It's negotiable: Fighting for a fair deal

Don't like the insurance plan contract you got in the mail? You've got more power to change it than you think.

By Robert Kazel — Posted Nov. 15, 2004

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Andy Tucker, MD, head of a seven-doctor pediatric group in Denver, talks about contract negotiations with health plans as a kind of tango -- a dance with a partner he doesn't especially like yet can't avoid, either. And he knows that choosing to be a wallflower -- the kind of physician who signs a deal thinking there's no way to contest it -- could cost his practice dearly.

In October, Dr. Tucker got in the mail a standard contract from a large commercial plan reminding him it was time to renew. In the cover letter, the plan announced it was dedicated to collaborating with doctors and improving relations with them, and that contracting would be simpler than ever. Just sign and date the document and be sure to use the return envelope, enclosed.

The sunny tone of the letter got Dr. Tucker angry, though, when he studied the numbers and found that the fee schedule had been cut considerably. "Whenever they send you a new contract, they seem to want to ding you a little more," he says. "Ninety percent of the time, it's a lower rate than you were getting before."

From experience, however, Dr. Tucker knew the lesson of the squeaky wheel. He telephoned his practice's representative at the health plan, fuming, and told her it was "ludicrous" to expect the medical group to accept the pay cut.

Without missing a beat, he says, the woman agreed to increase the schedule by 6%. Dr. Tucker told her that wasn't good enough. She said she could go up another 2%.

Showing your value

Not every plan is going to offer an immediate 8% raise over the phone. But negotiation experts say practices large and small could underestimate the ability they have to alter unfavorable contract terms. Many don't attempt it. That, they say, is something plans count on.

"One of the mistakes is to feel contracts are all boilerplate and can't be negotiated," says Steven Babitsky, an attorney in Falmouth, Mass., who teaches negotiating skills to physicians. "[Doctors] have more power than they realize. ... There's a lot that can be done."

Certainly for many practices, persuading a health plan to make big changes in a contract might be a hard sell and is likely to require more effort than a conversation with a low-level plan representative.

The key to success for many physician groups will be demonstrating that they're clinically superior or unique compared with other practices in the market, are needed by the plan in a given geographic location, or are at least good at attracting a lot of patients. Preparation, sound evidence and cogent arguments are all critical to making the medical group's case.

"I always go back to 'Physician, know thyself,' " says William J. Spratt Jr., a Miami health care attorney. "The physician needs to take off his doctor hat and put on his strategic business planning hat."

The prenegotiation process, experts say, entails a meticulous study of how much revenue a practice gets from each health plan, what the patient demographics are for each network, what proportion of the market the practice serves, what fee is being paid for each type of service and what the approximate cost for providing that service is.

Crunching those numbers is the only way to go into contract bargaining confidently, according to Keith Kelley, administrator of Calvert Internal Medicine, a 20-physician multispecialty group in Prince Frederick, Md.

"The way insurers are going to look at it is, 'How important is the group to me? Do they have a lot of our members and will they continue to [treat] them in the future?' " Kelley says.

To bolster its argument that Calvert is a big presence in the community, the practice collected data from a local government agency and concluded that 80% to 90% of its patients are coming from within the surrounding county. It also does analyses of ZIP codes to further show its dominance of patient markets in certain locales.

In addition, the practice knows what fees each plan pays and is able to discuss what changes it considers fair and why, Kelley says.

"We present data on why a [new fee schedule] is unacceptable, compare the new fee schedule with the past and prove it will be paying us less than what other practices get ... and we can reference Medicare rates," he says. "Insurance companies have a general idea of what other insurance companies are paying, too. It's no mystery."

The practice also mails a satisfaction survey twice a year to about 1,000 patients and submits the results to plans to "prove to them we're doing a good job," Kelley says.

These arguments don't always win over plans, he adds, especially as the plans find themselves squeezed on margins and pressured by employers to reduce costs. As consolidation in the insurance industry continues, some plans also feel less pressure to grant contract concessions to fill out their physician networks.

But although most plans are still tough bargainers, some appear to be trying to appease practices more than before, especially in matters related to customer service, Kelley says. This is possibly due in part to the settlement of class-action lawsuits against Aetna Inc. and CIGNA HealthCare that generated bad publicity for managed care nationally, he says.

Those lawsuits forced Aetna and CIGNA, among other things, to be more open about contract terms and more willing to communicate with physicians.

"Certainly insurance companies that were [tough on physicians] have softened and give better service than they used to," he says. "They got their wings clipped a little bit."

Indeed, the settlements by CIGNA and Aetna have focused large health plans' attention on issues long felt by physicians to be crucial. This awareness could encourage practices to bargain with more vigor, says Don Antrim, a health care attorney in Columbus, Ohio.

