Want to contract with managed care payers in a more productive fashion? Try these tips and tools to minimize frustration and maximize reimbursement. Collected from your peers and the professionals at the California Medical Association, these pointers will increase your negotiating power and improve your results.

Danielle Onstot, MD, FAAP, is frustrated. The Oxnard-based pediatrician wants to play the managed care game, but keeps finding that the rules seem to favor the other side. She'd rather be playing with her patients. At least the children she takes care of know how to play fair.

"I'd much rather see patients than deal with contracts, but if I don't look at the contracts, the health plans will take advantage of me," Dr. Onstot says. "It's tough to take the time to look at the business side of medicine when I want to be changing lives by practicing it. But if I ignore the business side, I won't be able to afford to continue to practice."

Dr. Onstot is new to dealing directly with plans as a solo practitioner, but she's already learned some valuable lessons. To the point: She strongly encourages doctors to know what they are paid by whom and for what.

For example, one recent contract cover letter she reviewed claimed "fair and reasonable reimbursement." But when Dr. Onstot crunched the numbers, she determined that the deal actually offered a significant pay cut--something in the neighborhood of 40 percent. "I recommend making a spreadsheet with your charges, your costs for supplies, and Medicare and health plan reimbursement," she advises. "I was blown away when I first did so and saw the huge, sometimes almost threefold difference in reimbursement. If I don't say anything, those low payers will get away with paying me one third of what my best payers pay."

But simply making a better proposal in return may not be enough. When Dr. Onstot responded to the 40 percent pay cut, she was offered better reimbursement, but not the kind she really needed. "I requested reimbursement on specific CPT codes that were missing from the pages of reimbursement rates the plan e-mailed to me," she says. "The plan also wanted to pay me less for point-of-service and exclusive-provider-organization patients than PPO patients. I told them in my response that I treat all patients the same regardless of insurance status, so I shouldn't be reimbursed less for POS and EPO patients." In addition, vaccine reimbursement is a huge issue for pediatricians, because there are all kinds of new products that can be very expensive. The fee schedule she received from the health plan did not include many of them.

Complex changes in coding can also vex physicians as they attempt to negotiate fair managed care contracts. For example, the CPT code for circumcision now includes the type of regional anesthesia recommended by the American Academy of Pediatrics, where previously pediatricians billed for the circumcision and the anesthesia administration separately. "I need to negotiate for increased reimbursement for the circumcision code because it is now two codes combined," Dr. Onstot notes.

Even the most basic elements of health plan contracting, such as communications, have proven difficult. "I wish I could say that my first attempt at negotiation with a health plan was successful," Dr. Onstot says. "I e-mailed the plan and sent a letter containing my response to their second offer by certified mail, but they never received it, even though I received the confirmation of receipt. Incidentally, the plan also lost my termination letter that I sent by certified mail--after faxing me a response to my letter."

Dr. Onstot's experiences are not uncommon, of course. Even doctors in large groups with staffers dedicated to contracting have learned similar lessons the hard way, too, and they've generally come away ready to share their knowledge. Indeed, Dr. Onstot lauds the California Medical Association for its guidance and services during her negotiation experiences. "Staff from the CMA reviewed my letters and gave me sample letters to notify patients when I did terminate a contract," she says. "People there will step in to help you."

There is, in fact, lots of help available for navigating the changing managed care landscape, and your colleagues and your county and state associations are among the best sources. Here's a sampling of their advice--wisdom hard earned--on what works, what doesn't and what you shouldn't even consider.

1. Know your numbers.
Physicians must be familiar with the going rate for their particular services and must read each contract carefully to determine its scope of services and how each service will be paid under the proposed rates, says Hector Flores, MD, co-director of the family practice residency program at White Memorial Medical Center in Los Angeles. Some rates may seem high at first glance, but you may be taking on too much financial risk in return, he says. Conversely, the rates in some contracts may seem low, but those contracts may minimize your risk and may also come with value-added benefits, such as in-kind or end-of-year payments.

"Do not be afraid to demand what you're worth," Dr. Flores says. "Do your homework to know what you deserve." He cautions doctors to ask others in similar fields for ballpark figures when doing that homework, because legally doctors can't share exact rates without risking an antitrust violation.

2. Be aware of the legal risks.
James Hay, MD, a family practitioner with the Encinitas-based North Coast Family Medical Group and speaker of the CMA House of Delegates, says seeking competent legal advice is perhaps the most important thing physicians can do to make contracting go smoothly. And, he adds, the legal imperative to keep service rates confidential to minimize antitrust risks also extends to keeping contract terms quiet. "Unless they're your partners or members of the same group, never talk to peers about the specifics of a contract, because that is an antitrust violation," he says.

