PRACTICE MANAGEMENT "IN THE TRENCHES": PART 2 - Thriving in a managed-care world

Although it's crucial to have a basic understanding of practice finance-the subject of Part 1 in this series-that knowledge is almost useless if you can't successfully negotiate contracts with local managed-care companies.

To accomplish that feat requires not only deft negotiating skills but the realization that insurers are not the enemy. But it may also call for assistance from the right experts, and appreciation of the fact that there is power in numbers. Let's get into specifics.

Practices live and die by their managed-care contracting

It's dangerous and foolish to have as your priority getting into plans, rather than obtaining the best reimbursements. I have seen practices collapse because they set their priorities this way. Never contract at a loss and anticipate that you will be able to renegotiate advantageously if you gain market share; you can't ever afford to practice at a loss. So as you plan a negotiation, be certain that you know the numbers ahead of time: your costs, your goals for reimbursement for each CPT code, and the minimum that you will accept. Be prepared to walk away if you cannot reach a satisfactory agreement. If you are renegotiating a contract and the insurer's proposal is unsatisfactory, consider informing your patients, and the employers who purchase their insurance, of the fact that your contract with the insurer may be ending; they may be able to exert consumer pressure on the insurer to meet your terms.

You'll also want to present the most impressive face possible to the managed-care company by sending only your most senior physician executives and managers to negotiations.

The managed-care company isn't the enemy

While it's essential to keep your best interests paramount among your concerns as you negotiate, remember that the success of your contract will be magnified when you have a good working relationship with the insurer. Every successful negotiation involves give-and-take, so as you prepare, also plan for what you'll be willing to concede if necessary, so that both parties can feel that they've been treated fairly and can live with the outcome. Treat the insurer's representatives as you would any respectable business people, and remember that the process is indeed a business negotiation, not a forum for addressing grievances against the burdens of managed care (as tempting as that may be).

To limit your vulnerability, make sure that no insurer is responsible for more than 20% of your business. That will protect you should a carrier make conditions unfavorable or go out of business. If you currently have a contract that covers more than 20% of your business, set up other contracts. Contracting with several carriers will increase your leverage with each individual insurer, which will help you to negotiate more favorable reimbursements. As you negotiate with each successive managed-care company, be careful not to accept a lesser reimbursement schedule than you have under existing contracts, because then those insurers will reduce their fee schedules to you when their contracts with you come up for renewal.

Exercise every caution before signing the contract

Many negotiations require more than one session; after each session, a memo outlining the terms thus far agreed upon should be prepared for both parties. Once the contract has been prepared, read it at least twice, making sure that all important items have been included and that no clauses have been added without your permission. Have a lawyer with expertise in contract law review the contract before you sign it.