Penny Noyes, President, CEO & Founder

1. Payer Negotiations – Getting Started 2013 MGMA Annual Conference Pavilion 6 - Monday October 7 Penny Noyes, President, CEO & Founder

2. Objectives for this session • Gather your fully executed agreements & rates • Determine when and with what payers/networks to negotiate • Initiate the contract notice and negotiation processes • Analyze your aggregate financial goal for a given contract negotiation • Achieve the aggregate goal through various reimbursement and negotiation methods

3. First Gather and Inventory Contracts • Make sure they are fully executed • Don’t forget the Amendments and Addenda • Determine if separate agreements are in place for various products or if is there a product list in base agreement. • Do you have a group agreement or individual ones for each provider? If individual do you have them all? • I have them gathered, now what?

4. Create a Summary Report for Easy Reference

5. Locate and/or calculate your payer and network reimbursement rates Expect a Long Journey with Lots of Tacks in the Road

6. Locating your contract rates …sounds easy, but much harder than it should be • From Contracts & Addenda • If Contracts are Individual – any variation? • With What Products Are you PAR? • Very few states’ laws require full rate disclosure • Rate Exhibits in Contracts rarely have dollar and cent rates for all of your codes • Rate Exhibits have narrative description based on • % or CF of Medicare • % of Proprietary Schedules • Reference to several schedules • Not always clear as to which products they apply • Defaults if no value in FS absent or vague

7. What you are likely to find in Rate Exhibits • Percent or Conversion Factor (CF) of Medicare Resource Based Relative Value System (RBRVS) • Payer/Network’s Proprietary RBRVS OR Standard Market Schedule • Relative Value Unit (RVU) Conversion Factor (CF) of Proprietary Schedule • Unique Network schedule with payer/network assigned identifier (S82 or 007-805 or 08943/08944) • % “of” or “off of” Charges OR State Schedules like WC & Medicaid • Banding based on service categories (E&M, Surg, Lab, Rad, DME) • Defaults – sometimes included in exhibit, sometimes not • Escalation clauses for multi-year- agreements -sometimes • Carve-outs • RARELY ARE RATES TIED DIRECTLY TO YOUR COST

8. Illustrations of Rate Exhibit LanguageWhat’s Wrong With These? • Provider Accepts as full reimbursement the lesser of 105% of 2010 Medicare RBRVS, or 60% of Provider’s usual billed charges. • Maximum allowable for surgery, radiology, non-clinical lab, and E&M are calculated based on the RVUs and other factors included in the ABC Payer RBRVS Policy in effect as of December 31, 2010. Except for new codes added after December 31, 2010, no further updates will be made to RVUs and other factors in ABC’s Payment Policies and Procedures. • Provider accepts Company’s Standard Market Schedule as payment in full • J Codes are reimbursed at Average Sales Price (ASP) +6%

9. What if Not Medicare Based • If a proprietary schedule like Aetna Market Fee Schedule, CIGNA RBRVS, BCBS Standard Schedule, etc., is the basis, ask for the dollars and cents rates for the proprietary schedule and apply the % in the Rate Exhibit. • Be sure these proprietary schedules cannot be moving targets during the initial and subsequent terms without your written consent – If you agree to 110% of Std Mkt Schedule and it goes down 8% next year, your reimbursement goes down proportionately

10. Example of Banding in Rate Exhibit

11. Banding w Multiple Schedules as BasisNightmare but in most marketsNote the varying percentages & FIVE different schedules –

12. Ways to Get the Schedules • EOB Allowables – great to spot check but not best source • Send Rep Spreadsheet with ALL practice Codes & Modifiers with Fac/Non-Fac columns for each product (HMO, PPO, Med Adv, etc) and ask to populate in Microsoft Excel or other useable format. • A good rep will do this for you, but most will not • Sometimes faxed or pdf – some convert to useable format, some not • Some say go to portal or limit to small number of codes • Log in to portals with username and pw • Numerous product names often do not match contract products • Limit on number of codes at one time • Portals need to be “enabled” • Verify if % from Rate Exhibit already applied or not • If Individual Contracts, schedules can vary by provider

13. Getting Tricare, Medicaid & WC Schedules • Tricare based on Medicare RBRVS for locality, but no values for many codes. Beware of lesser of discounted billed charges or discounted Tricare • Medicaid – Govt administered usually on state’s .govsite • Medicaid – Private administered- sometimes at 100% of state Medicaid rates but often at lower percentage or even % of Medicare • WC – Vary greatly – some high, some low; Some free fee schedules on state .gov site; Some must be purchase d through OptumInsight , f/k/a Ingenix (ex: NV & GA ); some complicated formulas (TN)

14. Contracted Through IPA or PHO? • Ask for copies of contracts associated with the “Messenger Model” – Many will not provide • Some have portals w all rates, some don’t • Some provide comprehensive summaries of key contract provisions, some don’t

15. Network Mergers & AcquisitionsIntegration often takes years. Which Rates Apply? EXAMPLES: • CIGNA/Great West • PHCS/Multiplan/BeechStreet/Viant • Aetna/Coventry

