Transcript Slide 1

CONTRACTING 101
you don’t get what you deserve,
you get what you NEGOTIATE!
Randy Farber, MSHA
September 21, 2011
AGENDA
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when should you negotiate
getting started
do your homework
today’s environment
change the discussion
negotiating rates and language
do it yourself or hire a consultant
in-network vs. out-of- network
WHEN SHOULD YOU NEGOTIATE
 New Enterprise
 Out-of-Network coming In-Network
 Any time a specific procedure turns upside down
(new technology, new supply or implant)
 3-6 months before anniversary date
 have a grid with renewal dates and notice dates
 many require notice of termination well before renewal
NEGOTIATIONS TIMETABLE
Payer
Anniversary Date Notice Date
Aetna
4/1/12
1/1/12
Blue Cross
1/1/13
7/1/12
HealthNet
1/1/12
9/1/11
GETTING STARTED
First, is it really the CONTRACT?
Case Study
 New ASC with high volume Ortho
 Contracts recently negotiated
 “We’re losing money on every case! We need
to renegotiate our contracts!”
 Brought in to renegotiate
 Contract review revealed good rates, terms
 EOB review told a different story
Bad Billing > Good Contracts!
Contract called for implant reimbursement at 50% of billed charges
 Required implants to be billed at 220% of cost with payment at
110% of cost
 This would mean a $100 screw should have billed at $220 and
paid $110
 Billing got it wrong – billed at cost; $100 screw then paid at $50
 Insult to injury: billed 6 screws @ $100; paid $50;
should have billed 6@$220 = $1,320 to pay $660
OBJECTIVES
Always start with your desired end-point in mind
more money
problem
resolution
more
volume
APPROACHES
The “Oliver”
• “Please, sir,
can I have
some
more?”
The “Parent”
• “We want
more
because I
said so!”
The “College
Professor”
• Data Driven
“Know your enemy and know yourself”
– Sun Tzu
“Negotiation”
HOMEWORK
 Know yourself
Costs
• By case
• Implants
Volume
Mix
• Multiple Surgeries
Expected changes in volume or mix
know what rates you need, what you want, and what
you’d walk away from
MORE HOMEWORK
know your enemy
 Market share
 Rate comparisons
 What do they pay others?
 Past problems/Hassle factors
 What are their alternatives?
 Have they been in the news? (And not in a good way!)
PAYER COMPARISONS
Carrier
Medicare
Total
Charges
# Cases
% of
Medicare
Rank by
Discount
Rank by
Volume
$2,256,789
2529
100.0%
4
1
$942,683
1472
88.2%
2
2
$353,524
500
112.0%
9
3
$332,690
490
108.1%
6
4
$312,628
428
88.8%
3
5
$173,612
155
108.9%
8
6
$133,443
69
102.5%
5
7
$122,454
71
108.7%
7
8
$120,215
38
84.5%
1
9
$119,466
48
156.7%
10
10
TODAY’S ENVIRONMENT
“Wow, we’re paying
(The company now
“G.M. has to address
spends) “almost as
much on health care
for our partners as we
do on the green
coffee we buy.”
how a company that
lost more than $20
billion last year can
afford $5 billion a
year in medical bills.”
—Steve Burd, CEO of Safeway, The
New York Times, November 29, 2009
—Howard Schultz, CEO of Starbucks
Corp, Thomson Reuters, July 27, 2009
—The New York Times, February 17,
2009
almost twice in health
care costs as what
we’re making in
earnings…”
TODAY’S ENVIRONMENT
 Cost increases are unsustainable
 At current trend, by 2020, a family of 4 can buy health
insurance for a year or a new Toyota Prius!
 Reform has payers scared
Trying to remain relevant
 Working hard to hold down costs
Severely limits percent increases as trend is the only
thing that matters right now
Turn this to your advantage by changing the
conversation
CHANGING THE CONVERSATION
 Unit price and unit cost are a race to the bottom
 Focus on Quality
 Find ways to create win/win
Eliminate perverse incentives
vs.
cost +vpercentage
cost + flat fee
•
• Thresholds
• No pay for multiple procedures
Be part of their solution, not their problem
NEGOTIATING RATES
Not all rates are created equal
 150% of Medicare may be great, may be awful!
Which base year?
GPCI-adjusted?
If tied to Medicare, fixed or floating?
 Percent vs. Percentage points
If you are at 120% of Medicare and they offer a 5%
increase, should be 126%, not 125%!
NEGOTIATING RATES
 Do you need more across the board, or can you isolate key
procedures?
This is where homework pays off!
• Be creative; would lowering the implant threshold be worth more
than a small percentage increase?
• What about adding multiple procedures?
 Can you concede in one place to get more in another?
 Understand what they need so you can be part of their
solution and still make more
LANGUAGE ISSUES
 In general, language is now reasonable
 Very limited to what they can/will change
Mutuality
• 90 days to appeal, but they have a year to retro
Time frames
• Usually some flexibility around submissions, appeals, notice provisions
Amendments
• Not unilateral
Offsets
• Notice first, then chance to repay before deducting
BEST CHANCES FOR SUCCESS
 Leverage
What makes you special?
• Location, Only one with key equipment, Only one with key doctors
Do they have problems?
• Slow or incorrect claims
• Non-compliant network lessees
• Do they owe you money?
 Position power
Can you terminate?
 Homework
The more you know, the better
HIDDEN THIEVES
 Evergreen Provisions
Lose $ at the rate of medical inflation
 Slow Play
No urgency for payer; the longer they take to close
the deal, the longer they keep more of your money!
Increase rate for each passing month
5% if effective 1/1, 5.5% if effective 2/1, etc.
DO IT YOURSELF OR HIRED GUN
 Do you have the time?
 Consultant advantages
Dispassionate
May have competitive intel and personal relationships
Gives you a 2nd bite at the apple
 Signs your consultant is disreputable
Value of rate increase is less than his/her fee
Bills for hours of language negotiations we all know will never,
ever be changed!
OUT OF NETWORK
 Can be lucrative
 Enjoy it while you can
 Benefits being drastically limited
Aetna, CIGNA capping in the $400-600 range
United, Anthem using 100-150% of Medicare as
maximum allowable, leaving substantial patient balance
DO NOT WAIT TOO LONG TO CONVERT
PEARLS OF WISDOM –
GUIDANCE FROM A HEALTH PLAN EXECUTIVE
Prepare!
Know the data and
dynamics of market place
Prepare!
Prepare!
Many of the same
principles we’ve
discussed!
Understand provider
negotiating style & adjust
Use problem solving
approach
WHEN ASKING FOR INCREASES,
REMEMBER THIS….
 Little pigs get fed.
 Big pigs get slaughtered.
Q&A
Randy Farber, MSHA
[email protected]
888.888.8888
www.farberconsulting.net