3. Do not freak out.
Sometimes health plans--or the IPAs between physicians and plans--will intentionally try to intimidate doctors and sometimes just the thought of intense negotiations will rattle them. But physicians should never sign contracts under pressure or in a panic, Dr. Flores emphasizes. "Everything is negotiable before you sign the contract," he says. "Be prepared ahead of time and know that time is on your side."

4. Remember that you have power.
"It's important for physicians to understand that they are in more of a position to negotiate than they may think they are," says Aileen Wetzel, associate director of the CMA Center for Economic Services in Sacramento and a 20-year veteran of helping doctors deal with health plans. "The only thing health plans have to sell is their provider networks. Physicians are the ones who control whether they'll be part of those networks."

5. Use every advantage at your disposal.
These are not, perhaps, the best of times for managed care organizations. The media has detailed widespread allegations of plans illegally canceling coverage when patients make expensive claims. Plus, there are many well-publicized examples of managed care plans making gigantic profits and executives making millions--at the same time the plans demand higher premiums and cut back services. Can you use payers' shaky public image to negotiate for better rates? It's worth a shot.

"Prior to going into any discussion with a payer, we encourage physicians to do their research and that includes everything from information on plan enrollment to which other physicians are in the network," Wetzel says. "We encourage doctors to research the financial status of a particular plan and to research the number and nature of patient complaints against it. That's all publicly available information, which is helpful to use in a contract negotiation. It should be part of the decision-making process. In general, we advise physicians to understand the payer and use that information to their advantage during negotiations."

6. Know your rights.
Take advantage of legal protections you may not be aware you have, Wetzel says. For example, AB 1455--the Health Care Provider Bill of Rights--contains many protections for doctors. In effect since January 2005, AB 1455 requires plans to fully disclose their fee schedules and payment rules, among other things. Prior to that, physicians were often only able to get a sample of, say, 10 CPT codes from a plan in advance of signing a contract. "When physicians are aware of the law and the protections it contains, they can use it to try to negotiate contracts that are fair and reasonable," Wetzel says.

7. Stay involved in contracting. 
Physician practice management companies don't have the industry clout they once did, but some still effectively manage doctors' businesses for them. Even so, the physicians who count on them should conduct reasonable follow-up, Wetzel says. "You should always be engaged in the negotiating process," she says. "Make sure you have the opportunity to opt in or out of any contract terms presented to you. Your practice is your business, so you have to look at the financials and review them on an ongoing basis."

Indeed, Wetzel advises office staffers to be aggressive in keeping their bosses focused on contracts. "If your physician is not asking you for information all the time, you need to put it in front of him or her," she says. "Trap the doctor in the hallway and say, 'I'm having trouble with a plan.' The physician needs to be aware of what's going on in the office."

8. Monitor payer compliance.
"Negotiating and signing a contract are just the first steps," Wetzel emphasizes. "The real work starts when you ensure that the payer is in compliance with the terms of the contract. That's where the rubber hits the road. The worst thing a physician can do is stick that contract in a desk drawer."

Physician offices need to develop contract summaries and educate their entire staffs on the terms of the contracts and what the fee schedules are, Wetzel advises, because there will "almost certainly" be areas where the plan is not compliant with the terms of the deal. Vigilance is required by all involved.

9. Protect your patients and your long-term interests.
Dr. Hay is part of an IPA, so his contracting with HMOs is generally handled for him. While his group reads and signs some of its own PPO contracts, a 300-member messenger-model physician partnership reviews most of them and tells the health plans what those members are willing to accept.

Still, from Dr. Hay's vantage point, contracting lessons are very real--including this one affecting his patients. "Years ago, we lost 1,000 patients to a competing group when a health plan block transferred them because we wouldn't accept its reimbursement offer," he says. "That was a big deal for us, because we're a group of only five family physicians. We weathered that, but it hurt. While the other group temporarily gained 1,000 patients, we were able to woo most of them back by convincing them to change insurance plans. The competing group that had won the patients accepted a lower level of reimbursement to gain access to a larger enrollment pool--but it ended up with the lower reimbursement rate and little access to patients. That's a perfect example of what we physicians have done to ourselves."

