Negotiation and the Alternatives

Josh Kaufmann, MA — Tue, 26 Oct 2010 16:05:36 +0000

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.

The Secrets to Getting an Increase: Secret No. 2

Josh Kaufmann, MA — Wed, 27 Jan 2010 16:14:00 +0000

In the last issue, I shared with you the first secret to negotiating an increase: As a provider, you have no value to an insurer.

I said, "You can argue all day long with an insurer about how great you are, about how poorly you're reimbursed, about this and this and that and that. And... when the day is over they will simply close out their email inbox and forget you."

In this issue, I'd like to life your spirits a bit and share the second secret to passing along an increase.

The Secrets to Getting an Increase: Secret No. 1

Josh Kaufmann, MA — Mon, 04 Jan 2010 16:18:00 +0000

Having reimbursement data gives you a number of advantages. Chief among them is knowledge about what the market is for your services.

As a healthcare practice, you sell your services to insurance companies while providing the services to patients. This is different from most industries where the purchaser and receiver of services is the same person or entity. Recognizing this distinction is critical to successful negotiations. Recognition and acceptance of this distinction will shape your strategy.

Let's consider a healthcare marketplace where the purchaser and receiver are the same person and the negotiation strategy that would make sense. In this scenario, a patient (or receiver of services) is also the payer (or purchaser of services). If you want more money for an office visit -- a 99213 -- you would ask the patient or receiver of services to consider the value of what you provide. And, you would ask them to pay more money.

Tips on Negotiations: Rethinking your approach

Josh Kaufmann, MA — Tue, 20 Oct 2009 15:20:00 +0000

Did you know that Best Buy negotiates? A friend of mine bought a washing machine and discovered, much to her pleasant surprise, that salespeople at Best Buy have up to 5 percent discretion. I didn't know this, but, now knowing, I will never pay full price again.

You might ask yourself, why didn't you know this? Why isn't this common knowledge? It's not in any of their promotions or commercials.

Think about it.

If everybody knew that Best Buy negotiates, everybody would negotiate. If Best Buy ran commercials saying it has 5 percent wiggle-room, everybody would shoot for it.

Newsletter

Negotiation and the Alternatives

The Secrets to Getting an Increase: Secret No. 2

The Secrets to Getting an Increase: Secret No. 1

Tips on Negotiations: Rethinking your approach