rebates. Some or all of the rebate may be an asset of the plan, which must be used for the benefit of the employees covered by the policy.

Payments made to phony vendors

Remember if left unaccounted for and/or if a lack of oversight exists, an employee can set up a phony vendor account(s). Payments made to this phony vendor are actually deposited into the employee’s bank account. In another embezzlement scheme I've seen involving medical supplies, a real vendor is overpaid and the vendor pays the employee a kickback. So the moral of the story here is simple: How good are your internal controls with regard to vendor payments and vendor relations?