Beat Payers at Their Own Game

Payers: love 'em, hate 'em, can't live without 'em. But you can live better with them, and we'll show you how. We wanted to find out payers' and employers' pet peeves and preferences so you could use that information to your advantage at the negotiating table and throughout the life of your network contracts.

For insights and tips we turned to three healthcare leaders - who didn't always agree on what's important to payers or whether the latest trends will last - but whose comments will, we hope, make your dealings easier with those groups that, like it or not, have strict control over the purse strings. First, some do's and dont's on contracting. Then, our experts offer their insights in their own words.

Our Panel

• Helen Darling, president of the National Business Group on Health. Founded in 1974 and based in Washington, D.C., the group's 224 employer members purchase health and disability benefits for more than 50 million employees, retirees, and dependents. Members include Cigna, Eli Lilly, Delta Airlines, and Honeywell. This high-profile group is influential on Capitol Hill and among government officials, as well as in the private sector, and has led the movement to demand greater accountability in healthcare.
• Dan Dragalin, MD, executive vice president of network development for MultiPlan, Inc., one of the largest PPOs in the nation. MultiPlan, based in New York City, has 4,600 hospitals and some 450,000 physicians in its networks. MultiPlan has agreements with 3,000 clients representing 30,000 employers, who in turn provide benefits for 27 million individuals and family members.
• Alice G. Gosfield, a widely respected healthcare attorney who has represented both payers and providers in contract talks. Gosfield has been a member of the board of the National Committee for Quality Assurance (NCQA) since 1992, serving as chair for five years. Gosfield also chairs the Physician and Physician Organization Institute of the American Health Lawyers Association, and has served as president of the group. She is a sought-after speaker, lecturer, and consultant.

Contracting Do's and Don'ts: What the Experts Said

• DO know the law, pick your battles, and understand the process. "The contracting people's basic mission in life is to enroll providers in their network, and [they] never want to have to deal with them again," Gosfield says. "They don't want to renegotiate anything."

Payers "hate it when providers argue over clauses that are required by statutes or by regulations. They are not crazy about battles over indemnification clauses," she adds. These clauses, which prohibit physicians from attempting to collect payment from plan members in the event of a plan bankruptcy, are required by virtually every state insurance department.

Similarly, plans typically insist on - and providers dislike - hold-harmless clauses that prohibit physicians from blaming the health plan if the doctor is sued for malpractice. Trying to remove these clauses will tick off the contract negotiators, Gosfield says, because "they don't like any situation where they have to bring lawyers in."

• DO insist on changes or amendments - and do not settle for a "side letter" - if you have a real problem with part of a contract. Side letters, which negotiators often offer, are "meaningless," says Gosfield, because contracts typically include an "integration clause." This clause states that the contract "supercedes any other understandings between the parties, either written or informal" - such as a side letter.
• DON'T demand more payment or better terms unless you can prove you are worth it. "Many doctors will go to a plan and say, 'We're better. Pay us differently.' You got outcomes data? How many optimizations have you prevented?

"There is a mythology that [payers] don't cut separate deals - they will," she says. "But you might have to sign a confidentiality agreement that you won't talk about the deal."

• DON'T be afraid to issue an ultimatum, and be willing to walk away. Gosfield describes the experiences of a hematology/oncology group that discovered one large payer accounted for 14 percent of revenues - but 24 percent of expenses. The two sides could not agree on payment and "the termination notices were issued. They would have gone into effect on a Monday." She says she got a call on the Friday before from one of the jubilant physicians, who reported that he got "everything" he asked for.
• DO make the best of the contracts you have, because new ones may be hard, if not impossible, to find. "There is so little contracting going on," Gosfield says.
• DON'T sign a so-called "favored nation" clause. This is a requirement that if you accept a lower rate or more favorable rates from one plan, you must offer that rate to other plans. You should participate in a few networks, but be selective about which networks you join, and really understand the contracts each offers and the differences between them, he adds."

It is an appropriate thing to participate in networks because the network is really an advertising arm," Dragalin says. "In return, the physician has to pay for that [advertising] and the payment is the discount" off her usual reimbursement amounts.

• DO make note of what the contract specifies for payment methods.  For example, if the contract says it will pay you on an RBRVS system, what happens if you bill using non-CPT codes, such as HCPCS? Will you be paid? Scrutinize clauses that pertain to canceling the contract, especially noting the process to do that and how long it would take.
• DO try to keep an open mind.  "Most of the things payers do that irritate physicians are not Machiavellian," Dragalin says. "It's not that payers are going after physicians in any concerted way. They have a very large mass of providers, and they are trying to make their own lives easier. Most of the mistakes I stumble across are not intended to defraud anyone. There may be misinterpretations of a clause, or something that is not clear, or something that is new. It is more errors than anything else."

Q&A: The Physician-Payer Picture

Physicians Practice: What are the most important qualities health plans and employers value in a medical practice - size, quality, location? Has this changed over time?

