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How to Negotiate Higher Physician Reimbursement Rates  

Posted by Nathaniel Arana, Aug 3, 2015

Nothing matters more to your practice’s bottom line than reimbursement rates. A physician’s reimbursement rates can determine the difference between profitability and breaking-even — or going out of business. Rates need to be carefully negotiated for a practice to remain profitable.

A physician’s reimbursement rates are rarely initially set according to ability, skill or clinical outcomes. Most insurance payers still present the lowest reimbursing contracts, which are quickly accepted by practices that need to get new patients in the door ASAP.

It makes sense from a business standpoint for practices to accept these low rates. Medical practices must have contracts in order to start seeing patients.

But another common issue I see is that many physicians, particularly solo physicians and those in small groups, are unaware they can negotiate (or later, renegotiate) their reimbursement rates.

When I work with medical practices on renegotiating reimbursement rates, I always tell them this: You need to think about what the insurance business wants and where your practice fits in.

What do I mean by this? To negotiate with insurance payers, you have to understand that the insurance business is all about remaining solvent and pleasing stakeholders. Ultimately, insurance payers are responsible to employer groups and patients who pay premiums. The insurance plan, in turn, provides a network of physicians to these employer groups and patients to provide healthcare.

If you can understand and define your role in this network, you have a much better leverage to negotiate better reimbursement rates.

On top of that, medical practices need to prove they’re an asset to the network and show how their services are vital to the network’s survival (for instance, through cost savings). The trick is to convey this information with as much hard data and analyses as possible.

You can’t simply approach an insurance payer and say, “Can we have an increase?” Instead, your practice needs to come to the negotiating table with numbers, figures, arguments and, most importantly, strategy. Insurance payers have a much harder time saying no to numbers.

Here’s a short case study of a practice I recently worked with and how we increased their rates:

A multi-specialty medical group contacted me for assistance with negotiating their reimbursement rates. After analyzing the practice, we identified the key advantages that would make them desirable to the health plan:

  • Scarcity of certain specialties in the area
  • Excellent clinical outcomes
  • Cost savings for the health plan as a result of excellent clinical outcomes
  • A nurse practitioner who provided care at a lower rate to less acute cases

We completed cost-savings analyses and collected actual figures and examples of how the practice saved the health plan (and its members), real dollars.

In the end, we had a negotiation proposal that was well-crafted and backed by carefully researched numbers.

So what were the results? The practice won a 20% increase over current reimbursement rates! Since this negotiation was with the practice’s largest payer, this had a huge impact.

Payers understand that in order to meet ACA requirements, they must work with practices rather than against them. Your job is to prove your worth – give your payers the hard facts on why you deserve higher reimbursement rates. If a negotiation wins you even a small increase, you could see significant improvement to your profitability.

Topics: ACA, Affordable Care Act, billing, eVisit Blog Posts, insurance, payees, payers, profitability, reimbursement

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