Managed Care Contract Negotiations

Medical practices operating in discounted fee for service managed care markets must address all of the financial and nonfinancial issues involved in a relationship with a managed care plan. These issues are spelled out in the provider contract between the managed care plan and its participating physicians. But what if the medical practice does not like the financial and nonfinancial terms of the contract? Can the practice change them? What if the managed care plan changes the terms of the contract after it is signed? Can the practice change them?

Success in changing managed care contracting terms usually varies from locale to locale. However, success can be achieved if the practice has the LEVERAGE to negotiate or renegotiate favorable contract rates and terms. Leverage can be achieved in many ways; if a practice does not have this kind of leverage, most practices will have to accept what is offered to them by the managed care plan. More often than not, this will usually have a major impact on the finances of the practice.

Here are my Steps for Managed Care Contract Negotiation/Renegotiation

  • Obtain copy of payor’s existing contract.
  • Obtain payor’s existing reimbursement schedule for the related contract.
  • Assess antitrust concerns; consult legal counsel if necessary.
  • If reimbursement schedule is not based on RBRVS, then compare to current Medicare rates and determine percent of Medicare being reimbursed.
  • Obtain CPT frequency report.
  • Draft contracting questionnaire and submit to client for completion. (Purpose:  Determine and assess practice leverage position with payor)
  • Obtain contact information (phone number, physical address, email address) for the provider representative and the manager for the provider representative that handles contract issues for practice.  Also, obtain same information for the executive director.
  • Identify leverage and develop contracting strategy.
  • Decide most favorable way to initially contact the payor. (i.e. letter, meeting, telephone, email)
  • Contact payor and make contract proposal. Negotiate!
  • Maintain strict follow-up schedule.
  • Obtain payor’s response to the proposal.
  • Review and analyze payor’s response and decide whether to accept or counter propose.

Acceptance

  • If decision is made to accept, submit to physician for review and acceptance.
  • If physician accepts, notify payor and document.
  • Obtain written contract change and execute.
  • Make sure future reimbursement agrees with new contracted rates.

Counterproposal

  • If decision is to counter-propose, adjust counterproposal appropriately (Counterproposal maybe our original proposal).  Submit to payor.
  • Maintain strict follow-up schedule.
  • If necessary communicate with payor contact’s superiors.
  • Obtain payor’s final response to counterproposal.
  • Review and analyze payor’s response and decide whether to accept or reject.  Discuss proposal with physician.
  • If physician accepts, notify payor and document.
  • Obtain written contract change and execute.
  • Make sure future reimbursement agrees with new contracted rates.
  • If physician rejects, decide whether or not to terminate payor contract.
  • Analyze potential financial impact as a result of termination.
  • If physician decides not to terminate, negotiation ends.
  • If physician decides to terminate, assess anti-trust issues.  Confer with legal counsel if necessary.
  • Have physician submit termination notice to payor.
  • Re-contact payor and determine if they are willing to reconsider their position.
  • Assist physician with patient notification.