INCREASING LEVERAGE IN PAYER NEGOTIATIONS

1. INCREASING LEVERAGE IN PAYER NEGOTIATIONS MGMA National Conference October 2013

2. Learning Objectives • List the three elements that drive leverage in payer contracting • Determine their cost to establish a pricing policy • Use a reimbursement analysis to establish a contracting strategy

3. Your Average Day

4. Your Efforts Have Ended Like This

5. Central Message You have more leverage than you think and More than payers will acknowledge

6. Position You For Success

7. Leverage is Market Power • Compels the payer to do what they are not already inclined to do • Increasing leverage can be accomplished by any practice • Improving Market Power is a strategic issue • It is not a task that can be completed a few days before the big meeting • There is a resistance to hope

8. The 1st Leverage Element Market Position • Three Parts – • Competition • Primary Care Orientation & • Geographic Isolation • Need to know, but little influence

9. Competition • How many physicians are providing the same services vs. how many does the market need? • The population is being treated now, who is doing the work? • Can you take that business / are they taking yours? • Examine communities with similar populations.

10. These Elements Work Together Geographic Isolation Primary Care Orientation

11. Improving Market Position • Primary Care Orientation • Increase name recognition • Raise consumer demand • Improve customer service • Increase consumer directed services • Geographic Isolation • Increase specialization • Focus on sub/micro markets • Provide some exclusive services

12. First Know Your Business

13. The 2nd Element Is Capacity • Capacity and Demand • Excess demand = a full practice • Excess capacity = insufficient demand

14. Managing Capacity is Strategic • We don’t think about capacity this way • Usually more capacity is assumed to be a good thing • Gets confused with growth • You have more control over capacity than demand

15. Managing Capacity is Strategic • We don’t think about capacity this way • Usually more capacity is assumed to be a good thing • Gets confused with growth • You have more control over capacity than demand Position your practice to have slightly more demand than capacity

16. Assess Demand • New patient visits to all visits • Look at payer mix over time • Survey patients that request records • Monitor appointment wait times • Compare the number of physicians to similar markets

17. The Power of Excess Demand Avg. Comm. Rate Cost

18. The Power of Excess Demand • Manage payer mix • Identify and reduce the lowest paying payers • Manage the appointment schedule as an alternative to cancelation • The best solution is to renegotiate • This data documents why your rate request is appropriate • The data helps change the conversation

19. Referral Dependence • Most practices are not as referral dependent as they believe • Don’t let it become an excuse for inaction • Classify referral sources with a Referral Margin Analysis • Talk to your referral customers • “We will treat your patients” • Help them understand

20. 3rd Element is Using Data • You are the source of the data • Use the data to know what to ask for • Strengthen resolve by knowing the facts • The facts tell us what to negotiate

21. Avg. Comm. Rate Cost

22. Avg. Comm. Rate Cost

23. Avg. Comm. Rate 23% Increase Cost

24. Can you walk away? Excess Demand Assume all RVUs replaced at Avg. Comm. rate ($47.42 - $38.46) x 7,000 = $62,727 Using Data To Make Your Case Svcs % MC Rate Value Divided 7,000 103% $ 38.46 $ 269,203 Cost 113% $ 42.19 Average Commercial Rate 127% $ 47.42

25. Can you walk away? Excess Demand Assume all RVUs replaced at Avg. Comm. rate ($47.42 - $38.46) x 7,000 = $62,727 Using Data To Make Your Case Svcs % MC Rate Value Divided 7,000 103% $ 38.46 $ 269,203 Cost 113% $ 42.19 (23% improvement) Average Commercial Rate 127% $ 47.42

26. Use data to prepare yourself • Increase confidence • Build internal support • Give you something to go back to in the heat of battle • Test and measure challenges to your plan

27. Make a compelling argument • Communicate through someone to decision makers • Reduce emotion • Take control over the discussion • Let the facts speak for you

28. There is no “Best Way” or “Right Answer”The data tells us how to argue

29. Useful Tools - Data • Walk-away calculation • Reimbursement Analysis • Cost analysis (with commercial minimum) • Silent PPO Enforcement Strategy • Fee Schedule Analyzer • Contract Analysis • Benchmark Comparison • Service/Margin Analysis

30. Invest In Reporting • Reporting off your Practice Management System (Crystal reports, BI vendors or similar) • Training (Excel, RBRVS, data transfer) • Off the shelf help (Win-Zip, Adobe, Monarch)

31. To Increase Leverage to Maximum • Manage capacity to less than demand • Do all that can be done to improve Market Position • Analyze data to know the facts and to form your argument • Use data to demonstrate your “Correct” position to payers • Sometimes your maximum leverage is not enough – but is always more

32. If we pull this off, We’ll eat like kings

33. Call Me: QUESTIONS Randy Cook AmpliPHY Physician Services Rcook@AmpliPHYps.com 615.500.1959