He notes that many physicians sign payer contracts without negotiating.
”Often the payer will say, ‘This is what we are paying in your market. Take it or leave it.’ We must understand that the terms in the contract are not immutable. We have to create and demonstrate value in terms of data, quality of care and cost-effective, long-term goals that benefit the team as a whole.”
He recommends creating a ”utilization report to capture and review data. Using a spreadsheet, determine the frequency of a current procedural terminology code and the number of times it was billed to that payer. Multiply that by the current payment amount. Determine the break even point. This is done by adding overhead and physician compensation by total frequency of all codes for that payer. The results are weighted average cost. Compare the weighted average cost to weighted average reimbursement.”
He also warns of the urgent need to monitor contract start and end dates.
“It may be advisable to start discussions with the payer representative 150 days before the contract term ends. It helps tremendously when the communication is channeled through one individual from the health plan with whom a business relationship has been built.”