The settlements covered issues where doctors had no leverage. "Now they can go into any negotiation and can point to a checklist, especially prompt pay off clean claims, using state statutes and settlement laws, getting quick reviews of non-clean claims, and getting questions answered via the Web," Antrim says.

The option of choice

In the background of most negotiations is the possibility, however remote, that one party will get so frustrated that bargaining will stop. Legal experts say doctors shouldn't be afraid of terminating contract discussions with a health plan if its terms are so onerous or its rate schedule so meager to make it unworthy of the doctors' time.

Saying goodbye might not be easy -- especially explaining to patients that you're not accepting their plan anymore -- but no contract might be a better choice than one that has no potential to improve a practice's bottom line, experts say.

"In a mature managed care market, we advise practices not to sign with everyone but strategically evaluate their market niche and play to their strengths," Spratt says. "What patients do they want?"

Of course, such an approach is easier said than done, especially if a particular plan accounts for a large portion of a practice's business. But physicians too rarely consider that the option of choice may exist, experts say.

"Not every plan is worth the contract. It's not worthwhile if it's not a good fit," says Neil Caesar, a health care attorney in Greenville, S.C. "The greatest weapon in [physicians'] arsenal is being able to say the word 'no.' You can't sign with everyone, even if you liked them all, because you can't manage them all. It's too much work. You have to be selective."

A practice that declares that it intends not to renew a contract doesn't need to be fully convinced it will follow through on the threat, Caesar says. "The take-it-or-leave-it attitude [on either side] is frequently not the end of the dialogue. ... The tough stand is a negotiating tactic."

When possible, physicians also should insist that contracts allow them to close the panel, or stop accepting new patients from a given network, as a way to move away from a relationship with an insurer that's proving intolerable or less than profitable, Kelley says.

"We want to close a panel if there are too many patients or we're unhappy with the plan," he says. "We pretty much will not sign a contract unless we can close a panel and close it [only] to that insurance company, not to all of them, usually on 90 to 180 days' notice." A provision letting a panel be closed is "one of the strongest forms of leverage we have with the managed care company."

As for Dr. Tucker in Colorado, even as he quickly negotiated a rate 8% higher than first offered, he is pressing on. He asked the plan representative for an even higher rate, but she said she lacked that much authority. At press time, Dr. Tucker was waiting for an answer to his request. He expects the negotiations to continue.

"I feel it's my obligation to fight them as aggressively as I can, to fight for a fair reimbursement," Dr. Tucker says. "The thing that raised my ire was this was a simple ploy: Throw out this [contract] and see how many people don't read it and don't catch you. You knew it was a business scheme to reduce their overhead, and if anyone called them on it, they had room to go up to a certain limit.

"It just didn't feel right. ... A lot of doctors ... just sign because they assume the insurance companies are giving them a fair deal. That's a lousy assumption."

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How to gain the upper hand

  • Read the whole contract.
  • Be familiar with all written contract-related materials before you negotiate -- policies and procedures manuals and all appendices to those manuals.
  • Consider hiring a lawyer or practice management consultant to at minimum read the contract and "red flag" hazardous clauses.
  • Ask your state medical association to see if it will review your contract and offer basic advice before you bargain.
  • Treat health plan representatives with respect. Present your practice as a business and your concerns as business issues.
  • Seek clarification on contract items you don't understand. Ask to have those clarifications added into the contract.
  • Feel free to request an in-person negotiating session with a plan representative.
  • Don't take "no" easily. Plan reps usually have fallback positions for many contractual clauses -- if you raise an objection.
  • Ask to negotiate with the payer's general counsel if you reach an impasse.

What you can change

Unfavorable provisions that health care attorneys say can sometimes be negotiated out of contracts:

  • Definitions of "emergency," "medical necessity," etc., are unclear or unfavorable.
  • Doctors lack ability to terminate a contract with reasonable notice without cause.
  • Plan can amend fee schedule without giving notice to doctors and without doctors being able to either accept the changes or end the contract.
  • Doctors must carry unrealistic levels of liability insurance.
  • Indemnification clause shifts liability onto the doctors.
  • Plan can hold onto claims an unreasonably long time before paying.
  • Grievance procedures are limited.
  • Plans can audit doctors' records, but not the converse.
  • Payer has an unreasonable ability to make retroactive adjustments to payments.
  • Continuation-of-coverage clauses lock doctors into treating a plan's patients.

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External links

AMA on managed care (link)

"Managing Managed Care for the Medical Practice, Second Edition" (link)

"AMA Model Managed Care Contract, Third Edition" (link)

AMA Council of Medical Education's "Principles of Managed Care, Fifth Edition," a compendium of AMA policy and statements on managed care, in pdf (link)

"15 Questions to Ask Before You Sign a Managed Care Contract," AMA Private Sector Advocacy, in pdf (link)

AMA Private Sector Advocacy on managed care issues (link)

AMA Private Sector Advocacy's online health plan complaint form (link)

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