INCREASING LEVERAGE IN PAYER NEGOTIATIONS MGMA National Conference October 2013

List the three elements that drive leverage in payer contracting Determine their cost to establish a pricing policy Use a reimbursement analysis to establish a contracting strategy Learning Objectives

Your Average Day

Your Efforts Have Ended Like This

You have more leverage than you think and More than payers will acknowledge Central Message

Position You For Success

Compels the payer to do what they are not already inclined to do Increasing leverage can be accomplished by any practice Improving Market Power is a strategic issue – It is not a task that can be completed a few days before the big meeting There is a resistance to hope Leverage is Market Power

Market Position Three Parts – Competition Primary Care Orientation & Geographic Isolation Need to know, but little influence The 1st Leverage Element

How many physicians are providing the same services vs. how many does the market need? The population is being treated now, who is doing the work? Can you take that business / are they taking yours? Examine communities with similar populations. Competition

10 These Elements Work Together Geographic Isolation Primary Care Orientation

– Increase name recognition – Raise consumer demand – Improve customer service – Increase consumer directed services Geographic Isolation – Increase specialization – Focus on sub/micro markets – Provide some exclusive services Improving Market Position

First Know Your Business

Capacity and Demand – Excess demand = a full practice – Excess capacity = insufficient demand The 2 nd Element Is Capacity

Managing Capacity is Strategic We don’t think about capacity this way Usually more capacity is assumed to be a good thing Gets confused with growth You have more control over capacity than demand

We don’t think about capacity this way Usually more capacity is assumed to be a good thing Gets confused with growth You have more control over capacity than demand Position your practice to have slightly more demand than capacity Managing Capacity is Strategic

New patient visits to all visits Look at payer mix over time Survey patients that request records Monitor appointment wait times Compare the number of physicians to similar markets Assess Demand

Cost Avg. Comm. Rate The Power of Excess Demand

Manage payer mix Identify and reduce the lowest paying payers Manage the appointment schedule as an alternative to cancelation The best solution is to renegotiate – This data documents why your rate request is appropriate – The data helps change the conversation The Power of Excess Demand

Most practices are not as referral dependent as they believe – Don’t let it become an excuse for inaction Classify referral sources with a Referral Margin Analysis Talk to your referral customers – “We will treat your patients” – Help them understand Referral Dependence

You are the source of the data Use the data to know what to ask for Strengthen resolve by knowing the facts The facts tell us what to negotiate 3 rd Element is Using Data

Cost Avg. Comm. Rate

Cost Avg. Comm. Rate

Cost Avg. Comm. Rate 23% Increase

Can you walk away? Svcs% MCRateValue Divided7, %38.46$ 269,203$ Cost113%42.19$ Average Commercial Rate127%47.42$ Excess Demand Assume all RVUs replaced at Avg. Comm. rate ($ $38.46) x 7,000 = $62,727 Using Data To Make Your Case

Can you walk away? Svcs% MCRateValue Divided7, %38.46$ 269,203$ Cost113%42.19$ Average Commercial Rate127%47.42$ Excess Demand Assume all RVUs replaced at Avg. Comm. rate ($ $38.46) x 7,000 = $62,727 Using Data To Make Your Case (23% improvement)

Increase confidence Build internal support Give you something to go back to in the heat of battle Test and measure challenges to your plan Use data to prepare yourself

Communicate through someone to decision makers Reduce emotion Take control over the discussion Let the facts speak for you Make a compelling argument

There is no “Best Way” or “Right Answer” The data tells us how to argue

Walk-away calculation Reimbursement Analysis Cost analysis (with commercial minimum) Silent PPO Enforcement Strategy Fee Schedule Analyzer Contract Analysis Benchmark Comparison Service/Margin Analysis Useful Tools - Data

Reporting off your Practice Management System (Crystal reports, BI vendors or similar) Training (Excel, RBRVS, data transfer) Off the shelf help (Win-Zip, Adobe, Monarch) Invest In Reporting

1.Manage capacity to less than demand 2.Do all that can be done to improve Market Position 3.Analyze data to know the facts and to form your argument 4.Use data to demonstrate your “Correct” position to payers 5.Sometimes your maximum leverage is not enough – but is always more To Increase Leverage to Maximum

If we pull this off, We’ll eat like kings

Call Me: Randy Cook AmpliPHY Physician Services QUESTIONS