Non-conventional contracting strategies

By David A. Hess

Entering into contract negotiations with health plans for additional monies is not always an easy task. There are countless variables involved in the process and these variables often favor the health plans, mainly because of the lack of health insurer competition in Pennsylvania.

This article will present two ideas for generating additional revenue for your practice when working with contract issues and health plans. The first subject concerns the relevancy of your fee schedule and its applicability when contracting with a health plan. The second subject matter concerns a contracting idea that is not conventional, but can be considered as a contracting strategy for increasing your practice’s revenue.

Fee Schedule Updates

There is a tendency for some physicians to forget about the relevancy of their fee schedules. This is traced to a general feeling among physicians that the relevance of a fee schedule no longer applies because of managed care’s dominance.

Physician practice fee schedules remain very relevant in this new millennium. It is common for commercial, Medicare and Medicaid health maintenance organization (HMO) and preferred provider organization (PPO) contracts to contain a provision along the following lines: “Health Plan shall compensate Participating Physician for covered services provided to Members. Participating Physician agrees to accept the lesser of (i) the usual, customary and reasonable charge for the services provided, or (ii) Participating Physician’s usual billed charges, as payment in full for the services provided to Member pursuant to this Agreement.”

A review of Medicare’s reimbursement for the 99213 evaluation and management code, for the years 1997 through 2000, provides a case in point. Medicare’s fee for this code has increased nearly 31 percent during this time period: 1997—$34.53; 1998—$37.71; 1999—$39.95; 2000—$45.18.

Based on this example, if a physician rendered care to a Medicare patient in the year 2000, billed under the 99213 code (Outpatient office visit/established patient/expanded focus/15 minutes), and had a $40 charge for this procedure, the practice would be reimbursed $40 instead of $45.18. The financial impact to the practice can be very significant as this code is a common code and may be used hundreds of times each year by an individual physician.

The Medicare conversion factor for the year 2001 is nearly 4.5 percent higher than the Medicare 2000 conversion factor. Therefore, the Medicare reimbursement for code 99213 has increased again!

Fee schedules still have relevance in today’s health care market. It is important to review and evaluate your fee schedules annually, preferably at the beginning or the mid-point of each year in order to take full financial advantage of the contractual provisions affecting your practice.

Payment for Adherence to Clinical Guidelines

Plan A—negotiating with health plan representatives and requesting additional reimbursement for various codes—is often a daunting and unsuccessful process. The purpose for entering into these types of discussions is to generate more money for your practice.

Even if a health plan wanted to be flexible, it is often difficult for these entities to do so and accordingly, reluctance prevails. Their systems, methodologies, and administration are set up to facilitate consistency for administrative efficiency.

If a physician proposes a change in the participation agreement, he or she will be told that it can’t be done because the Department of Health approved the participation agreement.

If a physician proposes removal of certain codes from his or her capitation payment to obtain fee-for-service reimbursements for these codes, he or she is told that it can’t be done because the health plan’s systems are not set up that way. Physicians know the routine and the drill.

If the above noted “Plan A” does not work in the pursuit of additional reimbursements, perhaps “Plan B,” an idea that has been negotiated with a large HMO in this Commonwealth, could involve entering into a contract with a health plan(s) outside of the traditional participation agreement methodology.

Consider proposing to the health plan’s medical director that your practice is interested in entering into a contract with the health plan, under a separate arrangement from the existing participation agreements, for adherence to clinical guidelines. Should the health plan show an interest, consider requesting for the following as it relates to this concept.

1. Propose the use of two clinical guidelines that would impact/affect the most prevalent and costly diseases within your practice as it relates to the health plan’s members. If you have a smaller practice, ask the health plan’s medical director what is the most prevalent condition affecting the health plan’s membership and choose a corresponding guideline.

2. For simplicity sake, propose the use of two of the health plan’s clinical guidelines. It is not worth the time to enter into lengthy negotiations/meetings with the health plan over guidelines and measures. It is reasonable to request the opportunity to review the proposed guidelines with the physicians within your practice for possible modifications prior to implementation. It is also reasonable to request literature references and background information that supports the clinical guidelines used to develop the measures.

3. Not all guidelines are easily convertible into economic performance measures because of their complexity or the lack of readily available data. However, for this arrangement, the selected guideline specifications will need to be converted into performance measures. The practice should work with the health plan in determining how measures will be defined to ensure that the final results are actionable and accurately reflect the clinical guidelines.

4. Ask that the health plan provide information as to whether it has an analytically ready database and how the information will be standardized and mapped on an ongoing basis. It is also reasonable to request how the data will be cleaned to ensure that it will generate valid measures.

5. Work with the health plan for a description of how the measures will be defined to ensure that the final results are actionable and accurately reflect the clinical guideline.

6. Ask for a description of reports (including reporting time periods) that will be provided that identifies adherence to the clinical guidelines, detailed information that can be acted upon, and documentation methodology.

7. Consider proposing the use of record review to determine adherence to the clinical guideline. Ask the health plan to make a registered nurse available to perform this function. The health plan has the resources and it performs these functions as part of its other responsibilities (HEDIS requirements).

8. The contracted price for your services, on a per guideline basis, is open for discussion. The goal is to increase reimbursements, on the margin, to your practice. Choose a price that is reasonable based on the size of your practice and the number of the health plans members that are affiliated with your practice.

One never gets what they do not ask for, so in addition to the reimbursements identified above, request an initial payment from the health plan. These payments should be used for in-service work to be performed by your group for training about components of the clinical practice guideline and clinical indicators, enhancement of internal documentation forms and procedures, and internal ongoing audits that measure your practice’s performance.

Consider requesting performance awards of 100 percent of the allotted monies for achieving 10 percent better than the national average. Prorated payments should also be envisioned as part of the arrangement. For example, should your group meet the national average, 70 percent of the allocated dollar amount for meeting the national average should be paid. A prorated schedule is also envisioned for adherence between the national average and 10 percent above this level, as well as 10 percent below the benchmark.

9. From a timing perspective, consider establishing nine months as the adherence period. Guidelines and measures should be established prior to implementation. Adherence measurements would require one to two months to record and report with payment made soon thereafter.

10. Try to structure the arrangement so that it automatically renews on a yearly basis with an annual three to four percent increase in the per-clinical guideline rate identified above.

Two contracting strategies were presented in this article to help generate additional revenues for your practice. The first strategy concerned the relevancy of a practices fee schedule and how it could have a bearing on revenues generated. The second strategy concerned entering into a contract with a health plan for adherence to clinical guidelines. Although neither strategy will generate large volumes of dollars, in today’s health care world for physicians, every dollar is important.

David A. Hess is Director of Contracting for PMSCO Healthcare Management and Consulting, a subsidiary of the Pennsylvania Medical Society.