Are Your Managed Care Agreements Performing?

March 22, 2011

As providers continue to wrestle with both the planned and unknown annual reductions in reimbursement, it is critically important to understand the managed care component of your payer mix - and more importantly, to understand if each contract is delivering its intended benefit(s).

As providers continue to wrestle with both the planned and unknown annual reductions in reimbursement, it is critically important to understand the managed care component of your payer mix - and more importantly, to understand if each contract is delivering its intended benefit(s).

It has been my experience that providers historically view managed care agreements as a burden - a requirement to be “in the game.” Typically, the process begins with the hope the payer network is open to new providers. And we then find the pricing conversations to be one-sided, with the payer’s approach coming from a “take it or leave it” perspective. Too often, we feel a sense of accomplishment if we are simply granted participation in the network.

However, with the right approach and a careful understanding of the payer’s goal, you can successfully craft an agreement that is beneficial to both sides of the conversation.
In the traditional managed care model, participating providers agree to accept a plan’s discounted payment in exchange for advantages that include faster payment and increased volumes created by the plan steering more patients to the provider.

Regardless of the fee schedule arrangement (fixed for the term of the agreement or tied to the Medicare allowable), you’ve been asked to accept discounted rates in return for more volume. You’ve provided a solution (reduced costs) to the payer, but are you seeing any advantages on your side of the benefit equation? Are you getting more volume in exchange for this discounted rate?

It is important to understand your payer volumes at the time you enter the price negotiations. How many beneficiaries have you treated over the past two years (what’s been your average monthly volume and what modalities have you performed)?

Share this information with the payer, and as the fee schedule is being reviewed, ask the payer representative what additional volumes can be expected should you agree to a discounted rate? It should not disappoint you if the payer cannot or will not answer with a finite commitment.

However, make sure you communicate your understanding of the agreement - that it is intended to be a mutually beneficial commitment. And remember: Don’t be afraid to say no if you do not receive a satisfactory answer to your questions.

Also have a clear understanding of your technology in relation to your market. In the past, a provider that was first to market with digital mammography. This technology was a selling point in negotiations with the payer, and the provider successfully negotiated attractive rates in return for increased volumes (which did follow).

Similarly, another provider had the first non-hospital based 3T Open MR in the state. Several payers recognized the state-of-the-art technology, recognized the additional costs with attractive pricing and increased the volumes due to the cutting edge technology.

Both of these agreements were the result of several progressive conversations between the payer and the provider. It was less a negotiation and more a collaboration.

Bottom line -it is your bottom line. Share your desire to develop a mutually beneficial agreement. Take your time to learn the payer’s needs. Take the time to educate the payer on your needs. And remember, if you are going to discount your rates, make sure the payer understands increased volumes are expected in return.

Bill Gurney is vice president of revenue cycle management for Medical Imaging Specialists. He has 19 years of progressive management responsibilities in healthcare administration, and for the past six years, his interest has been focused on the complex issues surrounding revenue cycle management in the radiology environment.