It’s Not All About That Rate: How to Approach Negotiations with Payers

Read Part I of this article in ACG MAGAZINE

Ann M. Bittinger, JD
Ann M. Bittinger, JD

By Ann M. Bittinger, JD
Bittinger Law Firm
Jacksonville, FL


What’s old is new again. The latest literature on payer arrangements with physicians resembles the literature on the subject from the mid 1990s. One theme resounds: risk. Capitated contracts are back. Payers are asking the physicians to share in some of the risk that the patient get better from the procedure. Certain utilization and referral controls that payers put in place during the managed care heyday may no longer be legal under the Affordable Care Act; however, payers are deliberately narrowing networks. Capitated arrangements are becoming prevalent once again. As Medicare and Medicaid managed care plan popularity and the Medicare population continue to grow, more physicians will be providing services under something other than a fee-for-service basis. Typically, capitated payments mean that the payer identifies a certain number of patients who are assigned to the physician and the physician is paid a dollar amount each month (per member, per month) for managing the patients’ care. Capitation was the main payment mechanism by Health Maintenance Organizations (HMOs). While capitated programs are targeted more at primary care than gastroenterologists, I have seen some “bundled” payments for some GI procedures and follow-up.

Global fee negotiation may be attractive to gastroenterologists. Global fees may be set in advance for a particular diagnosis for a particular time period of care following the diagnosis and treatment. Before negotiating with payers, identify procedures that your group does that could fit within a global fee, and analyze the financial impact of those procedures. Perhaps add a global fee component to your arrangement with the payer, but only for certain procedures that are important to the payer.

Know What You are Getting Into

Most payers provide a number of products: PPO, HMO, etc. The laws may differ based on whether the plan is a PPO rather than an HMO. Will your group be on all products, or only the products it chooses to be on? Watch for hidden “all products” clauses in the contract that say that the payer will pay you the lowest amount from all of its products for the service you provide.

Other Legal Terms

The most important legal provision in a payer-group contract at this time, in my opinion, is the arbitration provision. What process does the payer have in place to address what happens when things go wrong and you aren’t paid what you think you should be paid. Who picks the arbitrator? What levels of internal reviews must be completed before an external, independent arbitrator examines the claims? Are damages limited?

Another seemingly benign subject involves the term and termination sections. These become important for physician groups who, frustrated in contract negotiations with payers, decide to give notice of termination of the contract to the payer as an “atomic bomb” approach to force them to comply with a request for a rate change. A long notice of termination provision is not helpful in such a situation because it gives the payer time to realign its panels and prepare for your group’s departure. On the other hand, a longer period could allow there to be sufficient time for the parties to continue to negotiate prior to the actual termination date. The terms surrounding continuation of care are also important. A termination of the contract is of little threat if the physician group is contractually obligated to continue to treat patients for another six months.

At the Meetings

Once dialogue commences with the payer representatives, listen. Do not start the discussion asking for a rate increase. First, ask for a meeting to understand their key initiatives and goals for your specialty. As you listen, take notes on hot-button issues expressed by the payers, and start thinking about how you can assist them in achieving their goals. Are they looking to focus on rates in one area, but want to focus on collaboration and outcomes-driven payments in another area? Afterwards, call another meeting to present how you can help them achieve their goals. This may seem conciliatory to the payer, but in effect you are working to understand what will get you to “yes” with them as you listen to their goals, then couple your pitch on what you can do for them with your rate increases.

If you are not already seeing payments based on quality, expect that from the payers. Payers are incentivizing physicians to use their metrics and protocols by paying more to physicians who use them.

Be Creative

The physician groups with the best relationships with payers are those that were not scared to get creative in suggesting a new type of arrangement with the payer. Suggestions of creative approaches to the payment for and rendition of care is appealing to payers.

Ann M. Bittinger, JD, represents physicians and physician groups in transactions with other entities and with compliance with federal health care laws and in structuring their independent practices. Questions? Email

Read Part I of this article in ACG MAGAZINE