Securing the best contracts for your business can be a cumbersome experience when approached blindly.
“It comes down to really understanding your business and the contract,” said Dennis Clark, CPO, president of Point Health Centers of America.
It is best to approach negotiations with caution and keep in mind that you know your business better than anyone else. With that being said, it is always helpful to take a closer look at what sets your business apart from the competition by conducting an evaluation of your market position.
The following information is intended to help the O&P business owner, to look out for possible pitfalls in the contracting process.
Evaluate your business
Before entering into any contract negotiations, Susan Charkin of Healthcents recommends evaluating your business to determine market position.
“[Practice owners] need to look at their practice as an insurance company would look at them,” Charkin said. “You need to figure out a strategy and a plan of attack before you start negotiating.”
Taking a cold hard look is not always easy, but is necessary. Remove the emotion that went into building your business to objectively evaluate the state of the company.
“You’re dealing with a payer,” Charkin said. “They don’t know you. They are located in another state or another city and you need to [approach] this in the cold hard reality – this is a business. Insurance companies are in the business of trying to give as little as possible and you’re in the business of trying to get as much as possible.”
Ask yourself specific questions in regard to the contracts you are seeking. Do we need the contract? Does the volume we service justify the contract?
Also ask some questions based on your business alone. Who is my competition and where are they located?
“If they are the only game in town and there are no other providers in their area they are definitely going to warrant getting higher reimbursement,” Charkin told O&P Business News. “They’ll be in a much better position to get better contracts.”
Conversely, if another provider is down the street from your company, that puts you in a weaker position. Are you better off being in-network or out-of-network?
“That’s a new trend,” Charkin said. “Payers have ratcheted down contract reimbursement so much that a lot of providers are actually making the determination [that they are] better off being out-of-network versus in-network.”
Charkin explains that if they choose to be out-of-network they are going to receive a lower reimbursement rate than they would if they were in-network from the payer and collect the balance owed directly from a patient.
“On the other hand, they are able to collect 100% of billed charges in combination between what the payer is going to reimburse and what the patient is going to pay them.”
This is a decision that needs to be made on a case-by-case basis.
Another aspect to consider is the segment of the workforce you see and what types of services you provide most.
“Say you’re [negotiating] a contract to cover a certain segment of the workforce – you need to know, their job – is it a high-risk position, are they blue collar or white collar workers? What are the customary things that are happening within that population?” Clark said. “Then you can have some idea of what types of services you are going to have a tendency to provide and can look at your contract negotiations based on what you anticipate you are going to be providing for that population.”
What sets you apart?
Part of evaluating your business is determining what you provide that sets you apart from the competition and would thus entitle you to a higher reimbursement rate. For example, are you the exclusive provider of a specific service that no one else in the area provides? Are you the only provider within a certain geographic limit? These are the types of questions you need to address to uncover what sets your business apart.
Clark also suggests calling attention to the credentials of your practitioners and your business.
“We talk about the credentials of our practitioners, the fact that we have ABC-certified practitioners and that all of our facilities are ABC-accredited facilities,” Clark said. “We stress the fact that the number one way to save money in health care is to use a wellness approach and not a sickness approach. By that I mean, utilizing and qualifying providers.”
From a third party payer standpoint, expressing strategies that are ultimately working to save them money in the long run is in your best interest. Employing educated and credentialed practitioners can be viewed as a cost-saving tactic. Their health care decisions ultimately determine the amount of dollars spent on services making education an important asset to tote when applicable.
“That is the value of that education, the value of those credentials, and the value of all of the governing procedures that are involved in being an ABC-accredited facility,” Clark said.
Additionally, he advises educating the third party payers on what exactly O&P services provide to the patients and emphasizing the life-altering aspect of the business.
“[Third party payers] don’t do as many O&P orders as others, but O&P orders tend to be fairly expensive … so while we are not doing 10,000 at once, the orders that we do are extremely important and the business services that we’re providing … are absolutely critical to the patients that are receiving them,” Clark said. “If you’re getting a transtibial prosthesis, you put that on in the morning and you’re using it constantly all day long.”
While the numbers of patients and requests seem lower than in other realms of health care, the dollars being transferred per referral need to be addressed along with the quality of life issue that will effect the recipient of a device for the remainder of their lifetime. O&P services are a lifelong necessity as opposed to other areas of health care where a process may be a temporary requirement.
Language is the backbone of every pitfall in the contract negotiating process. Onerous language leaves business owners scratching their heads trying to decipher the messages hidden behind confusing acronyms, amendments, clauses and fee schedules.
