In recent years, for many physicians, negotiations with healthcare plans meant bruising battles. But lately a number of steadfast medical groups have increased their bargaining strength and flexed newly developed negotiating muscle.
Employing diverse means to gain leverage--by successfully positioning themselves as indispensable providers, using the news media or deploying information technology--these larger groups are winning concessions in what used to be take-it-or-leave-it contract sessions.
The summer of 2001 was hardly the "summer of love" for physician executives, but the season may be remembered best for the emergence of a national trend called provider pushback.
Here are some examples:
- In June, Partners HealthCare of Boston and insurer Harvard Pilgrim Health Care agreed on a new, four-year contract. The agreement returns withholds to 5,500 Partners physicians based on their achievement of certain quality measures rather than on cost containment.
- In July, a flurry of news reports from Ventura, Calif., to Savannah, Ga., told of physicians parting ways with managed care companies that would not raise reimbursements.
- In August, specialists in Washington state wrung from Regence BlueShield 7.2% physician fee increases worth $32 million.
HSC released a report in June based on the observations of its Community Tracking Study, which every two years assesses 12 healthcare markets through surveys and site visits. Researchers concluded that practice consolidations and close working relationships with major hospitals have given some medical groups a big leg up in contract negotiations as breadth of provider choice becomes a major factor for health plan purchasers.
The power shift was most marked in Seattle, Boston and Orange County, Calif., according to the HSC, but was occurring to lesser degrees elsewhere.
"We've seen this across such a diverse range of markets that we can't even link it to wealth or HMO penetration," says Cara Lesser, director of site visits for the study. Power, she says, seemed to flow to those groups that had attained brand-name status in their communities. "It is these must-have providers that have a lot of clout in health plan contract negotiations."
When its latest fee increase goes into effect in January, Regence, the largest health insurer in Washington state, will have upped physician reimbursements 18% in three years.
Regence officials say the impending 7% raise was needed to keep medical practices there viable. HSC says it was a strong physicians' advocacy campaign targeting employers and insurance brokers that resulted in pressure on the plan to grant the raise and preserve provider choice.
According to the HSC study, power shifted after Regence blinked in a 1999 showdown with more than 150 specialists in Seattle. That October, doctors protested a change in their payment system by refusing to renew their Regence contracts, effective January 2000. The revolt began when Regence said it would adopt Medicare's resource-based relative value scale, which lowered payments for many surgical services, orthopedists, neurologists and general surgeons.
"Although Regence claimed the overall decline would be only 3% to 5% across all specialty services, some surgeons argued payments for certain services would decrease by as much as 30%," HSC reports.
The standoff lasted six months before Regence finally consulted with a physician advisory panel and agreed to postpone implementation of the new payment system and adjust payments for surgical services.
The victory in Seattle was good news for other must-have specialists and big group practices, but few small groups and independent practitioners have developed as much market muscle, and these smaller groups still represent the bulk of medical providers. According to the AMA, 96% of self-employed physicians and 82% of physician-owned groups work with fewer than 50 practitioners.
"Often, smaller groups don't have the resources, knowledge or expertise to really understand contracts, though they seem to be learning," says AMA trustee Yank Coble, M.D., a Jacksonville, Fla., endocrinologist. These smaller groups, he says, are "doing the right thing for their patients and themselves when they don't sign contracts they can't survive with economically."
In many markets, for antitrust and other reasons, it isn't possible for physicians to form large groups, Coble says. He credits the model contracts that the AMA and other state, local and specialty societies have made available to their members with helping physicians better understand what they sign--or decide not to.
Washington State Medical Association President Nancy Auer, M.D., says even small groups have to be willing to say no to insufficient payments for care.
"Practices are finding that the anchor (of managed care) is pulling them under water, and while they may not survive without those managed care contracts, they can't survive with them," says Auer, an emergency medicine physician and vice president of medical affairs at Swedish Health Services in Seattle.
"That's especially true with managed Medicare--reimbursement does not cover physicians' costs for providing the care, and they can't make it up in volume."
Doctors have increased their pushback power by becoming more media savvy. One nasty side effect of a payer/physician dispute is market instability. In some cases, patients have been forced to find a new doctor or pay higher out-of-pocket costs to remain with their physician of choice.
Some medical groups have issued press releases, mailed letters to patients or purchased newspaper advertisements that detail their grievances, hoping to build and preserve consumer loyalty to physicians rather than to insurers.
An additional driver of provider pushback has been improved physician use of information technology. At one time, only plans had access to the claims data that physicians are now using to their advantage. Now physicians are better able to either force insurers to pay late claims or say sayonara to their chances for contract renewal.
As the exclusive providers of emergency medicine to two hospitals in Scottsdale, Ariz., the 27 physicians of Scottsdale Emergency Associates felt some pressure from hospital executives to contract with the same plans paying the hospitals.
According to its CFO, Stephen Andersen, M.D., the group was willing to negotiate with one of those plans, Aetna, which had been trying to recruit SEA anyway.
One stumbling block was $700,000 in outstanding claims.
"I'd invariably hear that they didn't owe us anything," Andersen says. "Apparently, the people doing the recruiting never talked to the AR department."
So, the next time Aetna disputed the amount and suitability of the group's claims, Andersen provided the plan with detailed spreadsheets documenting explicit coding and accounts receivable data gathered by Atlanta-based Per-Se Technologies, a healthcare management and consulting company.
"Per-Se showed us what codes are getting denied and what our outstanding days in AR are for each payer," Andersen says. "With that information, we (could) go to negotiations and say, 'Look, this is how much money you owe us. If you want us to sign anything ongoing with you, you first need to pay us what you owe.'"
Andersen says Aetna finally cut a six-figure check to settle all outstanding accounts. While not a dollar-for-dollar match with the group's claims, the physicians were happy to sign a contract last spring. The result: about 40% higher reimbursements.
"You have to remember, before we had a contract, we were balance billing their patients (for what Aetna wouldn't pay us)," says Andersen. He credits his new data arsenal with making him a better businessman.
For a long time, he says, the group thought it had to roll over and accept what was offered.
But a few financially squeezed years in the mid-1990s, including several months when even making payroll seemed doubtful, convinced Andersen to retain Per-Se's services in 1997.
"To be able to show (payers) that they owe us money--and to back it up with facts--that was the single biggest factor we had going for us in taking on the insurance carriers," Andersen says.
He adds that he's not reluctant to exercise the 30-day "out" clause they negotiated with Aetna should the plan show signs of foot-dragging on future claims payments.
And he admits that SEA's market prominence in Scottsdale provides the punch that makes Aetna and other plans pay attention.