Breaking Down Payor Contracting Bureaucracies

It is important to remember that payors are large companies, with protocols, policies and business practices. As with any large company, there are bureaucracies, and they are necessary to maintain the order and success of these organizations.

Therefore, the first tip is to understand that to get contracted you need to identify the right department and right person to send your request to get contracted. This is usually the payor contracting department and payor contracts’ manager. Generally, you will be sending your requests to the payor contracts’ manager in your state. A common mistake is to, instead, send these requests to provider relations or to another department.

This brings us to our second tip. That is, figure out the approach the payor is using to establish its fee schedules and negotiate your agreements based on the payor’s methodology. Some payors establish a percentage of local Medicare rates based on specific code groupings. There may be a pre-set rate for each code or perhaps the same rate for code groups. I have seen national payor fee schedules that price E and M codes at a specific percentage of Medicare and another rate for laboratory and pathology codes and several rates for various surgical code ranges. You want to be sure to negotiate fee schedules based on the methodology the payor uses to establish rates. Sometimes there is also the opportunity to “carve out” codes. Carving out codes means requesting specific rates for specific codes. You will want to be sure you carve out high utilization codes.

The third tip is to be sure to emphasize value from a payor’s perspective. payors generally value unique products and/or services that reduce surgeries and in-patient hospital stays and are going to help the payor reinforce its reputation. I worked with a large and innovative HME company that distributed a special boot that prevented diabetic foot ulcers. The value benefits of this product were that the company selling this product was the exclusive distributor of the product. The product had demonstrated outcomes, which both prevented surgeries and limb removals. These outcomes were important to payors since the alternative treatment methods were far more expensive due to increased patient stay days and surgical complications.

This brings us to tip 4. Tip 4 is to work your way up the payor chain of command, bottoms up, not tops down. Bureaucracies work best when you follow the chain of command. In fact, if you don’t and you go tops down, the likely outcome is that the senior executive will push your request down to the lowest level of the organization and, the unintended consequence is that you will not be able to escalate your way back up the chain, since you already started at the top. You will have inadvertently taken away your own negotiations’ options of drawing higher-level attention to your value proposition by starting at the top. Another unintended consequence is that you will likely have alienated the lower level managers who have now been handed the power in the negotiations, which will make it harder to get results. Always start at the bottom and work your way up.

The fifth and final tip is to use complementary networks to facilitate and expand your customer and patient base. There are many networks and products, including leased networks, Medi Medi plans, Independent Practice Associations (IPAs), Administrative Services Only (ASOs), etc., that can be used to supplement your direct commercial payor agreements. By contracting directly with commercial payors and supplementing with these other kinds of networks, you expand your patient/customer base and do not lose or limit the effects of the direct payor contracts. Leased network agreements usually exclude the direct-payor contracts that you have already put in place or are going to put in place. A leased network will not get in the way of your direct agreements. IPAs present an opportunity for their members to “opt in” to specific payor agreements and opt out of others. It is often a combination of Medi Medi Plans, and commercial plans, including PPO and HMO plans.

Originally published by HME News

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