Negotiating better managed care contracts

October 20, 2020
Jerri Ivey

Director of Revenue Cycle Management at VitalSkin Dermatology

Jerri Ivey, director of revenue cycle management at VitalSkin Dermatology, shares steps you can take and ways you can educate yourself in order to negotiate better managed care contracts. 

As we discussed earlier this year, revenue pressure can make running a solo practice difficult for many dermatologists. And managed care contracts can create a major impact on a practice’s revenue.

With the ongoing lack of consolidation in the physician space, most practices won’t have the leverage (or often the knowledge) to negotiate with large health insurance companies. As a result, they often sign standard contracts that hinder their practice. 

In these cases, dermatologists may not spot things that can put them at risk or cost them money. With terms that set year-over-year reimbursement rates and allow insurance companies to control billing and coding rules, a dermatologist’s revenue increases can be offset by stricter billing/coding rules and increased denial rates. 

Fortunately, unlike government contracts, managed care contracts can be negotiated. By taking the right opportunities, understanding the language and avoiding certain pitfalls you can put yourself in a better position to negotiate and get the most out of your agreements. Here are some steps to take (and problems to avoid) that can help you negotiate better managed care contracts. 

Steps to Take  

  • When it comes to Medicare Advantage reimbursement rates, make sure they’re equal to CMS Professional Fee for Service rates in your region. More general information on CMS rates can be found here
  • When reviewing a contract, make sure the items below are outlined in the contract. Doing so will help avoid denials and/or claim issues with appeals, payments, preauthorization, etc. 
    • Appeal period 
    • Initial term and renewal term 
    • Notification prior to term, so you can negotiate the contract 
    • Referral/preauthorization requirements 
    • Take-back period – how far back a payer can take back payments 
    • Termination without breach period 
    • Termination without clause period 
    • Timely filing 
    • Timely payment
  • Confirm you have easy access to any policies or manuals referred to in the contract. These may contain important details or points of clarification if you run into an issue. 
  • See if the contract says that stipulations (allowed amounts, policies, etc.) may be amended from “time to time.” If so, what are the notice and remediation periods listed? 
  • Check if the contract specifies how long a patient needs to be treated after the contract is terminated. 
  • Check if it refers to any “abnormal” reductions in payment due to modifiers or providers (APPs). 
  • Clarify and understand what your responsibilities are with coordination of benefits. 
  • See if your practice is required to wait until payment from the payer before you can collect copayments or coinsurance. This is something new that’s been showing up in contracts recently. 
  • Look for opportunities to educate payers on how you can differentiate yourself in the market compared to other dermatologists. If you’re in a smaller community and competing against larger hospital-owned groups, you may be able to highlight being a lower-cost alternative. 
  • Try to identify what a payer needs and how you can fill that need. Perhaps they’re trying to launch and expand their Medicare Advantage plan and need the right network in a certain market to show suitable coverage. You might be able to trade participation in their Medicare Advantage plan for higher rates on the PPO side. 
  • Investigate opportunities to join a health system or independent IPA or CIN and understand their participation requirements. You may be able to get higher rates through these options compared to what you’re receiving directly.  

Things to Watch Out For 

Stay alert for stipulations that let the payer adjust and pay claims at a lower level than submitted. 

  • Surprisingly, some contracts do allow this. Seek to contractually reduce a payer’s ability to change claims by asking the contract to state that the payer must notify you and explain any modifications from the Centers for Medicare and Medicaid Services’ Correct Coding Initiative (CCI). 

Be cautious of contracts that can be extended to affiliates. 

  • Payers and network PPO contracts may include a statement saying that the agreement is entered into by itself and its affiliates (often in the opening paragraph). If the payer you’re contracting with has affiliates, have the contract specify all of them. This will help stop the network from being “leased.” 

Keep an eye out for unilateral change authority statements. 

  • Often, payers will give themselves power to make unilateral changes to the agreement. This essentially gives them control to make any changes they want, with you being contractually obligated to accept (no matter what the consequences may be). If you come across this, it’s best to work on getting it removed. The payer may not like it and push back, but the effort will be well worth not locking yourself into a potentially problematic situation. 

Be aware of appeal limitations. 

  • Appeal limitations put the burden of finding claim-processing errors on you. And if you don’t report an error within a filing limitation, the payer may not reprocess the claim if it’s over 30 days old. Check the Payment and Reimbursement section of the contract to find anything regarding limitations. 

Depending on your size, you may not have the full ability to negotiate with larger companies and payers from the even position you’d prefer. But there are still things you can do, and ways to educate yourself to put yourself in a better position. 

 The risks from managed care contracts can never be fully avoided, but carefully reviewing everything and identifying potential red flags will help you minimize much of this risk when negotiating. 

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