cncrsrgry

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Nov 24, 2008
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does anyone know anything about the process of negotiating with insurance companies for higher reimbursement? I assume if you are the only provider or a large provider in an area and threaten not to take that insurance, they would be required to pay you out of network fees if those patients contiued to go see you. This would cost the insurance company money. Is this correct? Has anyone successfully done this?
Thx in advance
 

droliver

Moderator Emeritus
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May 1, 2001
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VERY hard to get anywhere on that. Insurers have little interest in negotiating with individuals, and with margins tight for them, they have even less. The only people who are successful with this are usually large single speciality or multi-speciality groups who have a dominant position in a local market
 

core0

Which way is the windmill
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does anyone know anything about the process of negotiating with insurance companies for higher reimbursement? I assume if you are the only provider or a large provider in an area and threaten not to take that insurance, they would be required to pay you out of network fees if those patients contiued to go see you. This would cost the insurance company money. Is this correct? Has anyone successfully done this?
Thx in advance
Kind of correct. Usually most plans have in network and out of network providers. For in network the patient pays the co pay and you agree to accept the amount for the encounter. For out of network the patient usually has to pay a percentage of the encounter fee and the company pays the rest. The amount can vary widely by insurance company and plan. I have seen everything for the patient pays 10% to the patient pays 80%. 20/80 and 30/70 seem to be common splits. In theory you could charge some exhorbinant fee and bankrupt the insurance company but there are usually two limitations on this. One is the amount of money the patient is willing to pay to go out of network. Patients are quite price sensitive to most health care costs. The other issue is that insurance companies have a "usual and customary" payment for an encounter or procedure. This is the amount they will pay. If you charge $400 and the usual and customary is 200 dollars then they will pay $160 (for 20/80) and the patient would pay $40. You could try to get the rest out of the patient by balance billing but that becomes very difficult. For more on this:
http://money.cnn.com/2005/05/26/pf/insurance/usual_and_customary/

So in reality it usually costs the insurance company less if you are out of network and the patient much more.

As far as negotiating there are a number of factors that come into play. They mostly range around scarcity. If there is a lot of competition in the market such as in primary care then its really hard to negotiate a rate much above Medicare. On the other hand if you are the only specialist in the area you can demand a lot. There is a finite amount that you can demand otherwise its easier and cheaper for the insurance company to send everyone out of network. The practice manager for the last practice I worked for was very good about this. He would keep the big payors (2-3 insurance companies with 75% of the market) in the upper middle range of payments. Every year he would look at all the payors and invite the 2-3 lowest payors to pay more. If they declined he would drop them and invite one of the plans we didn't take to come on board. Since the competing practice had long wait times there was always someone waiting to come on board and the dropped plans were a reminder to the others of what could happen. He also looked at the true cost of the plan. There was one plan that paid well but was a nightmare to work with. He calculated that it would take two additional approvals to get all the prior auth work done which made it a very poor deal. They were dropped with the option to come back when the prior auth was easier to deal with.

The other two issues is that most insurance commissions require a plan to maintain an adequate number of specialists. What that is varies widely so if you are in a state with an aggressive insurance commission then insurance companies may be more tractable. The other issue is that not having an insurance contract with a company may play havoc with your referral base. If you are in surgery for example and oncology has a big payor you don't have they will generally change the referral pattern rather than deal with the hate and discontent of out of network providers. Having your contracts aligned with your referral base may or may not be worth a few percent.

Here's a couple of articles on the basics:
http://www.physiciansnews.com/law/204.html
http://www.aaos.org/news/aaosnow/jan09/managing2.asp

Also MGMA and your specialty society may have information on this.

David Carpenter, PA-C