Practice Makes Perfect: Knowledge is power in payer negotiations

In June 2014, the Medical Group Management Association released the results of a questionnaire that ranked members' most pressing practice management challenges. In this edition of “Practice Makes Perfect,” we'll tackle No. 9 on that list: negotiating contracts with payers.

Payer contracts are deeply woven into many practice processes and are an important component of a financially sound organization. Payer contracts are so important that many MGMA resources and conferences address the topic. Administrators and medical practice staff are knowledgeable about writing, analyzing and negotiating contracts with payers. While it's much a part of practice operations, there are still new strategies to employ when negotiating with a payer—or renegotiating with an existing payer—that will help position the practice for success.

Begin negotiations with an insurer in the portfolio that represents a small percentage of the practice's income. Starting negotiations there will help staff members get their feet wet, perfect the process and help everyone learn from mistakes without costing the practice too much. By starting contract negotiations or renegotiations with a payer that doesn't dramatically affect the bottom line, practices can build skills and negotiation tactics and avoid more costly mistakes. In my experience, larger insurers have highly skilled negotiators at the table, so start small and learn to swim before jumping in the deep end.

Take a close look at the practice or organization and assess what information is available to the public, and thus, insurers. Review previous data about quality metrics and patient satisfaction that have been submitted to the payer. Research what others are saying about the organization online. Find information about the practice's market, too. If the payer does its research, what will it learn about the practice? Information that is readily available can be used as a leverage point in negotiations. Administrators who prepare for negotiations by doing the research will know their practice's strengths, weaknesses and market.

Know the practice's must-haves and would-like-to-haves before beginning any negotiation. Part of negotiating is knowing that the practice might not get everything it wants. Determine the ultimate goals ahead of time and be willing to make some concessions to get those things that are must-haves. Be clear about the things that are not negotiable and be prepared to walk away if the terms of the contract do not make financial sense for the practice. Finalizing the must-haves and would-like-to-haves beforehand helps administrators make thoughtful decisions in the midst of a negotiation.

Knowledge is power when it comes to payer negotiations. Starting small and knowing on the front end what will and won't work for the practice will help to position the organization for long-term success and sustainability.

Joan Hablutzel