By: Ronda Polansky, MS, CCC-SLP, TSHA Business Management Committee Co-Chair

This four-part series will discuss the vulnerability of healthcare, insurance contracts, data collection, government contacts, and contract negotiation.

Since the introduction of the Consumer Price Index in 1913, the highest inflation rate observed in the United States was 23.7% in June 1920 (Henderson, 2022). In 2024, we continue to live in a high-inflation environment. Our gas and groceries have gone up, mortgages and rent are up, the cost of goods and supplies increased, labor cost has increased, and you have less time with patients than you ever had. Yet convenience and more of your attention are the expectation of patients more than ever before. With five-star reviews on Google, your quality of care has not changed, but the payors unfortunately do not recognize these types of details; therefore, their reimbursement rates have not changed since before there was a thing called COVID-19. Why are they not offering better reimbursement? They have been allowed the flexibility to set their own rates and also because you have not asked. The responsibility honestly lands in the laps of practitioners to initiate contact with their payor sources about these concerns.

“Unless there is something with the Medicare fee schedule that could be advantageous to payers, they prefer to leave the contracts in the state they are,” said Tracy Watrous, vice president for member services of the Medical Group Management Association (Shryock, 2023).

Funding goes hand in hand with quality healthcare. The disturbing truth is that it has been more than 10 years since there has been an increase in reimbursement rates for any provider in the U.S. Health insurance should be a bridge to medical care, not a barrier. Inadequate health insurance coverage drives the climbing medical debt in our current society. A majority of individuals with health insurance, specifically Medicare Care Advantage Plans (MAP), have encountered obstacles in covered services, including higher bills and denials for medical care. Negotiating insurance contracts is widely avoided because it is regarded as a difficult, contentious process, but it is a challenge that any type of medical practice must undertake to remain profitable in the volatile healthcare reimbursement environment we currently endure. The payors will underestimate you; therefore, you must be persistent and well prepared to initiate this process. The following article will discuss some tips to establish a productive negotiation to create a positive impact on your bottom line over time.

Insurance Contracts
Healthcare insurance contracts are the written contracts between a managed care organization (MCO) and a healthcare provider. It is common for providers to accept the standard terms of an insurance payor’s contract that is provided to them, which operates with a fixed fee schedule. These are based only on a percentage of what Medicare pays, are always lower than the Medicare fee schedules, and disappointingly are tied to payment levels that are three or more years old. The introduction of the Resource-Based Relative Value Scale (RBRVS) and the creation of a national fee schedule by Medicare basically eliminated a practice’s ability to generate more income from insurance carriers by increasing what it charges for services. RBRVS determines prices based on three separate factors: physician work (54%), practice expense (41%), and malpractice expense (5%) (Mertz, 2004).

Most providers who question this methodology for paid professional services are told that they can take it or leave it. If providers and payers are unable to agree on the contracted prices, the provider is typically excluded from the insurer’s network. A recent example of this occurred on December 17, 2020. St. Luke's Health in Houston, Texas, announced that its contract with Blue Cross Blue Shield of Texas (BCBSTX) expired at 11:59 p.m. on December 16, which came after months of efforts by St. Luke's to get BCBSTX to agree to reasonable rates that would allow the health system to remain financially sustainable. Despite these multiple efforts and multiple proposals by St. Luke's Health System, BCBSTX would not agree to rates that allow for the financial viability of St. Luke’s, affecting over 65,000 patients. They did not come to an agreement and rejoin until January 13, 2021.

For small practices in speech-language pathology and audiology, being ignored and disregarded by your payor sources is frustrating. Although state associations can certainly advocate at a government level, the state associations as an organization cannot and do not have the power to negotiate reimbursement rates for any of their member providers. Legal firms strongly advise against this as it risks violating anti-trust laws. The laws are designed to protect the consumer, and we, the providers, are considered the sellers, just as insurance companies are considered the buyers and also the consumers to services. Any state association must use caution to not encourage nor promote negative publicity such as a boycott of an insurer, including those initiated on social media platforms, in order to avoid the risk of a legal response. The role of any state association can be supportive in the education of members, providing resources and collecting data.

Payers are certainly not willing to graciously grant large increases just because you ask, yet with supported data and a sensible approach, you may be able to overcome some injustice existing in today’s fee schedules to maximize total reimbursement. Those choosing to take on the challenge of contract negotiation are finding that more reasonable payments are possible. Even a 1% or 2% increase from a payer that is heavily represented in your practice can yield a significant revenue difference for your practice.

Consider the following when negotiating insurance contracts.

Read Your Contract
Never initiate a conversation before you read and understand the provider contract you have signed and agreed to. Pay close attention to the headers that address the following items:

• Date of the contract
• Duration of the contract
• Interest rate formula
• Premium increase rate, if applicable
• Notice of non-renewal details

The following are some questions you will want to consider prior to the negotiation:

• Did the number of claims go up or down during the current year when compared to the previous year?
• How many people left the workforce? How many have joined the workforce? Has that made the average age of your employees go up or down?
• Are you planning to hire more people this year and therefore make the service an attractive client to insurers?

If you do not know these numbers, be assured that they will know. You may consider asking them for your practice’s total number of claims over a date range prior to initiating a conversation.

Build a Database of Common CPT Codes
The very first step to a successful negotiation is to identify your most frequently utilized codes that generate around 75% of your revenue from payors. Create yourself a spreadsheet listing how many times each code was used in the previous 12 months and how much you currently charge for that service. You will want to review the current year Medicare reimbursement rate for these same codes. You will use this information to identify the variation in what the payors are offering and whether you can leverage the differences to increase your revenue for your high-volume codes. If you serve patients under Medicare, you will not be able to negotiate better rates through the government. The Centers for Medicare and Medicaid Services (CMS) on July 31, 2024, finalized its 2025 Skilled Nursing Facility Prospective Payment System (SNF PPS) rule, approving a net increase of 4.2% or approximately $1.4 billion in Medicare Part A payments for 2025. CMS stated that the increase is calculated based on the SNF market basket percentage increase of 3%, plus a 1.7 percentage point forecast error adjustment and 0.5% productivity adjustment (CMS.gov).

Identify Your Largest Payors
Repeating this process with each insurer you accept could become overwhelming; therefore, you should focus on only the largest payors. It is the private insurers such as Aetna, BCBS, and United Health Care that can be open to re-negotiating contracts for you to stay competitive in your specialized area of service.

In addition to identifying the largest payors, review billing codes that generate the most revenue. You may recognize that only a handful of service codes are responsible for the majority of your revenue. Therefore, your focus and effort should be in obtaining the best rates for those most profitable billing codes. Use your payors’ explanation of benefits (EOB) statements to identify how much they are allowing for each code, and then compare your reimbursement rate to the current Medicare rate for leverage during a negotiation. This data collection can be time-consuming, but you want to get the biggest bang for your buck. Be on the lookout for attempts by insurance companies to offset fee increases for one service with decreases for another. This is a standard practice for Medicare as well. Think carefully about what you are willing to accept before you start your negotiations.

Analyze the Data
Data is important. Your negotiations also should focus on high-volume services of the practice. Full reimbursement depends both on fees and on the volume of services. With your practice’s budget in mind, it is easy to focus all of your attention on the fee schedule for the specific services that have fallen below your other contracts or have consistently lowered over the past several years. You also should examine and renegotiate fees for lower-volume services that require substantial office hours.

Codes that are below Medicare rates are most appropriate for re-negotiation for a better rate in the next annual contract. Understand your value and communicate it. Leverage your practice’s data to achieve a more favorable managed care contract. Invest time in networking with professional connections to research what other healthcare providers have successfully negotiated in terms of contract terms and reimbursement rates. Stay updated on industry trends, regulatory changes, and market conditions that may impact insurance payer contracts. Back your negotiation data by showcasing positive outcomes, patient satisfaction levels, and any other factors that highlight services. Location also plays a role in this. Practices in densely populated areas tend to have more advantage with the data than those located in the more rural areas.

Time Delays
Delays are to be expected as it takes time to move a contract proposal through a payor’s bureaucracy. Anticipating delays will ensure you are not placed in the position of having to accept lower reimbursement rates because of time constraints. Unfortunately, the process will take anywhere from six to 12 months or possibly longer. Do not walk away early, even if it seems like it is not progressing forward. While the individual contact will vary depending on the payor’s organizational structure, it is most commonly addressed by a manager in the contracting department. During ongoing delays, think carefully before making a quick decision to go above their head. Your contract likely will get returned to the contracting department anyway, and the person making the decisions in that department may not appreciate your attempt to bypass them. Use the correct channels for submitting your contract, and be patient with the process.

Deal or No Deal
With the costs of doing business continuing to rise, it is imperative that you do everything you can to improve how you are paid. Successful renegotiation of your insurance contracts can have a return of a 10% to 12% increase over a one- to three-year period. These are funds that are available but are typically lost because most small offices do not have the time nor the expertise required to successfully renegotiate. It often becomes a David and Goliath situation, in which a small practice faces off with a faceless giant corporation. It is your job to identify your rock-bottom number and convince them of the mutual benefit of the change you are requesting. Do not be intimidated. Simply start the conversation with, ”I have had this fixed-fee contract in place for several years, but my expenses and cost of care have increased. I would like to discuss an increase in my current contract.’” The health plan representatives may try to deceive you by indicating that there are no contract negotiations allowed to ensure they benefit from the current contract. Never forget that a contract is between two parties, each of whom has equal rights to negotiate.

Outsourcing contract negotiations is an option for anyone, but this will cost money, and with extra time and data collection, this can be successfully completed in-house. Whether you negotiate your reimbursement rates with the help of a consulting company or on your own, be sure you are being presented with a contract that is specific to the codes you use and relevant to your specialized practice. On the other hand, do not be afraid to get professional guidance. Attorneys can help decipher what you may be signing and help identify unfavorable clauses and terms.

America’s population is growing and also aging. This, in turn, increases the demand for care and services in our healthcare continuum. Being an effective communicator and patient advocate and having critical negotiating skills take practice and passion and require persistence and a well-prepared plan to perform in these professional roles. 

References

• Abelson, Reed, It’s Not Just You: Many Americans Face Insurance Obstacles Over Medical Care and Bills,  June 15, 2023
• American Medical Association, RBRVS overview, Updated February 28, 2024 
• CMS, Fiscal Year 2025 Skilled Nursing Facility Prospective Payment System Final Rule (CMS 1802-F) Jul 31, 2024, CMS.gov
• Hernandez, Richard, Bureau Labor of Statistics, January 2023 What caused inflation to spike after 2020
• Mertz, Gregory J., MBA, AND FACMPE Can You Negotiate Better Reimbursement? With the right data and a reasonable approach, you can overcome some inequities in payers’ fee schedules, Fam Pract Manag. 2004;11(9):31-34
• Richter, Felix, ow U.S. Consumer Prices Have Evolved Since February 2020, Nov 15, 2023, Statista
• Shryock, Todd, Negotiating payer contracts April 28, 2023, Medical Economics Journal May 2023 Volume 100 Issue 5
• Srinivasan, Hiranmayi, Historical U.S. Inflation Rate by Year: 1929 to 2024, Updated July 31, 2024
• Stulick, Amy, CMS Finalizes 4.2% Skilled Nursing Medicare Increase, Expanded Penalties, Skilled Nursing July 31, 2024