By Nathaniel Arana NGA Healthcare |
How practices can negotiate higher reimbursement rates

Practice Management

How practices can negotiate higher reimbursement rates

Date Posted: Wednesday, October 07, 2015


Nothing matters more than a practice's reimbursement rates. Rates can determine the difference between profitability and breaking-even, or worse, going out of business. A physician's reimbursement rates need to be carefully understood and negotiated, when necessary, in order for a practice to remain profitable. 

a physician's reimbursement rate is rarely initially set according to ability, skill or clinical outcomes. Rather, most insurance payers still rely on presenting the lowest reimbursing contracts that are quickly accepted by practices - usually out of necessity.

It makes sense, from a business standpoint, for practices to accept these low rates; practices must have contracts in order to start seeing patients. Furthermore, many physicians, particularly solo physicians and those in small groups, are unaware of their ability to negotiate their reimbursement rates - even after these contracts have been in place for some time.

To negotiate with insurance payers, it is important to understand the insurance business and its strategy to remain solvent and please stakeholders. Ultimately, insurance payers are responsible to employer groups and patients that pay premiums.

The insurance plan, in turn, provides a network of physicians to these employer groups and patients to provide healthcare. If a physician can understand their role in this network, they have a much better leverage to negotiate better reimbursement rates.

What strategies can be used to negotiate better rates for your contract? Practices need to show how they are an asset to the network and how their services are vital to the network's survival by providing cost savings to the health plan. The trick is to convey this information, with data and analyses, to the health plans.

Here is an example of a practice I recently worked with and what we used to increase their rates:

A multi-specialty group recently contacted me for assistance with negotiating their reimbursement rates.

After an analyzing the practice, we found that there were certain key advantages to the practice that the health plan wanted as part of their network:

  • Scarcity of the specialty in the area
  • Better clinical outcomes
  • Cost savings realized to the health plan as a result of better clinical outcomes
  • A nurse practitioner that provided care, at a lower rate, to less acute cases

We provided cost-savings analyses and actual figures and examples of how the practice has saved the health plan, and its members, real dollars.

A practice can't simply approach an insurance payer and say, "Can we have an increase?" The practice must come to the negotiating table with numbers, figures, arguments and, most importantly, strategy.

In this particular case, we found several competitive advantages that the practice was offering to members of the insurance network that saved money for both parties. In the end, we had a proposal and negotiation that was well-crafted and backed by carefully researched and referenced numbers and studies that the insurance company couldn't say "No" to.

The result? A 20% increase over current reimbursement rates for the practice. As the practice's largest payer, this had a significant impact.

Payers understand that in order to meet ACA requirements, they must work with practices rather than against them. From a business standpoint, it's best to negotiate your reimbursement rates with the help of a qualified individual or organization that can help get the best rates for a practice. Even a small increase could result in significant revenue contribution to the practice's profitability.

Nathaniel Arana is a nationally recognized healthcare business consultant with experience ranging across many different specialties. He is a physician advocate and has helped practices become more profitable by allowing his clients to focus on patient care. You can subscribe to his newsletter here. You can email Nathaniel at nathaniel@ngahealthcare.com or check out www.ngahealthcare.com.

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Nathaniel Arana

Founder & CEO
NGA Healthcare





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