Private practice: negotiating with insurance companies

[shangrila]

Private practices usually have to negotiate with insurance companies to set a rate for their services. I am very confused by this concept so I would appreciate it if anyone could explain the basics of this negotiating process and why it happens?

Do you only talk to one insurance company or do you find the one with the best rate? Why do larger practices have more leverage in the negotiations? Do large hospitals have to go through this negotiation process as well? How does this relate to in/out-of-network?

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[Priapism4tooLong]

You might want to post this on the pre-med forums. I'm not sure if anyone will know here.

 

[Daodejing]

^I think he means *physician/resident* forums or any place else that's frequented by more attendings/residents.

On another note, I do wish the business of medicine was emphasized better at schools. Even when it is offered, it tends to be so watered-down/uninformative.

 

[music2doc]

Private practices usually have to negotiate with insurance companies to set a rate for their services. I am very confused by this concept so I would appreciate it if anyone could explain the basics of this negotiating process and why it happens?

Do you only talk to one insurance company or do you find the one with the best rate? Why do larger practices have more leverage in the negotiations? Do large hospitals have to go through this negotiation process as well? How does this relate to in/out-of-network?

I worked in a clinic where we dealt with this sort of thing, but I'm not really sure where your confusion lies. You contract w/ a bunch of companies – basically ones from whom you are willing to accept the terms & agreed pricing. (They basically tell you what they're going to pay. Obviously, if you are the only show within a few hundred mile radius doing XYZ, you are going to have quite a bit more sway when it comes to asking for better payment. That's simply how economics works.)

Everyone who works w/ an insurance company has to negotiate their terms.

In-network means you have a contractual agreement with the insurance company and the patient's plan includes you (i.e., some plans – most plans now w/ Obamacare – have restrictions on which providers within a given insurance provider's network are "in-network" for a given plan).

 

[Winged Scapula]

Step 1: apply to be on insurance panel (i.e., be a provider on that company's plan); you read requirements for credentialing and submit paperwork
Step 2: after credentialing, the insurance company will send a contract which states, "we will pay you x% of Medicare reimbursement rates"
Step 3: you negotiate a higher rate based on x, y and z that you have to offer
For example, my partners and I command a larger than average reimbursement because we are the largest group in the state (so we can serve more of their members; this is very important to an insurance company: coverage), because we are fellowship trained (used to be the only ones in the area), have 4 offices so cover a wide range of hospitals and because we have data to show that fellowship trained surgeons in our specialty provide better care
Step 4: sign contract or refuse contractual offering
Step 5: insurance company tells you, "don't tell anyone we gave you this great rate"; of course, they tell everyone that so you think you are getting a special deal when you really aren't
Alternate Step 1-5: sometimes insurance companies will contact you, asking you to apply. These are almost always Medicaid type plans with poor reimbursement. You are not obligated to accept these; I take none which offer me less than Medicare reimbursement rates.

Sometimes negotiations can lead to some "interesting" conversations.

My partner (after we had added 2 other surgeons to our group): "So we get 130% of Medicare rates, and we'd like to add Drs. X and Y, as they are now under our Tax ID Number."
Insurance Company Rep: "Yes I see that Drs X and Y have been contracted with us at 90% of Medicare, so we will send a new contract to you for all of you to sign."
My partner: "Ok, so we will all get 130% of Medicare, right?"
ICR: "No, it will be for 90%."
My partner <WTF>: "No, we should all get 130% not 90%. We are providing more coverage for your members and as a larger group, we cover more hospitals giving your members better service."
ICR: "Yes, I understand, but we can't do 130%."

--- this goes on for some time

ICR: "It sounds as if we cannot come to an agreement, so we will just cancel the contract for all of the doctors."
My partner: <WTF>. "Please don't do that, I will call you back." <calls me>
Me: <trying not to laugh>: "So have you told Dr X (a "bigwig" in our specialty, former national society president) that you got his contract cancelled?"

--- long story short, we could not get them to agree to 130%, but we did get them to back off on dropping us from the panel and giving us 115%; loss for the 2 of us, gain for the other 2 surgeons.

Fun times.

These contracts are common for everything. Another example:

Office mgr <handing me a check to sign for biopsy needles>: "I need your signature here."
Me: "That's a lot of money. How many needles are we buying?"
Mgr <shows me bill>
Me: "That's like $47.50 a needle; I'm pretty sure we normally pay a lot less for them. Can you see what's going on?"
Mgr: "Sure"

She comes back a day later. We were being billed the non-contractual price for needles (yes, $47.50 each), as opposed to our contractually agreed upon price of about $15.00/needle. Apparently, our contract needed to be renewed and they sent an email to our former office mgr which of course, went unanswered and they never bothered to call or otherwise contact us, so just decided to charge us the "going rate".

I refused to pay that price and told her to send back the needles until they renewed our contract at the prior price, or we would just use the needle from their competitor.

 

[shangrila]

Thanks for your elaborate explanation and funny anecdotes Winged Scapula! Your post created a few more questions if you don't mind (simple answers are fine):

What factors usually determine a doctor's negotiated reimbursement rates other than # of doctors in practice, fellowship, experience/status (but the "big-wig" didn't seem to get paid more in your story)? Why does there have to be variation between what different doctor's are paid for the same consult or procedure? and there seems to be quite a LOT of variation, ie. 90% vs. 130% of Medicare is 50% more!

I read in the news that some private practice doctors are no longer accepting Medicare due to low reimbursement rates, does that mean they will only accept private employer/self-bought plans?

So out-of-network means the doctor doesn't have a negotiated pricing contract with the patient's insurance company - how would reimbursement rates be determined then?

What do you mean when you say that you have 4 offices instead of just one??? How do you divide your time between the 4 offices and wouldn't you have to pay 4 times the rent???

Lastly, is there a place where a future doctor can learn about these things? I can't seem to find a focused source of valuable information.

 

[Sephiroth]

Sometimes negotiations can lead to some "interesting" conversations.

My partner (after we had added 2 other surgeons to our group): "So we get 130% of Medicare rates, and we'd like to add Drs. X and Y, as they are now under our Tax ID Number."
Insurance Company Rep: "Yes I see that Drs X and Y have been contracted with us at 90% of Medicare, so we will send a new contract to you for all of you to sign."
My partner: "Ok, so we will all get 130% of Medicare, right?"
ICR: "No, it will be for 90%."
My partner <WTF>: "No, we should all get 130% not 90%. We are providing more coverage for your members and as a larger group, we cover more hospitals giving your members better service."
ICR: "Yes, I understand, but we can't do 130%."

--- this goes on for some time

ICR: "It sounds as if we cannot come to an agreement, so we will just cancel the contract for all of the doctors."
My partner: <WTF>. "Please don't do that, I will call you back." <calls me>
Me: <trying not to laugh>: "So have you told Dr X (a "bigwig" in our specialty, former national society president) that you got his contract cancelled?"

--- long story short, we could not get them to agree to 130%, but we did get them to back off on dropping us from the panel and giving us 115%; loss for the 2 of us, gain for the other 2 surgeons.

What kind of terms are on these contracts? For example, can they just be cancelled at any time? In this scenario, was it that Drs X and Y were already on this insurance plan at the lower rate before joining your practice? Because if the 2 of you already in the practice would be having much higher volume, it may have been better to leave it at you 2 at 130 and the other 2 at 90 if that were possible.

These kinds of issues seem to show the value of, for one, larger practices, as you have much more leverage if losing a contract with your practice means a lot more patients on their plan would have to go elsewhere or switch providers, and there are fewer alternatives nearby, and also having multiple insurance companies in an area that will be willing to step in and offer more agreeable terms should a competitor lose a contract, and try to take their customers. I did a quick search and found this: http://blog.medicaljustice.com/can-doctors-form-a-union/ It seems that if the latter is met, then there's the issue of how to handle the anti-trust/price-fixing issue for the former. Large hospital systems with physician employees seems to help on that negotiation front, but many physicians seem to dislike it for other reasons. Not sure if there are more ideal solutions to that.

 

[Winged Scapula]

What kind of terms are on these contracts? For example, can they just be cancelled at any time?

I don't have the contracts in front of me, but I suspect there is some clause which allows them to remove providers from the panel.

In this scenario, was it that Drs X and Y were already on this insurance plan at the lower rate before joining your practice?

Yes, they were. This was one of the big plans.

Because if the 2 of you already in the practice would be having much higher volume, it may have been better to leave it at you 2 at 130 and the other 2 at 90 if that were possible.

That's not an option. All providers are billing under one corporate Tax ID number; therefore, the contracts are by TIN and all providers are paid the same.

These kinds of issues seem to show the value of, for one, larger practices, as you have much more leverage if losing a contract with your practice means a lot more patients on their plan would have to go elsewhere or switch providers, and there are fewer alternatives nearby, and also having multiple insurance companies in an area that will be willing to step in and offer more agreeable terms should a competitor lose a contract, and try to take their customers.

Exactly. I think sometimes hospitals, vendors and insurers forget we're in a large city and have many other options of places to practice and insurance panels. It also comes into play with colleagues; for example, a large multidisciplinary oncology group has asked us several times to join them so they have a surgical branch. We have always said, "no", preferring to maintain our independence. Recently they considered hiring a surgeon to join their practice. We were made aware of this and told them, in no uncertain terms, that if they hired a surgeon, they could forget about oncologic referrals from all 6 of us. They quickly abandoned the idea as we are (according to them), their largest source of referrals for breast cancer.

 

[Winged Scapula]

Thanks for your elaborate explanation and funny anecdotes Winged Scapula! Your post created a few more questions if you don't mind (simple answers are fine):

What factors usually determine a doctor's negotiated reimbursement rates other than # of doctors in practice, fellowship, experience/status (but the "big-wig" didn't seem to get paid more in your story)?

Those would be typical things; in essence, like any contract negotiations, you can command a higher reimbursement if you offer something your "competition" doesn't. Essentially anything you can think of can be used in negotiations. The "bigwig" in our practice doesn't make more simply because of who he is since we are all on the same contract and are all reimbursed the same (he does make more however because his volume is very high because of his "name" and 30 years of experience locally as a surgeon, so he's well known). However, it also needs to be said that he admits that he never renegotiated his contracts because it was "so much work". Thus, its not as if he couldn't have commanded more from those insurance companies where his reimbursement was lower than ours (before merging our practices), he just wasn't as assertive in contract negotiations.

Why does there have to be variation between what different doctor's are paid for the same consult or procedure? and there seems to be quite a LOT of variation, ie. 90% vs. 130% of Medicare is 50% more!

LOL…I suppose it would be if Medicare paid a lot. 50% more of nothing is still not very much! The reason for the variation is very complex, based on coverage, number of members, geographic variation, etc. This is likely to change with reimbursements being tied to outcomes or even part of a contractual agreement with hospitals for bulk payments based on CPTs.

I read in the news that some private practice doctors are no longer accepting Medicare due to low reimbursement rates, does that mean they will only accept private employer/self-bought plans?

Yep. They can accept private insurance or self-pay if they wish. It is not unusual to tailor practice based on reimbursement. For example, I do not place brachytherapy catheters for patients with cancer on TriCare because the reimbursement is *lower* than the cost of the catheter (several thousand dollars); each one I place means I lose money, something I am not willing to do. Of course, its unfair to patients but they need to be the ones that complain to the insurance company for fair reimbursement if they see providers refusing to take their policies.

So out-of-network means the doctor doesn't have a negotiated pricing contract with the patient's insurance company - how would reimbursement rates be determined then?

They are typically based on something called "reasonable" or "customary" or "prevailing charges". Most insurers will pay a portion of out of network prevailing charges; your co-insurance pays the remainder or you pay out of pocket. On occasion, a patient needs an out of network provider to provide needed services. For example, SCAN (an Arizona Medicare plan) does not have any plastic surgeons on its panel that do breast reconstruction. When I see a patient who needs a mastectomy and wants reconstruction, we go through this every time: SCAN tells the patient they can't see the plastic surgeons I work with because they are not on SCAN. They advise the patient to see the plastic surgeons on their role. Those plastic surgeons advise the patient that yes, they do take SCAN, but they don't do breast cancer reconstruction. Patient calls me in tears, yadda yadda and we have to explain to SCAN that they don't have a provider who provides the service their member needs and thus, they need to pay out of network to a plastic surgeon who does (and they should consider opening their panel to more plastic surgeons).

