NEGOTIATING MANAGED CARE CONTRACTS

Numerous management books and articles have been published regarding negotiation techniques, and there are as many styles as there are individual personalities. It is not possible to specify one "style" that is successful in all situations, or which will work for everyone. There are, however, several factors which you should keep in mind in negotiating a new managed care contract or renegotiating an existing one, with the key element being that of preparation.

First, plan your strategy within a realistic framework. Remember your ultimate goal is to develop a mutually beneficial, long-term working relationship with the plan; structure your negotiation strategy to achieve this end. Never lose sight of the fact that you will both be partners in the delivery of health care, and that partnerships that do not benefit both parties in a relatively equal manner do not last. You want to be reimbursed fairly for the services you provide; the health plan wants a geographically diverse, stable provider network that delivers value (quality care at an acceptable price). You have financial commitments that must be met, and are limited on the amount of services that you can provide at a discount; the health plan is limited in its ability to reimburse based on marketplace constraints.

Understand your business and the minimum terms you can accept. It is essential that you know the limits of reimbursement which you can accept for the number of patients the plan will send. If you are negotiating a contact for patients you do not currently see, this represents a source of new revenue, and you may be able to discount your fees to capture this market. Determine how many of these new patients you can accept before they crowd out existing, higher paying patients, or you need to hire more office staff to handle them.

If you are renegotiating a contract, be familiar with the past performance of the plan. Identify problems that need to be corrected, and how they have impacted on your business operations. Is your current reimbursement in line with your other plans? How does it compare to RBRVS factors? How many days in accounts receivable do you have with the plan, and how does this compare to your other plans?

Always prepare primary and fall back positions before negotiating. Identify your primary goals (i.e., raising reimbursement to X %) and fall back positions (not less than Y % discount) that are acceptable to you. Most negotiations identify two or three fall back positions or combinations thereof which will achieve their objectives. Keep these confidential, and present them in a sequential manner as counterproposal during the course of the negotiation. Do not present them all at once. If you find yourself at an impasse during the negotiation, call a "time out", present the counterproposal as a method of breaking the deadlock and coming to a mutually beneficial agreement, and ask the plan to consider it over a short period of time, preferably not more than one week. This will give the plan time to collect and evaluate data relevant to the counterproposal. Before the meeting is over, schedule the next meeting and the topics for discussion.

Develop supporting documentation. Bring as much quantifiable information to the table as you can to support your position. You can be sure the health plan will be prepared with their own marketplace studies, which will support their position. Be sure you analyze their data, but not during the negotiation. If you are not able to review it before the negotiation, put it aside and do the analysis after you return to the office. Don't be pressured into making a snap decision. Check to see if it is (1) current, (2) limited to your geographic area, (3) specific to your practice, and (4) in a numerical format that will enable you to compare to your data. For example, if you are trying to compare their RBRVS rates per unit of service, data furnished relating to per member per month capitation rates that only the plan can convert will not be useful to you.

Be proactive. Contracts take time to negotiate, and health plans are under constraints to process large numbers of them in short time frames. I recommend allocating 60 to 90 days to complete the process, given the difficulties of scheduling meetings and the need for multiple layers of review by the plans. When presented with a new contracting opportunity, reply immediately and try to set up a face-to-face meeting as soon as possible. Find out the absolute time deadlines for completion, and organize your efforts to meet these. Stay on schedule, and insist the plan do the same.

When renegotiating an existing contract, be aware of the time limits for completion, and call the plan 60 to 90 days in advance to start things off. If you wait to the last minute, or rely on them to call you, your probability for success will be significantly limited.

Negotiate in person. Meet with your counterpart; do not negotiate major issues over the telephone. Face-to-face negotiation will put a human perspective in your relationship, and provide the best chance for success. Be cordial, polite and firm. Listen carefully to your counterpart's position, and look for areas of compromise. Control the meeting to the extent you get out your agenda items. Present yourself as flexible and willing to compromise, but do it within the context of your negotiating position. Don't make unilateral concessions; if you give up a point, get something in return.

Under no circumstances permit the negotiation to become "hostile," even if you have to call a time out and meet another day. Remember, you are creating a working partnership with the plan; "winning by intimidation" does not make for long-term relationships.

Put it in writing. After you make an oral proposal/counterproposal, follow up the next day with a letter outlining the terms you have proposed and identify all agreements that were arrived at during the negotiation. Confirm your next meeting times, and request any data be sent to your office by a specified date prior to the meeting. Be firm. Request an immediate response if there are questions or concerns about the details of your letter.

Be Patient. Successful negotiating takes time, and it is often a frustrating experience. This is particularly true for physicians, who have limited time to devote to business issues, and are used to quickly evaluating and correcting problems. A common negotiating tactic is simply to wait out your opponent; don't let this happen to you. Time delays should not force you to abandon your negotiating position. Remember that contract terms can be made retroactive to an earlier date if the negotiation process is slower than expected.

Renegotiate within the terms of the contract. If you are renegotiating an existing contract, be aware of the time limitations and other terms that may be in the contract. Pay particular attention to the "dispute resolution" time frames and written requirements of the contract, and structure your efforts to meet them.

When you undertake contract negotiation in a structured, analytical manner, you will find the outcome to more likely be favorable, and your ability to structure a mutually beneficial relationship with the health plan to be greatly enhanced. Negotiators who don't do their homework, and elect to "wing it," come out second best when the person on the other side of the table is prepared.

Robert Chiffelle is a consultant with Wolfe Consulting Group, Ltd. He specializes in managed care issues affecting physician practices. He can be reached at 602-266-8700 or email robertc@wolfecon.com