Dragalin: Size, quality, location all matter, and no, it hasn't changed. From a payer perspective, we would rather deal with smaller groups than larger groups. They are just easier to deal with. The larger groups are more complex; they are a lot less flexible. By large, I mean several thousand; by small, I mean less than 50.

Darling: Employers would rather be paying for care that is based on best practices, on recommended care, on evidence-based care. This [desire] has accelerated within the last few years because the costs have soared again. When health plans tried to do any management, politicians, journalists, and sometimes employers said, 'We don't want you to put any limitations on physicians; don't make them mad or hassle them in any way.' The health plans felt burned.

Physicians Practice: Are you saying employers made mistakes?

Darling: Yes. Employers made a mistake in not engaging physicians earlier, and by putting in changes that made doctors mad. If something is going to work, it is going to have to be designed and accepted by practicing physicians. We actually see quite a difference [now] in the number of physician organizations becoming much more engaged in how to deal with these problems.

Physicians Practice: Physicians are skeptical of pay for performance, if not outright opposed to it. Is this concept here to stay?

Darling: Yes. The programs we have so far I think are really good, because they encourage physicians to meet certain standards ... and if they do, they get paid more. We should be paying doctors more. In terms of fees, at least, they are not the problem in the system. Primary-care providers are underpaid, in my opinion. We want to reward physicians who do everything evidence-based to help those patients. It sends all the right signals.

Dragalin: Physicians have a right to be skeptical. There are many, many different groups that say they can demonstrate quality. A lot of the variables have not been tested, from a longevity standpoint. I think most pay-for-performance systems out there today are based more on rates and less on quality. Pay for performance is nothing more than tiny snapshots in the care spectrum to see if a certain medical action was done. 

Gosfield: Pay for performance is a rapidly developing phenomenon that I believe is transitional. I don't think it's going to last. It is not a sustainable model. Once you move everyone up [to meet quality standards], then where do you go?

Physicians Practice: What role should the federal government play in this?

Dragalin: I don't think the private sector is going to get it together - ever - to put together a pay-for-performance system that stands the test of time. Employers endorse specific programs and measures that are being pushed by whatever business coalition they belong to, and those are influenced by whichever consulting group is advising them. The private sector does not have the volume. I think the variables will come from CMS [the Centers for Medicare and Medicaid Services]. The government needs to step in and mandate a specific set of quality indicators that physicians need to be following for Medicare participation, and decide what we are going to do in terms of technology assessments, what drugs are covered. I don't understand how there is any other answer. Physicians will not be able to comply with 10 different health plans' pay-for-performance standards.

Darling: The federal government has to lead because it pays for such a high and growing amount of healthcare. Providers will, understandably, hold back from making investments to avoid the risk of doing something that would be a waste. We believe the federal government should convene all stakeholders, set tight deadlines for the stakeholders to work out the standards, uniform measures, interoperability requirements, and the rules needed for everyone to be efficient and effective.

Physicians Practice: Should physicians be making more investments in information technology (IT)? Who should pay for these?

Dragalin: Technology makes it easier, but technology is nothing more than the ability to manipulate certain pieces of the medical record, to have all your diabetics listed in a certain file [for example], so you can know when they have come in and when they haven't. Who should pay for it? Who pays for the nurse? It's buried in the physician's overhead. The same people who pay for all the rest of healthcare.

Darling: They should put in what is most useful to them first, scheduling or bookkeeping, billing, e-mail ... maybe the PBM [pharmacy benefit manager] gives them something with e-prescribing built in. We would love to see that, and we are happy to support the programs that would support physicians' offices [to] become more computerized.

We are encouraging our members to pay for pilots that would test the efficiencies and effectiveness of e-mail for physicians, and encouraged their foundations to make grants not just for hardware, but also for training and for time off. We think there are enough savings for everybody to make the investment. It is possible to lend money and have some shared savings. A payer would save money if transactions were done electronically.

Physicians Practice: Should there be consequences for physicians who don't change, or evolve, or adopt technologies? Should they be cut from networks?

Dragalin: There are physicians who are following much more objective, standardized protocols than other physicians. Does that mean everyone who is not following protocols should be cut? Probably not, since most physicians aren't.

Darling: I don't think so ... There should be positive incentives. If they are good doctors but they are slow to adopt technology, I don't think they should be punished. They need incentives.

Physicians Practice: Are there other issues of concern about physicians?

Darling: One thing we would like to see much more of is the use of other health professionals. The idea is that a lot of things are done in a medical group practice that are good for patients, but they don't [all] need to be done by a physician, such as counseling if you are a diabetic. These could be done by a nutritionist, or a nurse. If we could find a way to do that without hurting the physicians' income ... Right now we have a payment system that works against that.

Theresa Defino is an editor for Physicians Practice with more than 15 years' experience covering economic, legislative, and clinical aspects of healthcare issues. She can be reached at tdefino@physicianspractice.com.

This article originally appeared in the July/August 2005 issue of Physicians Practice.