What do you mean when you say that you have 4 offices instead of just one??? How do you divide your time between the 4 offices and wouldn't you have to pay 4 times the rent???

When you own the buildings you don't have to pay rent. 😉 We lease an office in one building, and own the others (but yes, we have business loans to pay). I don't personally go to all 4 offices. There are 6 surgeons in our practice: 2 in the eastside office, 2 in the central office and 2 of us that go to the north and west office. The more offices you have, the wider coverage you can provide. This is not unusual.

Lastly, is there a place where a future doctor can learn about these things? I can't seem to find a focused source of valuable information.

I'd venture that each speciality society has some courses in practice management, etc. There is no large scale teaching on practice management in medical school and residency. Coming out of academic surgery, I was pretty naive about all this stuff, including billing and coding. I learned on the job and was fortunate to have a very wise business minded partner when I started.

 

[DermViser]

Step 1: apply to be on insurance panel (i.e., be a provider on that company's plan); you read requirements for credentialing and submit paperwork
Step 2: after credentialing, the insurance company will send a contract which states, "we will pay you x% of Medicare reimbursement rates"
Step 3: you negotiate a higher rate based on x, y and z that you have to offer
For example, my partners and I command a larger than average reimbursement because we are the largest group in the state (so we can serve more of their members; this is very important to an insurance company: coverage), because we are fellowship trained (used to be the only ones in the area), have 4 offices so cover a wide range of hospitals and because we have data to show that fellowship trained surgeons in our specialty provide better care
Step 4: sign contract or refuse contractual offering
Step 5: insurance company tells you, "don't tell anyone we gave you this great rate"; of course, they tell everyone that so you think you are getting a special deal when you really aren't
Alternate Step 1-5: sometimes insurance companies will contact you, asking you to apply. These are almost always Medicaid type plans with poor reimbursement. You are not obligated to accept these; I take none which offer me less than Medicare reimbursement rates.

Sometimes negotiations can lead to some "interesting" conversations.

My partner (after we had added 2 other surgeons to our group): "So we get 130% of Medicare rates, and we'd like to add Drs. X and Y, as they are now under our Tax ID Number."
Insurance Company Rep: "Yes I see that Drs X and Y have been contracted with us at 90% of Medicare, so we will send a new contract to you for all of you to sign."
My partner: "Ok, so we will all get 130% of Medicare, right?"
ICR: "No, it will be for 90%."
My partner <WTF>: "No, we should all get 130% not 90%. We are providing more coverage for your members and as a larger group, we cover more hospitals giving your members better service."
ICR: "Yes, I understand, but we can't do 130%."

--- this goes on for some time

ICR: "It sounds as if we cannot come to an agreement, so we will just cancel the contract for all of the doctors."
My partner: <WTF>. "Please don't do that, I will call you back." <calls me>
Me: <trying not to laugh>: "So have you told Dr X (a "bigwig" in our specialty, former national society president) that you got his contract cancelled?"

--- long story short, we could not get them to agree to 130%, but we did get them to back off on dropping us from the panel and giving us 115%; loss for the 2 of us, gain for the other 2 surgeons.

Fun times.

These contracts are common for everything. Another example:

Office mgr <handing me a check to sign for biopsy needles>: "I need your signature here."
Me: "That's a lot of money. How many needles are we buying?"
Mgr <shows me bill>
Me: "That's like $47.50 a needle; I'm pretty sure we normally pay a lot less for them. Can you see what's going on?"
Mgr: "Sure"

She comes back a day later. We were being billed the non-contractual price for needles (yes, $47.50 each), as opposed to our contractually agreed upon price of about $15.00/needle. Apparently, our contract needed to be renewed and they sent an email to our former office mgr which of course, went unanswered and they never bothered to call or otherwise contact us, so just decided to charge us the "going rate".

I refused to pay that price and told her to send back the needles until they renewed our contract at the prior price, or we would just use the needle from their competitor.

Good mother of God.