In the end, physicians agree that they are in many ways key culprits in their own unhappy situation when it comes to managed care contracting. And that has to stop. "If physicians don't take the time to review and negotiate their contracts, health plans will continue to take advantage of us and our income will continue to decline," Dr. Onstot emphasizes. "At some point we may no longer be able to afford to practice medicine at the reimbursement rates offered. Let's start taking charge now."

FEATURE ARTICLE SIDEBARS


A TREASURE TROVE OF CMA TOOLS
The California Medical Association offers a wealth of information to help physicians negotiate better third-party payer contracts.

* Two contracting toolkits, "Taking Charge: Steps to Evaluating Relationships and Preparing for Negotiations" and "Managed Care Contracts Deciphered: The Physicians' Guide to Their Rights and Obligations," have been bundled onto a CD available for purchase in the CMA bookstore. Members pay $40 and nonmembers pay $100. A portion of "Taking Charge" can also be downloaded free on the "Reimbursement Advocacy" page of the association's Web site at www.cmanet.org.

* In addition, "Taking Charge" and "Managed Care Contracts Deciphered" are offered as a seminar/CD package. The seminar, called "Taking Charge: Third-Party Payer Contract Analysis and Negotiation," helps physicians assess the value of specific payers, prepare for contract negotiations, identify key clauses to leave in or take out of a contract, and monitor payer compliance. The seminar also instructs physicians how to target payers for contract termination, negotiation or renegotiation. Contact your county association for a schedule of when the seminar may be in your area.

* Additional contracting resources can be found at CMA ON-CALL, the association's online library of medical, legal, regulatory and reimbursement information. Documents are free to members and nonmembers can purchase them for $2 a page.

* CMA members also have free access to the association's Model Managed Care Contract and written analyses of a dozen major health plan contracts. The analysis of the PacifiCare/ United Healthcare physician contract was updated in early March, after the plans merged.

The analyses flag problems for doctors. Here's a recent tip: "Health Net physicians recently received a contract addendum intended to bring the health plan into compliance with the RICO settlement agreement. CMA has analyzed the addendum and the underlying contract and found that both contain language that not only violates the settlement terms, but also in many ways violates the Knox-Keene Act."

* Another link on the CMA Web site--available to member physicians only--takes users directly to forms for filing a complaint under AB 1455, the 2-year-old law that protects physicians from some of the payer community's worst abuses, including poor contracts and bad negotiating tactics.

* As well, CMA-contracted attorneys offer members a 15 percent discount on other contract analysis services, including reviewing them for compliance with California and federal law to help determine whether, from a business and practical perspective, the contract provisions are physician-friendly. Contact the CMA legal information line at 415/882-5144 or send an e-mail to legalinfo@cmanet.org.
 

A TO-DO LIST FOR MANAGED CARE PAYERS
No matter hard physicians might wish it away, managed care is here for the duration. So maybe health plans--and the IPAs that often do the direct-to-physician contracting for them--could make the contracting experience a little less horrible. Here are four things that doctors would like health plans to do before the next time the parties meet at the table:

1. Educate physicians.
Doctors want to sign contracts with their eyes open, says Hector Flores, MD, co-director of the family practice residency program at White Memorial Medical Center, Los Angeles. Think "informed consent," he says. Satisfied doctors become the best recruiters.

2. Change attitudes.
Contracting shouldn't be us vs. them. Doctors control 80 percent of healthcare spending, so plans should work with physicians and their staffs.

3. Improve online tools.
Electronic eligibility information and electronic access to approval processes, done rapidly, would solve a lot of problems, says James Hay, MD, a family practice physician with Encinitas-based North Coast Family Medical Group and speaker of the California Medical Association House of Delegates.

4. Seek uniformity.
One drug formulary would make patients and doctors much happier and reduce administrative hassles and costs, Dr. Hay says. And, if the industry could make practice parameters and pay-for-performance measures uniform across health plans, that would be immense. "It's a fantasy, though," he says. "Plans, for their own antitrust reasons, probably never will do those things."


A THUMBNAIL GUIDE TO CONTRACTING
Little is as integral to your practice success as managed care contracting. So here's a little reminder about the essential concepts of health plan negotiations:

1. Get creative in how you negotiate. There are no rules.

2. Make sure your bread-and-butter services are paid at fair reimbursement rates.

3. To the extent you can, start delinking contract fee schedules from Medicare reimbursement rates.

4. Beyond accepting the fee schedule, make sure you understand and can comply with all of the terms of the contract.

5. Never sign a substandard contract, even if a plan has a large share of the market. The cycle will just continue.

6. Don't put all your eggs in one basket. If any one plan makes up 50 percent of your business, you're in big trouble.