How to Negotiate Fees
PPOs are here to stay. Today, more than 80 percent of all dental plans sold in the United States are PPO plans, so there is more pressure than ever before for the fee-for-service provider to consider contracting with at least one or more plans. There are about 12 PPO plans sold for each indemnity plan. The greater the number of individuals covered by a particular plan in the practice area, the greater the pressure to join that plan.
One of the key considerations in the decision to participate with a plan, or to continue participation, is the plan’s fee schedule. Depending on a practice’s overhead and procedure treatment mix, even a modest reduction in reimbursement can have a significant effect on profitability. Conversely, a modest increase in reimbursement may create a similar increase in profitability.
Many doctors do not realize that some dental payers are willing to negotiate fees. The bottom line is that the doctor is not obligated to accept the fees offered to participate with any plan. Additionally, all doctors have the right to negotiate a reasonable fee. In the recent past, there has been a notable increase in the number of practices that have successfully negotiated with payers to increase their contracted fee schedules. The practice’s ability to negotiate is a real and viable alternative to the blind acceptance of offered fees.
Doctors negotiate every day with patients when discussing treatment needs, with suppliers when purchasing equipment and supplies, and with staff when establishing expectations and compensation. These experiences can be used to negotiate with PPOs to increase the reimbursement schedule offered. However, negotiations take time, preparation, and an understanding of your current situation and the PPO marketplace.
So, how do you begin the negotiation process?
Assess the Current Situation
Before entering into a negotiation, it is vital to first examine your current position. In any negotiating process, the stronger the position you have, the greater the chance of success. If you are currently participating with any plans, begin the analysis by collecting the following data:
- Identify all plans with which the practice participates. For each plan, determine the number of practice patients covered by the plan, the amount of practice revenue generated from those patients over the past year, the percentage of total revenues for each plan, and the total required writeoffs generated from the plan.
- Examine the practice’s current busyness and financial position. Consider the practice’s current busyness: Is the practice stagnant and in need of new patients in order to grow? A good rule of thumb is that ideal “doctor busyness” is being solidly booked one to two weeks ahead. (Note: Using block scheduling and/ or utilizing an unbooked operatory can provide openings for emergencies and new patients.) Also, determine the practice’s total annual overhead expenses and the amount of revenue required to continue practice operations.
- Gather the plan’s contact information. Identify the phone number or email address for each plan’s provider relations department, network recruiting department, and provider retention department.
- Track the important dates. Determine the initial participation date with the plan and the date of any fee changes made by the plan, either “automatic” changes or prior negotiations.
- Consider the other potential plans with which the practice could contract. Track the number of patients requesting participation information regarding all plans. Also, track the number of patients who call about plans with which you are in-network and out-of-network. Breakdown that number based on the rate at which callers make appointments regardless of your in- or out-of-network status. Finally, determine if there are PPO plans covering the employees of major employers in the area with which the practice does not participate But, keep in mind that employers do change their health and dental benefits.
- Determine the effects of ceasing participation with a contracted plan. Will the practice lose a large number of existing patients if the decision is made to drop the PPO? It is easy to drop a three percent market-share plan, while 30 percent requires a great deal of study and analysis.
- Identify the practice’s most utilized or billed procedures. In most practices, around 25 procedure codes represent nearly 95 percent of practice revenue. Modest increases made in these procedure codes will have a much greater effect on the bottom line than large increases in fees for services that are rarely provided. Track services that are commonly remapped in the negotiation process to determine if they require the biggest write-offs. PPOs will often negotiate about 10 to 15 fees. Run a report and determine the 10 to 20 procedures that bring in the most revenue and, more importantly, the most profit.
Know Your Position at the Negotiation Table
Some larger plans with huge networks in place will not negotiate fees, period. In many cases, the more saturated the market is with participating practices, the less leverage the doctor has in negotiating. Your time is best spent focusing on plans that are open to negotiation.
Investigate how many in-network practices are in your area before you begin the negotiation process. The smaller the number of participating doctors and the greater number of insured individuals in a certain geographic area, the stronger the doctor’s negotiating position may be. Payers find it very difficult to market plans in areas where there are no contracted doctors. The best time for negotiation is when a payer is actively “recruiting” doctors to participate in a plan in a new area.
For the plans that are open to negotiation, do your homework and come to the negotiating table prepared. It is better if the doctor engages in the negotiations rather than a staff member. Delta will not negotiate; and MetLife has announced that it will not negotiate with a third party. Be aware of leased panel agreements between insurance companies and leased networks. Networking relationships can provide an opportunity to participate with multiple payments at higher levels of reimbursement. However, networking can be complicated and it has its drawbacks.
Remember, timing is everything. For new enrollees, this is particularly important. Also, never accept the first offer. As in any other negotiation, the first offer is seldom the best offer.
Understand that every doctor must enter into the negotiation process individually. There are some very significant antitrust issues that could arise from a “group effort” initiated by a number of doctors in a particular area to increase fees. Antitrust laws prohibit doctors from conducting “group negotiations” or even to discussing fees. So, if you want to negotiate fair and accurate insurance reimbursements, it must be done on an individual basis.
A third party negotiator may be a good option to help you review your insurance participation, analyze your current insurance contracts, and complete negotiations on your behalf. Your dental team may not have the time, expertise, or desire to complete the necessary research and work required. Some third party negotiators have a good understanding of leased panel networking, have established relationships with payers, and understand the negotiation process.The quality of third party negotiators varies by company. Be sure to understand the services offered and get references from a trusted source.
Start the Negotiation Process
It was once unheard of to negotiate with a payer to increase a fee schedule, but today these negotiations are becoming more commonplace and are frequently quite successful. Do not be surprised when the payer is open and willing to make some fee concessions after simply asking for the increase.
Begin the process by drafting a letter requesting a fee increase. This request should be simple, direct, and to the point. No one wants to read through a lengthy dissertation extolling the virtues of and arguments for a fee increase. Keep the request short, two paragraphs at most. State that you are seeking to negotiate your reimbursement rates and suggest a time frame to begin the negotiation. Provide multiple methods of contact (i.e., phone, email, and/or fax) and indicate which method is best for your practice.
Be sure to direct the communication to the correct person or region. In most cases, a call to the plan’s provider relations department can help determine the appropriate contact. Get the name, title, address, email address, and fax number of the responsible party. It is also a good idea to use the representative’s preferred method of communication.
Make your request simple and clearly stated. Focus on the practice’s most commonly reported codes by revenue. Also, include the alternate procedure codes in the negotiation. During the conversation, politely convey the practice’s dissatisfaction with the existing fee schedule Following the initial discussion, the representative may instruct you to submit your office fees and/or your most utilized procedures.
All communications made during the negotiation process should be clearly and concisely documented in the event that there is ever a question about what was discussed or agreed upon. If the discussion occurs over the phone, send or request an email confirmation from the representative confirming the topics discussed and/or agreed upon. Follow-up as necessary with each request.
Evaluate the Response
As previously stated, never accept the first offer. Carefully evaluate any proposed fee changes and determine how they apply to the procedures performed in your office and to the practice’s overall revenue. Focus on the codes with the highest total revenues and/or profit margins.
Keep in mind the fee negotiation process is a numbers game. The offer may include what appears to be an eight percent overall increase for all reimbursed services, but may actually only provide a one percent increase for the practice’s most frequently performed services. Evaluate each offer based on your top 25 procedures to determine the potential impact the offered increase would have on your practice. Do not be afraid to ask for an increase as high as 20 percent, especially if participation in your area is low. However, keep in mind that most offers will be in the three to 10 percent range for a one to two year time frame.
Sign the Agreement
Following the negotiation, the payer will provide the practice with an agreement that will contain a list of new fees and the effective date of the fee increases. Review the contract carefully to determine if the agreement is the best option for the practice and if it contains any new provisions. If the new agreement is acceptable, notify the payer of your acceptance in writing. The payer should then acknowledge your acceptance in writing. Confirm the effective date of the increased fee schedule with the payer. Remember, the new fee schedule is not considered effective until both parties have signed the new contract.
Sometimes the updated fee schedule is not reimbursed with the first claim submitted after the effective date. Monitor explanation of benefits (EOBs) received for a few weeks or months following the implementation of the new fee schedule. If underpayments occur, always notify the payer and request correct
Negotiating a new fee schedule can be daunting and time consuming. However, it is usually worth the effort. Payers may be open to negotiating, and you should take advantage of any opportunity to increase your in-network reimbursements. Before beginning the negotiation process, be sure to analyze the major contributing factors.
The bottom line is that, if you do not ask for a fee increase, it is unlikely you will ever receive one. Most payers will entertain a request for a fee increase every two years, sometimes annually. Be prepared to contact the proper individual, make your case, and let the negotiations begin. Remember, the worst thing that could happen is for the payer to say “no.”