16. Other Contract Provisions Impacting Reimbursement • Assignment • Product Participation • Amendments • Payment Policies

17. How did your reimbursement change? • Amendment Provision – most do not require your written consent • “Routine” Network Reimbursement Updates to the standard market schedule • Payment Policies and Procedures referenced in agreement but not included in the agreement

18. Now that we know most rates Let’s Evaluate the impact on your bottom lineGather the following: • Medicare Rates for the last several years for your locality and possibly national in some markets • Charges for ALL of your CPT* Codes • Annual Utilization of each code in aggregate and by payer or network, including encounters under capitation Expect Leased Networks’ utilization to be harder to find in PMS because these are rented by payers. The Payers that rent show up in the PMS, not the Network * CPT is the registered trademark of American Medical Association

19. Create a Side-By-Side Line Up Networks, Medicare, Medicaid, WC Best to Include Charges + Aggregate & Payer Specific Utilization Too

20. At this Stage, Stop and Evaluate Charges Why? • All too often, practices have certain codes that fall below contract rates and almost all contracts have “lesser of charges or contract rate” provision • Contracts that are primarily based on a percent off of charges will be devastating if charges are too lowExample: Charges are at 150% of CY Mcr and the agreement pays 50% of charges – you are getting paid 75% of CY Mcr. • Most agreements default to % “of” or “off of”charges if no value for a specific code is in fee schedule _____________________________ • Note: With few exceptions - Charge the same for all payers for single analysis base

21. Why Charge the Same for All • Same denominator for collections comparison • You can adjust for self pay – prompt pay or hardship • Payers will take their due adjustments • Example of Varied Charges: Hand Surgery Practice • Charged the State WC Fee Schedule for Comp • Largest WC Contract Reimbursement based on Lesser of 3% off State FS or 17% off charges • On every claim they gave away 14% too much • Increased charges to never be less than 150% o state FS and additional $100K/MO fell to bottom line in the first month for 5 doc group

22. Determine Who’s Robbing You Most

23. Get Your Notice On The Table • Determine when notice must/can be sent - Generally use Term & Termination timeframes from contract. Is it tied to anniversary? Or with or without cause anytime? Is Initial Term one or multiple years? • Send signature required & save tracking info to contract notice address and email to rep • Include: • Name & TIN of Practice • Names of Providers tied to Agreement(s) • Date by which you expect response • Desire to renegotiate, but if terms not met by given date, accept this notice as termination on _______ • Means to reach the person who will be negotiating

24. They will likely tell you…. • Not negotiating at this time – do not accept this • Tell us what you have in mind? So let’s start modeling an offer: • Ask Payer/Network what methodology can they best support • Percent/Conversion factor of Medicare w locality • Proprietary • Carve-outs • Escalators • P4P

25. Gain can be Deceiving$34k improvement on $293K =11.6%

26. Increase Percent of 2011 Medicare from their initial offer of 100% to 110%

27. Change Default if No Mcr Valuefrom 40% of charges to 50%

28. Add Carve-Out –Bingo $80K

29. Payer Says OK but Bases Final Offer on 2009 Instead Lost 18K with year change

30. What if not on Percent of Medicarebut based on Conversion Factor & Don’t Forget Site of Service Differential

31. Do A Similar Analysis Using CF vs %

32. What if all commercial utilization is paid at each network’s rates side-by-side – Total and by Band

33. Ask Yourself Some Tough QuestionsIf the practice drops Payer 1… • Do you provide a service, hospital coverage or emergency care that few if any in market can replace? • Will the appointments be filled with patients of better paying plans or self pay? • Example: Appts filled w/ better paying Mcr and patients covered by termed plan still came and paid in advance. • Will there be opportunities to cut expenses due to reduced patient load after termination • Example: Practice closed on Fridays reducing expenses and improving margin. After one year the net revenue was only $3k less than previous years and everyone had Fridays off!

34. Figure Worst and Best Case Scenarios if your practice terminates • If you lost ALL of the revenue of the terminated payer what would that do to your bottom line? • Will the decision have an impact on the relationship or contracts with hospital, ASC, referral sources? • Examples: Hospital based specialty, Free standing imaging center, and Surgical group w ASC ownership • Public perception of greed

35. In Conclusion • Locating and/or calculating your payer and network reimbursement rates can be daunting. Don’t let the obstacles flatten your tires. • Evaluate the impact of contract rates on your bottom line. After finding ALL rates, decide if you need to renegotiate…or • Determine whether you need to be PAR with every payer or network. If you pare down your payers, it may not necessarily mean less net revenue, might mean more net revenue with fewer expenses and less stress.

36. Penny Noyes, President, CEO, Founder Health Business Navigators 701 Dishman Lane Extension, Suite 3 Bowling Green, KY 42104 270-782-7272 P.Noyes@HealthBusinessNavigators.com Mention your attendance at this session HBN’s Booth # 1431 and get a ContractMaster tool FREE For more info visit www.HealthBusinessNavigators.com