business of pediatrics

Negotiating Insurance Contracts: 8 Steps to Success

Although it may seem daunting as an independent pediatrician to take on an insurance company that has not provided fair payment for your services, it doesn’t have to be intimidating or time-consuming. Done in the appropriate way, from a position of power and confidence, the process of negotiation can yield results.

Here are eight tips to get started.

Tip 1: Determine which insurance company lags the most in terms of compensation

Figuring out which companies are not meeting your practice’s needs is an important first step, says Chip Hart, Director of PCC’s Pediatric Solutions consulting group. It’s critical to look at the correct metrics. “Don’t pay attention to what they’re paying you for individual procedures,” he says. “Look at the entire revenue for a cohort of patients.” Practices often get caught up in the “shell game” many insurance companies play. For example, you may be able to negotiate a five percent increase in well-visit payments, but then the payer drops immunization payments by $1, resulting in a net decrease for your practice. Instead, begin by sorting payers by average revenue per visit, for all visits. Use this number to decide which company to target for negotiations and avoid getting caught in the shell game trap.

Tip 2: Know your data, know your contract

In the hustle and bustle of patient care and practice management, it’s easy to lose sight of key business documents. Find your insurance contracts and become familiar with them. Are negotiations only allowed during a certain set time period? Any other clauses or stipulations related to payment changes? Going into talks armed with these key details puts you in a position of power.

“Insurance companies do not know what to do with a pediatrician who has data,” says Hart.

Have a solid working knowledge of where your practice excels and be able to cite the numbers. Excel at asthma management? Are your HPV vaccination rates above average? Bring this information to the negotiations. This shows that you’ve done your homework and you know exactly why your patients are loyal to your practice.

Tip 3: Make the phone call and ask

You’ve done your homework: You know which company to target based on average revenue across all visits. You know the ins and outs of your contract, and the data supporting your practice’s value. Now it’s time to make the call. The first step is a simple one: Call your representative and ask what you can do to get a better agreement. “You want to do the easy thing first,” says Hart. Sometimes, companies have simple methods to increase payments, like joining a quality program that requires tracking and submitting data for a particular set of conditions. Sometimes, this additional step is well worth the time and effort and meets your financial needs.

Tip 4: Draw your line in the sand; be prepared to take action

Hart points to the popular parenting “how-to” book, 1-2-3 Magic, as a good example for pediatricians entering negotiations with an insurance company. In the book, parents are urged to follow through on an action they promise if a child continues a disruptive behavior. If parents fail to do what they promise to do, the child quickly learns that the consequence will never materialize, and the words lose their meaning.

“If you get frustrated and tell your ineffectual insurance rep that you’re going to drop their insurance, and don’t… all you’ve done is cement their belief that they can push you around,” says Hart.

Take that mindset into negotiations. Gear up and find the insurance company that isn’t paying you properly. Says Hart, “Look them in the eyes and say to them, ‘If you don’t stop becoming my least good payer, I’m going to drop you.’ If they don’t step up, then you drop them. This may sound like a scary proposition, but following through on the threat is key. Be prepared to take action. Your practice will survive because you’ve done your homework, you’ve targeted the right company, and you know your worth. Also, you have an army of loyal families on your side.”

Tip 5: Mobilize your patients

“Your patients are your best asset, by far,” says Hart. He suggests mobilizing them on your behalf. First step: Print out letters to parents of all of the patients who are on the plan you’ve dropped (see a sample letter on Chip’s Blog). Explain that you’ve negotiated with the company in good faith, but that you’ve come to the conclusion that they are not interested in fairly paying for child health. Cite specific relevant examples, like non-existent compensation for depression screening, or vaccination payments that aren’t sustainable. Say to parents that you simply can’t continue to accept this insurance and provide the quality of care that they’ve come to expect from your practice. Give them the time frame within which the insurance plan will be dropped, and let them know which plans you do take. Include contact information for the membership management representative for the company, as well as the name and email address for the company CEO. Link to the company’s financial information, so families can see how profits stack up against the reality for pediatricians in their community.

You must also make clear that the relationship you value the most is between you and your patient families and you will continue to see them, regardless of their insurance coverage. Parents need to learn that it’s the insurance company that has inserted itself into your relationship.

Tip 6: Strategically deploy letters to patient families

You have the letter in hand that makes the case to families that fair payment is necessary for your practice to continue to be a good steward of their children’s health. Be thoughtful and strategic about how you deploy those letters. “When you have that letter, don’t send the letters all at once,” says Hart. Instead, send them out in batches - 50 on Monday, 50 on Tuesday, 50 on Wednesday, and so on as you work through all of the families on the plan. That direct feedback from paying customers – some of whom may be ready to drop their plan to stay with the pediatrician they’ve trusted for years - often makes the insurance company stop and take notice (See some examples of success stories on Chip’s Blog). Hart stresses that you don’t need to be a large practice to make this work. Just one family may pay tens of thousands of dollars in premiums annually. If you are a two-doctor practice asking for a net annual payment increase of $20,000, that may cost the insurance company less than the premiums they stand to lose by even two or three families dropping them.

You should also prepare another, shorter stack of letters – one for each of the H/R departments of the employers who are contracted with the insurance company in question. You will want to point out that the insurance company they have contracted with doesn’t provide the coverage they probably expect. Cite the number of their families who are going to lose their medical homes and quality pediatric coverage. Often, a concerned call from a large local employer is all it takes to get an insurance company to come to the table.

Tip 7: Fill the income gap

The day you start sending the letter to patients, Hart suggests recalling patients from your remaining payers who are overdue for clinical services. For example, in most pediatric practices, half of teenagers are behind on their well visits. Get in touch with those families and make sure those patients come in to catch up on their care. Not only are you providing a valuable service, you’re filling the short-term gap in your schedule. And since you’ve done your homework and dropped the lowest-paying insurance company, you don’t need to bring in as many patients from the remaining companies to fill the gap. For example, if the company you’ve dropped paid you 30 percent less than the remaining payers, on average, you need only to recover 70 percent of the visits. What’s more, if you gave families adequate notice in the letter you sent, some will take the opportunity to switch to an insurance provider on your accepted list. You keep these patients, and the insurance company you dropped stands to lose significant revenue. You will actually find yourself generating more revenue with fewer visits.

Tip 8: Be prepared to re-negotiate with the provider you dropped

You’ve crunched the right numbers and taken appropriate action with the insurance company providing the lowest average payment across all visits. You’ve also mobilized patients on your behalf. This sets the stage for a re-negotiation in the months and years to come.

“Because you’ve done your homework in a way that your peers around town have not, it gives you an advantage because you can move sooner and more effectively,” says Hart.

As other pediatricians in the area begin to feel the financial strain from the low-paying insurance company, they may also drop the provider. Then, as the company begins to have trouble finding pediatric practices to sign on, be prepared for them to come back to you to re-negotiate a contract. You can enter the negotiations from sound financial footing; you’ve filled the income gap by reaching out to existing patients, and you know that the company needs you more than you need them.  

In the end, don’t be intimidated by taking on a low-paying insurance company. Know your bottom line, know that your patients are your strongest asset, and stand firm. Enter into negotiations with confidence, and make sure you’re fairly compensated for the important services you provide to your patients.

Do you know the top mistakes of pediatricians?

Erin Post

A resident of Burlington, Vermont, Erin Post has a B.A. degree in English from Hamilton College, and is a graduate of the writing program at the Salt Institute for Documentary Studies. She is currently working on her master's in public health at the University of Vermont. In her spare time, she likes to bike, ski, hike, and generally enjoy the Green Mountains of Vermont.