The Executive Suite: Breakup best practices: Developing a payer contract termination strategy

Tuesday, November 12, 2019

Breakup best practices: Developing a payer contract termination strategy

Insulting. Ridiculous. Absurd.

These are just a few of the words likely uttered within the halls of medical practices after a major payer recently announced it would no longer reimburse after-hours care.

It doesn’t take a doctor to know that kids get sick at night, too. Which is why this move might have been enough for some clinicians to throw their hands up and finally say out loud what they may have been thinking for a long time: “I want to break up!”

Independent practices often feel like David to a payers Goliath. That makes sense, given their relative size and resources. But the truth is a little more complex.

Those practices and the physicians they employ actually have a lot more power than they realize. To utilize it effectively, though, they have to be strategic. Breaking up with a payer may be cathartic in the short term, but in the long run it may do nothing to help that practice, nor the patients it serves.

Breakups should be a last resort, the rock and slingshot used only when every other tactic has failed. Instead...

Start with a comprehensive analysis

Begin with the opposite of emotion: data.

Ask yourself the question openly and honestly: What would actually happen if we terminated this payer contract?

Consider whether you can replace the lost revenue by replacing that payer with another. Study market conditions through the lens of a payer. For example, if you are a dermatology practice find out of there are five others participating with this payer within 20 miles. Then find out how long it takes a patient to get into your practice. It’s possible you’ll be able to replace the business and stumble into an even better reimbursement rate, though you have no idea until you do the homework.

And while the goal here is to create an objective analysis, it’s also worth considering whether a payer that’s acting like a bully is worth the trouble. If office morale is going down the drain, put a quantitative number on lost productivity, even if it’s just an educated guess.

When it’s all said and done, you should have a clear picture, backed up by data, of what terminating your contract would actually look like. By stepping back and taking emotion out of the equation, even when a payer has clearly wronged you, you can begin to take control.

Build consensus among stakeholders

Once you have your analysis in hand, take that information to your most important stakeholders. At this time, the fact that you’re even considering breaking up with a payer shouldn’t be communicated outside of those critical team members.

These are the physicians and administrators responsible for making critical business decisions. You can’t have four out of five physicians agreeing to it, you need all five.

And no matter your role, whether you’re a clinician-leader or an admin who’s cursed a cutback on reimbursable CPT codes, ensure you have a plan for building that consensus by allowing the data to tell the story.

Have a comprehensive plan in place before you take any action

Play out every scenario, from best to worst, and outline how you would communicate the contract termination to both employees and patients.

Don’t do this in a silo: include those stakeholders and ensure there are no gaps left unfilled. Consider what happens to patients of that payer. Can they still see you out-of-network? What about referral pipelines?

If you do send notice of contract termination, find out the date that the payer plans to notify their members. This gives you leverage with the knowledge that a counterproposal will likely arrive before that date, or comfort in knowing exactly how much time you have to deploy your own communication plan.

It may feel silly, but your preparation should include a roleplay of what a conversation would look like with patients or referral providers. You should develop a plan that considers the entire timeline, ideally at least six months out.

The more of the unknown you can make known, the better off the practice will be emotionally, professionally, and financially.

Remember that you have power

The truth is that payers don’t want to lose independent practices. They are critical to maintaining payer networks and provide more value than consolidated health systems.

As a David, you are more important to the Goliath than they’ll ever let on.

In fact, in many cases issuing the termination notice acts as a spark for negotiation that ends up in a more agreeable contract and a better relationship between both parties. You may never even need to act on your termination, and because you performed due diligence and have the data in hand, you can stand up for exactly what you require and nothing less.

Set your terms and have the courage to stand by them. But first, know what those terms are.

Independent medical groups have the right to stay independent and practice medicine the way they believe it should be practiced. And despite what big payers might tell you, it’s just as important for them as it is for you that you do stay independent.

While it’s not the step anyone wants to take, it’s a step you have every right to take when the situation demands it. Acting strategically will give you the data, knowledge, and courage to do what’s right for you.

So go ahead, pick up that rock. Just know that there’s a lot of work to be done before you throw.