Time to review all payer contracts

December 1, 2006

The insurance companies with whom you do business appreciate your services but they are ultimately responsible for ensuring that their business - not yours - stays healthy.

Now is the time to start reviewing all of your payer contracts to see which ones are worth keeping and which ones may be prime candidates for renegotiation or, perhaps, termination.

Because so many private payers follow Medicare's lead when it comes to reimbursement, let's consider those changes first. On Aug. 8, 2006, the Centers for Medicare and Medicaid Services (CMS) announced its proposed modifications for 2007.

These following adjustments will result in an overall reduction of 7 percent in Medicare payments for dermatologists:

Some may end up taking even deeper reductions thanks to tweaks that CMS wants to make in the formula on which the Geographic Practice Cost Index (GPCI) is based. CMS proposes to remove the previously mandated minimum floor of 1.0 for the GPCI work component. This change will negatively affect more than two dozen locales. Dermatologists in South Dakota, for example, would receive the most significant percent decrease of 3.35 percent due to the GPCI changes and, thus, a decline of more than 10 percent in their overall Medicare reimbursement in 2007.

Deal with private payers

That's because most Unites States insurance companies base their reimbursement schedules for physician services on Medicare rates.

While changes in the Medicare program always grab the lion's share of attention, don't forget about private payers. Many dermatologists seem to have forgotten that participation with these insurers is, like Medicare, voluntary. Many also forget that participation is a two-way relationship. In other words, it takes two to tango.

To analyze the value of your payer relationships, first determine your average time to next available appointment for new patients. Then, ask your staff if they're having trouble finding appointment slots for current patients with whom you need to do follow-ups. If your findings raise concerns about patient access, and you don't have plans to recruit another physician or nonphysician provider, it's time to shave off some demand.

Making the kindest cut

To determine which insurance company relationship(s) might be most expendable, analyze your reimbursement rates for your most frequently billed procedure codes by payer.