The Art of Negotiating Urgent Care Contracts

Physicians work with standards every day: the standard of care, standard X-ray views, standard drug formulary, and accreditation standards. We have been trained in the standardization process and it’s no wonder we ascribe standards to the business world. There are no standards, however, when negotiating contracts with health insurance payors; that’s why it is called negotiating and not standardizing. Payor contracts can be referred to as “common” but are never, ever standard. There are five principles of negotiating which can help you get an acceptable agreement when faced with this daunting task. These include: getting involved in the contracting process; doing your homework; humanizing a de-humanized process; politely refusing “standard” contracts; and developing a mutually acceptable agreement. Following these principles will help practice owners gain control over the medical decision-making process, learn how to stand up against bullying tactics, and create long-term, sustainable businesses for their future.

Get Involved

All those in favor of calling your local provider rep to initiate the contracting process say, “Aye!” There are very few physicians who willingly decide to get actively involved in acquiring and negotiating provider contracts for their business. Most of us turn a deep shade of green and feel nauseated when faced with requesting contracts from payors. Outsourcing this process is an option and there are some very talented consultants who will take care of this for you. The reality is, however, no one except you really cares about your money. In addition, you are the one with the credentials and you are the one who the payor ultimately needs to remain in existence. Without you, the medical provider, payors could not offer services to their beneficiaries. So it’s up to you to “market” yourself to your payors. Schedule a face-to-face meeting with your provider representative, collect data from internal and external sources to show them, and explain clearly the value of your services in the community. It also helps to show them how much money they will save by contracting for your services and directing beneficiaries away from the emergency room to your urgent care center. When provider representatives hear from their providers they tend to listen. When it comes from the doctor, it’s different.

Do Your Homework

This concept sounds very basic, but opportunity will favor the prepared mind. Your ability to negotiate a more satisfactory contract depends on how well you know the other side. There are three key areas on which to focus. First, know your payor. You have the advantage if your business is located in a growing rural community where medical resources are scarce but the payor concentration is high. Payors are more willing to negotiate higher reimbursement rates in these areas to save money spent on reimbursing rural hospital emergency rooms. If you live in an area with more competition, you still need to know the market penetration of your payor and a little about your competitors’ experience in dealing with them. Market penetration data on payors can be found on most states’ department of insurance. Tables are listed for payors which show the number of complaints to the insurance department and their market share. You can also do a background check by visiting established practices in the area. Most physicians are actually more than willing to share information on their experiences in contracting with payors and most will have a lot to say about it!

Second, know your competition. Businesses don’t operate in a vacuum. Resenting your competition only makes it worse for you because it will isolate you. Take the time to get to know your competition. You may find some surprising things. Even though they are so-called competitors, most owners are more than willing to talk to anyone interested in their business — they are proud of it. When you get around to talking and networking, you may find they are not actually competitors. You may find their services are not exactly like yours. In fact, you may find your services complement theirs. This realization brings you one step closer to the last area of focus.

Finally and most importantly, know yourself. I commonly hear from network contractors the familiar phrase, “All your competitors have accepted the same rate without negotiating.” Be aware this is only a tactic. Define for yourself your value-added services and be able to clearly articulate these to your payors. It will show them that you know your stuff and that you expect to get paid for knowing your stuff. Even though the immediate-care industry has common features, your particular practice is unique. Articulating these extra benefits to the payor allows them to see that they will benefit from these quality measures.

One of the most valuable sources of data is your own internal claims data. You can make your own comparative reimbursement chart and identify any lagging contracts, then use this data to approach the payor and request higher reimbursement. Table 1 demonstrates this concept. Choose your most frequently-used code and calculate the percent CMS Fee Schedule. Using EOBs for this code, calculate your reimbursement for each of the payors. In this simple example, Payor X is lagging and this data may be used to request a schedule of at least 115 percent CMS fee schedule.

Humanize the Process

Healthcare delivery has become de-humanized. Patients can electronically check in, communicate via the net with their doctors, and even have surgery performed by physicians thousands of miles away. From a claims processing perspective, billing personnel work with electronic remittance and appeal claims directly through Web portals without even speaking to a payor representative. The contracting process is no different; call the provider contracting line, submit your request, and wait for your contract to arrive in the mail. Carried out in this manner, contracts metamorphose into “standard” contracts in both the eyes of the payor and the provider. This does not have to be the case. Taking the time to call the provider representative and invite him or her over for coffee and a tour of your facility adds a personal touch which could mean a difference in your reimbursement rates. In addition, showing off your services, your staff, and your facility allows the provider rep to experience what their beneficiaries will experience. It makes it easier for them to become an advocate for you when taking your request to a higher level. We meet our provider reps face to face and also know that several large payor reps and even corporate executives have utilized our services for themselves and their families. Representatives sit behind a desk all day and work on the computer answering and making phone calls. Many have jumped at the opportunity to enjoy some human contact, a breakfast bagel, and a good coffee. Don’t forget that even though they may represent entities physicians loathe, they are fundamentally human beings who like to be treated the same way you do!

Politely Refuse

The practice of medicine has largely been passed down via apprenticeship techniques. It is only since the 1600s when Sir Francis Bacon formulated scientific methodology that medical practice has become evidence-based. Today, we rely on rigorous, large — scale clinical trials to test hypotheses which provide an evidence-based method of clinical decision making. It’s no small wonder physicians think that the contracting process with payors, especially industry goliaths, is similarly standardized.

Urgent care has seen the implementation of the so-called standardized “global fee” contracts which are usually a first offer of reimbursement by payors. If you question these contracts, you are likely to receive “standard” payor reasons: this is a standard contract for the urgent care industry, and your competitors are accepting these contracts without negotiating. What payors are really saying is: we have decided for you the “standard” in order to keep our costs low, and peer pressure should keep you quiet. Contracting is about negotiating, not accepting. The bottom line is you are the one who needs to meet payroll next month and you need to keep pace with inflation and cost of living. It’s mandatory to negotiate a contract which will allow you to stay viable. It is possible to change an initial contract offer, even from a mega-payor. All you have to do is try it.

Develop a Win/Win Scenario

Stephen Covey, in his landmark book “The Seven Habits of Highly Effective People” (1989), refers to win/win as “a frame of mind and heart that constantly seeks mutual benefit in all human interactions (page 207). Well, we all know that big healthcare payors really don’t have at heart a desire to seek a “mutual benefit.” So, does that mean you give up? In their book “Getting to Yes: Negotiating Agreement Without Giving In” (1981), Roger Fischer and William Ury outline two objectives to address when negotiating agreements with others who have a stronger bargaining position: protect yourself and make the most of your assets (pages 97-106). You have to know what your bottom line is before entering negotiations. That means knowing exactly how many patients you need to see and the average reimbursement rate per patient you need in order to break even and pay all your expenses. You also need to know by how much your revenue needs to increase annually by either of these two factors: total number of patients seen and changes in average reimbursement per patient. If you accept contracts which rely exclusively on only one factor, it may be more difficult to make ends meet if that factor doesn’t pan out for you.

Making the most of your assets refers to developing a plan which addresses attractive alternatives in the event an agreement cannot be reached. Notably, when the market is largely controlled by two industry giants, this is so daunting that we take the “standard” versions of contracts in desperation. Patient deductibles have increased from an annual average of $446 individual/$958 family to $652 individual/$1,232 family between 2002 and 2005 (Agency for Healthcare Research and Quality, November 2007). At urgent care rates, we are well below even a very sick family ever meeting this deductible through urgent care services alone. It doesn’t make sense to price your cash — pay fee schedule rate at $100 payable at the time of service, and accept a contract from a payor for $50 to $90. The latter will cost you much more in administrative time, employee salaries, miscellaneous overhead expense and emotional agony, only to realize the balance went to patient responsibility 30 to 90 days later. Now you have to chase down the balance from the patient. Don’t sign the contract from the payor, develop a great cash-pay fee schedule, and stick to the mantra that cash is king!

Standards are important in our daily practice as physicians because they help prolong lives. When negotiating a contract from a payor, however, it’s important to follow five basic principles: getting involved; preparing well; humanizing the process; refusing first offers; and creating a win-win. Following these principles will not guarantee an exemplary contract. Failing to follow these, however, will guarantee you receive the “standard” offer. Don’t be a standard in urgent care business. Become instead, the standard deviation! icb

Natasha Deonarain, MD, MBA, CPE, is president and CEO of UCR Health Centers in Chandler, Ariz. Since 1997, she has specialized in the field of urgent care medicine and currently holds board certification with the American Board of Family Practice and the American Board of Urgent Care Medicine. She is also a certified medical review officer and oversees all occupational injury care cases along with a UCR Health Center case manager.

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