Optimizing RCM in the midst of physician practice acquisition: Three steps to improve payer contracts

Health systems show no signs of slowing their efforts to acquire physician practices, and these investments can undoubtedly yield numerous benefits. From the patient care perspective, adding practices strengthens and expands services to health systems' communities.

The more comprehensive suite of services also positions health systems for value-based reimbursement by addressing more of patients' clinical needs across the entire care continuum.

Acquiring physician practices also affords health systems many opportunities to achieve financial and operational advantages. In particular, payer contracts can contribute to health systems' financial growth. Oftentimes, physician practices might not have as much negotiating power on their own because they are smaller entities. After an acquisition, however, they can benefit from the the increased bargaining power hospitals and health systems have. Additionally, by having the right tools and data analytics implemented, organizations can even more effectively optimize payer contracts.

Healthcare leaders can take the following three steps to negotiate better payer contracts after acquiring physician practices.

1) Assess the rationale, knowledge and strategy that went into acquired physician practices' payer contracts

It's important to recognize each physician practice team will have varying levels of contracting knowledge. Some may not have the level of sophistication to optimize their payer contracts, which can result in contracts that leave money on the table. When this happens, the health system may be in a position to facilitate a number of improvements by leveraging existing payer relationships and negotiation power. Health systems should also review the practice's payer contracts with an eye toward understanding how the practice came up with costs to provide each service, particularly the ones that are highly profitable or high volume.

Just as health system leaders must learn about their physician practices' knowledge of payer contracts, they must also be aware of their own individual levels of expertise. Physician practice contracts may have different nuances than hospital contracts. Additionally, the practice's specialty often requires a specific knowledge set. In these cases, it's helpful for health system leaders to research specialty payer contracts prior to negotiations. More importantly, review the contracts with practice leadership and ask questions. Consider the many potential differences in the practice environment: common procedure codes may have different nuances in the practice environment; certain procedures may take a different amount of time; and practices may use different supplies. In these cases, health system leaders may not understand the reasoning behind a practice's fee schedule. A logical reason likely exists, and the physician practice team will have the answers. Having this knowledge can help organizations better negotiate, and help them understand what a favorable contract looks like.

2) Leverage data-driven analyses, matrices and lists of lists

Being able to review contract data and terms of the agreement in black and white is a necessary step toward optimizing contract negotiations; however, it's only the first step if a health system has acquired a number of physician practices. The data for multiple acquired practices can be cumbersome, making a comprehensive review challenging. For each practice, develop a matrix of all procedure codes and the corresponding reimbursement rate. Then develop a list of every physician practice matrix—in other words, a list of lists. This matrix will enable leadership to review reimbursement rates across all organizations within the health system and can facilitate an apples-to-apples review for specific specialties. Your "master list" may also include things like when a current contract expires, advance notification requirements for a request to negotiate a new fee or contract item.

The work that goes into developing these matrices can seem daunting; however, once it is complete, their usefulness will be evident. Before negotiating with payers, leadership can compare elements such as fee schedules, patient satisfaction scores and quality scores. During contract negotiations, these data points can be invaluable. For instance, having five cardiology practices rather than one enables organizational leadership to say, "We're now doing 20 percent of your cardiology claims, so how can you improve your contract with us?" In addition, exceptional quality metrics also give health systems a strong vantage point. Being able to say, "We've achieved the highest possible quality scores with our one original cardiology practice and are now expanding the same best practices to our other four practices," shows readiness for value-based reimbursement.

3) Work with practice leadership to prepare, set goals and enter negotiations with eyes wide open

Lastly, take the time to regularly meet with practice leadership, review all relevant data collected during step two and prepare for negotiations by setting clear goals. In addition to looking at contracting, evaluate whether the practice has the optimal fee schedule—an activity that is part art, part science. Be sure to set aside ample time, as this step will take more than one meeting due to the amount of data collection required. Know the important details about the current contract and practice's volume per procedure code, so health systems can go into negotiations with eyes wide open. This level of awareness will put the organization in the position to achieve a more beneficial contract.

When meeting with practice leaders and evaluating their contracts, health system leadership should remember they acquired the practice at least partially for its relationships, ties to its patients and service to the community. Work with leadership to assess what the practice does well today; health systems don't want to tamper with what made the practice successful. In addition, collaborate with practice leaders to determine where the organization needs improvement and how the health system's knowledge can help. It's a delicate matter to discuss with practice leadership, but it's a necessary give and take.

Strengthening a Health System's Position by Building Partnerships

A common theme in these three steps is the partnership between health system and physician practice leadership. In everything from collecting data to developing patient payment processes to creating population health plans, leaders from both sides must work together, share knowledge and understand the value of what they can learn from each other. When going into payer negotiations, nothing is more important than a united front of leaders who are aligned because they've taken the time to build a knowledge base and develop their optimal position for negotiations. Further, payer contracts are just the first step: As value-based reimbursement becomes more pervasive and health systems serve patients across the entire care continuum, leadership must come together and share their knowledge to build the best care model and the optimal revenue cycle. By building these partnerships, health systems can ensure their financial health during substantial change in the years to come.

About the Author
Jim Denny is co-founder and CEO of Navicure, a provider of cloud-based healthcare claims management and payment solutions. You can follow him on Twitter @J_Denny.

The views, opinions and positions expressed within these guest posts are those of the author alone and do not represent those of Becker's Hospital Review/Becker's Healthcare. The accuracy, completeness and validity of any statements made within this article are not guaranteed. We accept no liability for any errors, omissions or representations. The copyright of this content belongs to the author and any liability with regards to infringement of intellectual property rights remains with them.​

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