Written by Steve Selbst, CEO and Co-Owner of Healthcents Inc., www.healthcents.com
The experienced and talented staff at Healthcents have negotiated thousands of payer contracts over the years, covering all types and sizes of practices, ASC’s, and ancillary providers including DME companies. This experience has opened our eyes to several “landmines” that can significantly impact payer contracts’ reimbursements. We call this new series “Payer Contract Landmines”.
Our third landmine is titled “Trust your own data.” What does this mean and why is this a revelation? Let me begin by saying that this landmine came to light in a several recent and complex payer contract negotiations that I personally led. It involved a large specialty practice and large health insurance companies. The issue is that the utilization that the payer had in its system varied significantly from the utilization in the provider’s system. By way of illustration, suppose we have two codes, 99213 and G6016, a radiation oncology code. Suppose that our reimbursement rate for 99213 is $100 and the reimbursement rate for G6016 is $700. (See figure 1 below). Let’s further assume that there is no disagreement between the practice and provider about the accuracy of these rates. Here is where it gets interesting. After a difficult negotiation, all seemed well. The payer and provider agreed to a 9% increase over current rates. However, it is not time to pop open the cork. After doing a revenue based assessment, we find out that the result is that our increase is only 7% and not 9%. The payer explains that based on their actuarial analysis, they provided a 17% increase on radiation oncology codes and a 3% increase on E and M codes for an average of 10% (17+3)/2. Even this is fine, so it seems, until we figure out that we have very different utilization statistics in our billing system vs. the payers system. In particular, in figure 1, notice that for code G6016 our provider volume is 50 while the payer’s volume is 110. When you apply the math and add up the marbles, the total revenue change in our model is 7% and the payer’s model is 9%. So, the payer believes they are providing an increase of 9% but we see only 7%. The first question that comes to mind is why is our utilization different than the payer’s? The answer is: don’t know, will never know. We use a billing system we trust, the payer uses a system it trusts. Can we go down a path of trying to study utilization and make it match? The answer, unequivocally, is no way! You will be at it for a long time, weeks turning into months, months turning into a year or more before you finally realize that “never the twain shall meet”. Trust me, I have seen this happen more than once. At the end of the day, agree to disagree. Trust your data and accept that the payer will trust their data.
To solve the problem, instead, take a practical approach. Focus on what you do agree on. That is, it should be possible to agree on the current fee schedule and the proposed fee schedule. These documents are published by the payer and there is only one “truth” to what the fee schedules are. So, focus on the common truth. Normally, a medical practice has somewhere in the range of 15-40 codes that drive 80% or more of its revenue. Let’s work with the payer to agree on increase that will result in a fixed percentage for those codes. In this example, if the two codes selected were 99213 and G6016 and we agreed on a flat 10% increase for these codes (Or for some combination of rates that yielded a 10% increase over our current revenue view of $125,000) we could get to our goal and the payer can get to their goal. Revenue distills into two components, the rate or unit of service value and the volume or frequency performed. If we focus changes uniformly on the rate, we don’t need to get into a debate about volume variability.
What is the moral of this story? Answer: “trust your data” and focus on uniform rate increases for codes that drive your revenue.
To further assist you in your contracting efforts, please click our free whitepaper link here about 3 techniques to analyze and increase your reimbursements. You have nothing to lose, it is free and will help you. If you would like to discuss your payer contracts, please send me an email and I’ll be happy to assist. For more information, please contact: Steve Selbst, firstname.lastname@example.org or 831-455-2174. For general information or questions, please phone us at 1-800-497-4970 or send an email anytime to email@example.com. We look forward to hearing from you and are glad to provide information that helps you as a provider to run a more profitable practice / company.