While this certainly does not cover the full gamut of hang-ups in the process, the representatives interviewed for this story offer the following specific cautions when going through the process of contract negotiations:
· ‘Lesser than’
“One of the things that you want to look for is language that says, ‘the lesser of contracted rates or billed charges’,” Cathie Pruitt, chief executive officer of PrimeCare O&P Network, LLC and president of Strategic Marketing Inc., said. “Make sure that when you see ‘lesser than’ language, that you’re still going to be getting good reimbursement when you file the claim.”
· Silent preferred provider organizations (PPO)
“These can occur when you are contracted with third party administrators (TPA), which most everyone is. These TPAs work for insurance companies, large employer groups and self-insured funds and handle the claims processing and other ‘back office’ tasks,” Pruitt explained.
When included in your contract, these PPOs have access to the original agreement. Furthermore, these parties may try to apply their own discount on top of the contract allowable agreed upon by the original contracted payer.
“If you have a rate with one TPA that is lower than with another one, or have a direct private contract with an insurance company that is retaining the services of a TPA that you also have a contract with, you may find that the TPA will apply the lower rate,” Pruitt said.
Managed care contracts can retain a number of these groups on one contract. Ask the contracting payer for a list of these organizations and ensure that the reimbursement rate is uniform throughout the contract and applicable to all payers included.
“You may have to be quite firm to get the client list from certain TPAs,” Pruitt said. “Force the issue, like most of the other aspects of contracting, information is king.”
Bottom line, know who you are doing business with, Pruitt said.
· Termination clause
While it may not be your first consideration when you are about to sign a contract, being able to terminate one is an allowance you want to secure before you sign.
“You don’t want to be stuck in a contract that is going to take an inordinate amount of time to terminate with or without cause,” Pruitt said.
The problem here is not rooted in the need to terminate itself but in the terms most payers require you terminate within, Charkin said.
“A lot of these contracts do not allow you to terminate unless it is 180 days prior to the anniversary date [of the contract], and you have to give the notification within 60 days of the anniversary,” she said. “If you don’t do that then you are stuck with the contract for another year.”
She suggests trying to renegotiate termination without cause with a 60- or 90-day time frame.
· Fee schedule
Fee schedules are tricky to navigate. Standard discounts and timely payment are two of the suggested items to consider in contracting, according to Clark.
Medicare is a common baseline for contracting so you should be leery of a contract where you can’t find a logical basis from code to code or successfully compare your contracted agreement to the Medicare standard.
“Fee schedules with random numbers and pricing not related back to any standardized fee schedule – that is a red flag to me,” Clark said.
He also added that most contracts, if related to Medicare, should include the year that indicates the Medicare fee schedule being followed. It is important to double-check this information since the codes are updated often.
Also, beware of low margins and more specifically, of contracting groups who tell you that you will make the difference of the low margin up in volume.
“I’m sorry. You’re not,” Clark said. “If the pricing you have doesn’t show you having a positive net, than I don’t care how many of them you do, you’re going to continue to lose money.”
Never take for granted the importance of clear communication. It is best to talk with your contracting payer about the process they follow for authorizations and inquiries.
“Those things need to be spelled out,” Clark said. “Some of the contracts are not very clear with that on the front end and you just have to help the contracting organization, the third party payer, understand that if we are going to do this together, [we need to] understand and define each others roles so we can work [together] in a timely fashion.”
“If you’re a mom and pop organization and you are concerned about your ability to get contracts because you’re not geographically disbursed enough or you don’t believe that you carry enough weight because of the overall volume that you [bring in] to ask for more preferred pricing, then you may consider being part of a network,” Clark said.
The pros of this choice are that you maintain your own identity and relationship with your referral source and that you become an in-network provider within the region or group that you align with.
Another source of help can be someone you went to school with or a colleague within the O&P profession.
“You can’t talk about pricing,” Clark said. “But you can say, ‘this is what is being offered. Does this make sense?’”
These conversations to assist one another might be a good place to start as long as you keep them within the limits of what can be discussed in such a forum.
Charkin offers this last piece of advice for business owners.
“If you’re doing this on your own …do the upfront analysis,” she urged. “If you [were to] buy a business … you don’t just offer them a price. You [conduct] an analysis.”
The same time and consideration also need to come to the contract negotiation table.— by Jennifer Hoydicz
|Caution: Pitfalls Ahead|
Following are five hang-ups that may be encountered during contract negogiations: