Ron Howrigon President & CEO 30 years in healthcare industry - - PowerPoint PPT Presentation

Insider Secrets for Negotiating

with Managed Care Companies

Presented by: Ron Howrigon President & CEO Karl Johnson Sr, VP Business Development

Ron Howrigon President & CEO

• 30 years in healthcare industry
• 18 years in the managed care industry
• Held senior-management level positions with three of

the largest managed care companies in the nation

• 12 years representing physicians and hospitals in their

dealings with managed are companies

• President & Founder, Fulcrum Strategies

Karl Johnson Sr, VP Business Development

• 30 years in healthcare industry
• Began his career at John Muir Medical Center, Walnut

Creek, California

• Senior management positions with Tenet Healthcare

and a catholic multi-hospital system in New Jersey

• Physician Practices operations, financial and new
• utpatient business development.

Ron Howrigon President & CEO

Opening Remarks Agenda

Agenda

• The reality of the exchange world and payer reactions to ACA
• Why are negotiations critical to your business success?
• The negotiation process
• Position evaluation
• Goal setting
• Strategy development and examples
• Negotiation tactics and examples
• What happens next?

Newton’s Third Law:

To every action there is always an equal and opposite reaction.

Healthcare Spending as a % of GDP

From Managed Competition to ACA and the Exchanges

• 1993 Enthoven writes about “Managed Competition”
• Create uniform benefit plans
• Force universal coverage
• Competition not only between plans, but also between

delivery systems

• Create a market place where transparent pricing drives

purchase decisions

• Drive budget-based capitation
• End result - a more efficient and effective economic

market for health insurance and the delivery of care

Payer Reaction - Consolidation

• Aetna buys Humana - $37 billion
• Anthem buys Cigna - $54 billion
• Centene buys HealthNet - $7 billion

Consolidation – Before

• 1. United

$141 B

• 2. Anthem

$ 61 B

• 3. Aetna

$ 58 B

• 4. Humana

$ 48 B

• 5. Cigna

$ 29 B

• 6. Centene

$ 16 B

• 7. HealthNet

$ 14 B

Consolidation

• 1. United

$141 B

• 2. Anthem

$ 61 B

• 3. Aetna

$ 58 B

• 4. Humana

$ 48 B

• 5. Cigna

$ 29 B

• 6. Centene

$ 16 B

• 7. HealthNet

$ 14 B

Consolidation – After

• 1. United

$141 B

• 2. Aetna/Humana

$106 B

• 3. Anthem/Cigna

$ 90 B

• 4. Centene/HealthNet

$ 30 B Total $367 B Medicare $505 B

Payer Response?

• Tiered Networks
• Exchange Networks
• ACO Model
• Value Based Contracting
• Capitation and Risk Transfer
• Fee Schedule Reduction

Why Negotiate?

• Healthcare reform means insurance companies

are going to get more aggressive

• Narrow networks are real
• Medicare is still going broke
• Managed care is targeting physician expenses
• Protect your future. Remember: if you are not

invited to dinner, you probably are dinner.

The Negotiation Process

Evaluate Position Negotiate Close Deal Evaluate Opposition Set Goals Develop Strategy Evaluate & Adjust

Evaluate Your Position

• Market position
• Competition
• Payer mix
• Payer fee schedules
• Value proposition

Karl Johnson Sr, VP Business Development

Know Your Numbers! The MediGain Practice Analysis

Payer Mix – Average Reimbursement – Top 10 CPT by Top 10 Payers

Reimbursement tests are based on Closed Claims. In general Closed Claims are Claims which are:

• Paid or mostly paid by the Payor
• Paid or mostly paid by the

Patient

• Contractual adjustments taken in

line with charge markup %

• Minor remaining balances written
• ff
• These claims DO NOT include

Claims remaining in AR or 100% written off. Ratios by Payor indicates that the practice has a: 54% average Net reimbursement ratio.

Compare “Like” Payors or Financial Classes to their peers and to a baseline

• f Medicare or a Major Commercial

Payor.

Focus on Reimbursement

Reimbursement by Payor Closed CPT codes Based on charges billed Excluding Total Write-off

Payor Charges Payments Adjustments Reim % Adju % Medicare Advantage $ 2,858,043 $ 842,334 $ 2,015,709 29% 71% Self Pay $ 1,804,727 $ 1,708,465 $ 96,262 95% 5% BCBS $ 979,468 $ 452,381 $ 527,087 46% 54% Commercial $ 409,874 $ 202,737 $ 207,137 49% 51% UHC $ 81,487 $ 56,186 $ 25,301 69% 31% Unallocated $ 77,156 $ 77,156 $ - 100% 0% Indigent Agencies $ 57,300 $ 16,813 $ 40,487 29% 71% Federal $ 34,937 $ 17,400 $ 17,537 50% 50% Work Comp $ 21,565 $ 15,844 $ 5,721 73% 27% Medicare $ 18,354 $ 17,325 $ 1,028 94% 6% Other Payors $ 370 $ 279 $ 91 75% 25% Total $ 6,343,280 $ 3,406,920 $ 2,936,360 54% 46% 29% 95% 46% 49% 69% 100% 29% 50% 73% 94% 0% 20% 40% 60% 80% 100% 120% $- $500,000 $1,000,000 $1,500,000 $2,000,000 $2,500,000 $3,000,000 $3,500,000 Medicare Advantage Self Pay BCBS Commercial UHC Unallocated Indigent Agencies Federal Work Comp Medicare Charges Payments Reim %

Focus on Accounts Receivable AR by Insurance Carrier & CPT Code Aging by Date of service

Accounts Receivable (AR) Test identifies that the same set of CPT codes that are previously paid by the same Payor mix are later Denied / Not recovered. Rollover is occurring at day 45 from Date of Submission.

The Highest outstanding is for the CPT code 28270 The Highest outstanding Payor is BCBS of MI

CPT Code 30 Day 60 Day 90 Day 120 + Grand Total % 28270 $ - $ - $ 698 $ 28,384 $ 29,083 10% 28230 $ - $ 4,774 $ 6,826 $ 17,311 $ 28,910 10% 73620 $ 7,618 $ 4,716 $ 4,643 $ 7,176 $ 20,152 7% 20680 $ 4,436 $ 250 $ - $ 12,490 $ 15,175 5% 28124 $ 12,415 $ 876 $ 354 $ 495 $ 14,140 5% 11721 $ 5,382 $ 3,406 $ 3,653 $ 2,612 $ 13,054 4% 11042 $ 1,769 $ 3,757 $ 1,658 $ 6,436 $ 11,620 4% 99213 $ 4,943 $ 1,983 $ 1,024 $ 3,515 $ 10,465 3% 28234 $ - $ - $ - $ 10,018 $ 10,018 3% 28122 $ - $ 345 $ - $ 870 $ 9,215 3% Other CPT's $ 31,261 $ 26,862 $ 26,821 $ 45,429 $ 138,372 46% Total $ 67,823 $ 46,969 $ 45,675 $ 134,736 $ 300,203 100%

28270 28230 73620 20680 28124 11721 11042 99213 28234 28122

Payor 30 Day 60 Day 90 Day 120 + Grand Total % Blue Cross Blue Shield of Michigan $ 15,906 $ 11,233 $ 12,141 $ 43,716 $ 77,996 26% Medicare $ 23,923 $ 7,649 $ 6,426 $ 15,856 $ 56,854 19% Travelers Insurance $ - $ - $ 1,283 $ 11,584 $ 12,867 4% United Health Care $ 2,629 $ 1,441 $ 1,559 $ 7,840 $ 12,469 4% US DEPARTMENT OF LABOR $ 4,416 $ 2,815 $ 292 $ 2,574 $ 12,098 4% Humana $ 261 $ 4,595 $ 7,041 $ 1,746 $ 11,643 4% UMR $ 221 $ 2,274 $ 5,216 $ 3,778 $ 9,489 3% Medicare Plus Blue $ 4,602 $ 1,922 $ 715 $ 3,423 $ 8,663 3% Chubb Group Of Insurance Compaies $ 350 $ 2,248 $ 1,513 $ 4,008 $ 8,120 3% Cofinity $ 462 $ 1,472 $ 686 $ 280 $ 7,901 3% Other Payors $ 15,052 $ 11,320 $ 8,802 $ 39,929 $ 82,103 27% Total $ 67,823 $ 46,969 $ 45,675 $ 134,736 $ 300,203 100%

Blue Cross Blue Shield of Michigan Medicare Travelers Insurance United Health Care US DEPARTMENT OF LABOR Humana UMR Medicare Plus Blue Chubb Group Of Insurance Compaies Cofinity

The Possible Loss in error is calculated based on CPT codes that have been paid in full by insurance carriers in the past then written off on subsequent claims. $1,765,338 x 47% (The Closed Claim Reimbursement rate) = $829,709 (Per Annum). (Calculation: Total W/O amount x Paid CPT code closed reimbursement rate = Possible Loss)

Focus on Write-offs

Write Off Test - Estimated cash loss Due to Adjustments Charges = WO/Adjustments

Write-offs should be separated and measured by CPT Code and by Payor just like other tests. Be on the look out for Write-offs early in the Revenue Cycle. You can have write-offs in the 30 day column for specific reasons but these should be well documented and rare. AR that has Rolled over in to the 120+ column is typically written off at some point. This test only measures Write-offs in total compared to the charge

• amount. Partial write-offs are not

measured in this test. The object is to find the root cause

• f common Write-offs by Payor and

Code combination.

Payor 30 Day 60 Day 90 Day 120 + Grand Total % Medicare (MEDICARE) $ 5,227 $ 31,520 $ 37,072 $ 316,852 $ 390,671 22% BCBS PPO (BLUECROS) $ 3,597 $ 10,945 $ 13,300 $ 164,832 $ 192,674 11% United Healthcare (UNITED17) $ 642 $ 3,823 $ 3,398 $ 36,354 $ 44,217 3% United Healthcare PPO (UNITEDH4) $ 94 $ 1,207 $ 1,230 $ 35,058 $ 37,589 2% Cigna PPO (CIGNAHE1) $ - $ 2,799 $ 1,500 $ 27,515 $ 31,814 2% Aetna PPO (AETNAUSH) $ - $ 1,208 $ 2,369 $ 26,201 $ 29,778 2% Aetna POS Managed Choice (AETNAMA1) $ - $ 2,042 $ 2,651 $ 21,488 $ 26,181 1% United Healthcare (UNITED20) $ 94 $ 1,534 $ 720 $ 16,728 $ 19,076 1% Medicaid Star Superior (SUPERIOR) $ - $ - $ 1,625 $ 13,814 $ 15,439 1% United Healthcare PPO (UNITEDH1) $ 148 $ 752 $ 618 $ 12,600 $ 14,118 1% Other Payors $ 3,462 $ 17,388 $ 19,760 $ 923,171 $ 963,781 55% Total $ 13,264 $ 73,218 $ 84,243 $ 1,594,613 $ 1,765,338 100% Adjustment % By Bucket 1% 4% 5% 90% 100% CPT Code 30 Day 60 Day 90 Day 120 + Grand Total % 94375 $ 9,024 $ 46,636 $ 53,128 $ 361,304 $ 470,092 27% 99291 $ 600 $ 1,200 $ 4,200 $ 430,200 $ 436,200 25% 99233 $ 185 $ 925 $ 185 $ 198,505 $ 199,800 11% 94728 $ 1,770 $ 15,446 $ 16,444 $ 144,066 $ 177,726 10% 99232 $ 125 $ 375 $ 125 $ 90,125 $ 90,750 5% 94150 $ 648 $ 5,832 $ 5,238 $ 47,898 $ 59,616 3% 99255 $ - $ 385 $ - $ 45,815 $ 46,200 3% 31500 $ - $ 425 $ 850 $ 29,750 $ 31,025 2% 99254 $ - $ 610 $ - $ 25,620 $ 26,230 1% 36556 $ - $ - $ 360 $ 24,120 $ 24,480 1% Other Services $ 912 $ 1,384 $ 3,713 $ 197,210 $ 203,219 12% Total $ 13,264 $ 73,218 $ 84,243 $ 1,594,613 $ 1,765,338 100% Adjustment % By Bucket 1% 4% 5% 90% 100%

Ron Howrigon President & CEO

Your Next Steps Enhance Your Negotiating Position

Evaluate Your Opposition

• Market Share
• Competition
• Current Performance
• Leverage
• Weakness
• Intangibles

Set Goals

• Reimbursement
• Contract Term & Termination
• Language
• Walk Away Points
• Opening Position
• Negotiation Points

Managed Care Strategies

• Delay: “Our lady of perpetual negotiations”
• Limit of authority: “Corporate, legal, budget, etc.”
• Two steps forward and three steps back
• Funny math
• The run around
• Package pricing

Managed Care Strategies

• Divide and conquer – hospital vs. physicians
• ACO Strategy
• Corporate Budget
• Not all products – narrow networks
• Indifference
• Employer communications
• Termination language and dates

Develop A Strategy

• Negotiation is all about leverage!
• “Let us never negotiate out of fear. But let us never

fear to negotiate.” - John F. Kennedy

Provider Strategies

• Value Play
• Non-Par Bluff
• Court of Public Opinion
• Musical Chairs
• Sell to the Hospital Bluff
• Make the pain of the change less than the pain of

the status quo

Road Map to the Maze

• Be proactive!
• Map out relationships first!
• Stay involved with all local physician organizations.

Don’t become the scape goat.

• Develop analytic and alternative payment capabilities.
• Know your leverage points.
• Don’t fall for payer spin.
• Once you have secured your flanks, then negotiate!

Negotiation Points to Remember

• “The best battle plan rarely survives the first contact

with the enemy.”

• Adapt, adjust and overcome
• Everything is negotiable
• I can’t vs. I won’t

Post-Election Update: What Happens Next?

• ObamaCare will not be repealed
• Medicaid expansion will not be rolled back
• The Republican’s are scrambling for a plan
• If the exchanges are not fixed BCBS plans will

start to leave in 2018

• No one knows what the new administration will

do, including the new administration.

Key Points

• Negotiation is a process not an event!
• You must effectively negotiate your managed care

contracts in order to succeed.

• Knowledge, analysis and planning are essential for a

successful negotiation.

• Contract language negotiations can be as critical as the

rate negotiations.

• Be prepared. Don’t go into a gun fight armed with a

knife.

Contact the “A” Team

To Negotiate a Better Contract

Get the Nation’s Top Negotiator

• n Your Side (over 1,500 Practices)

Ron Howrigon President Fulcrum Strategies r.howrigon@fsdoc.com (919) 436-3380

www.fsdoc.com Get the Data from a Complimentary Practice Analysis to Make Your Case

Karl Johnson Sr. VP of Business Development for MediGain Marketing@MediGain.com