Negotiation and the Alternatives

70% of practices don’t negotiate their managed care contracts.  That shouldn’t be surprise when 100% of payers reject your first offer.  The consequences of not negotiating or not being able to are fairly extreme.  When your expenses go up – liability protection, employee benefits, rent – the money has to come from somewhere.  There are only a few things you can do to cope.

1). Staging. Spreading surgeries out over several visits is a response to multiple procedure discount payers charge if you combine procedures into one visit.  I call these Multi-Procedure Penalties, as it hurts you and the patient.  Some physicians believe staging’s unethical.  Others point out going bankrupt is the greater harm.

2).  Do more with less. As an entrepreneur, you should be mindful of the light bill and bloated staffing.  You should fill your appointment slots.  This strategy, however, has threatened the quality of the patient’s experience and your quality of life.  How many of you find medicine as enjoyable as you thought it would be in med school?

3).  Take a pay cut.  I once knew a physician who didn’t draw a salary for 3 years because his reimbursement was less than the cost for his supplies.  This doesn’t make sense.  Now, if you’re bleeding the practice, then you might consider keeping some money in the bank.

4).  Sell.  Sell.  Sell.  ‘Tis the season for consolidation.  It happens every 4-5 years, dozens of practices being gobbled up by hospitals.  Then, 3 years after that, everybody wants their independence. Many don’t fully consider the trade-offs.  You start off with a comfortable, guaranteed salary, but at some point, the hospital CFO is going to want to see some production. 

Negotiating managed care contracts is tough.  There’s no denying that.  It’s tough precisely because it’s the surest way to increase your profitability.  When you negotiate, you get paid more for the same effort.  It’s like getting a raise.  Yet, many practices devote too few resources to figuring it out.  Your profitability REQUIRES that you raise your prices from time-to-time.  Every other business does it, including the insurance company.  So should you. 

Of course, this means you have to know when “NO” isn’t the final answer.”  Put another way, when all they do is lie, how do you know when they’re telling the truth?  I’ll end with a few points and we’ll get into things more fully in another article. 

• Look for ways you can help the insurer – things you’re not already doing.  For example, commit to do more procedures in-office instead of at a facility.
• Can you legally prove others are making more money?  Be careful here.  Don’t ask your buddy to show you his rates.  Instead, go to BenchmarkDatabase.com.
• You’re not likely to get all you want in one year. Offer to have your increases spread out over 3-4 years.

In the end, it boils down to this.  If you’re hearing “no”, you’re not asking the right question. 

Josh Kaufmann is a partner with Praesentia LLC, a firm representing physicians in their managed care negotiations.  Praesentia specializes in small practices, helping them discover untapped leverage and bring their reimbursement rates in line with the market.  Kaufmann can be reached via praesentiallc.com or by calling 317.250.7564.