While the future of healthcare may be value-based, the reality is most laboratories and pathologists still largely operate in a fee-for-service environment. Given that fact, understanding how to effectively track and negotiate your insurance payer contracts is a must for diagnostic providers looking to keep their patient populations healthy and business models thriving.
Ann Lambrix, VP of RCM Consulting, LLS
Health insurance companies manage their provider networks in a variety of ways and under different strategies. When it comes time to negotiate with your existing payers, it’s important to remember labs don’t just have to accept whatever rates and terms are proposed.
“Labs and pathology groups always have so much coming at them that it can be difficult to be familiar with the various terms and clauses across your payer contracts,” says Ann Lambrix, VP of Revenue Cycle Management Consulting for Lighthouse Lab Services. “If you get a letter saying a payer is going to drop your reimbursement rate, you don’t have to just sign and accept it, or be afraid you’re going to lose something by fighting for fair payments.”
With that in mind, let’s explore some of the factors driving reimbursement rates down and review some tools to bring to the bargaining table:
Understand your options for negotiating and know reimbursement can be changed
When the time comes to renegotiate an existing payer contract, you’ll want to come to the table with a sound understanding of what your current contract and relationships allow so that you understand the options available to you. The primary clauses you’ll want to be familiar with include:
Unilateral amendments: These clauses allow payers to change the terms of your contract at their discretion.
Reimbursement: This should clearly outline how the payer will reimburse you for your lab or group’s services. As Lambrix notes, most payer contracts have clauses allowing reimbursement rates to be changed at any time.
Lambrix says the introduction of the No Surprises Act (NSA), which has created a complicated framework for receiving reimbursement for out-of-network services that critics contend is heavily tilted in favor of payers, has many payers moving to renegotiate contracts at rates they deem to be “reasonable and customary.”
“Because of the NSA, many payers are re-examining legacy contracts that may pay a significant percentage above Medicare rates,” Lambrix notes. “Do all contracts allow rates to be changed at any time? In many cases, yes.”
Network stipulations: These cover the requirements providers must meet to remain part of a payer’s network.
Existing agreements with a hospital or health system: Pathology groups or hospital-based labs will also want to be sure to understand whether they are required to participate with a particular payer under the terms of their agreements with their hospital or health system. While this is separate from your payer contracts, understanding which payers you are required to participate with will clarify your negotiating leverage before you head to the bargaining table.
How the current reimbursement landscape hurts small- and mid-sized labs
Lab reimbursement rates have been hit particularly hard since the introduction of the Protecting Access to Medicare Act (PAMA) in 2016. While the act’s intent was for CMS to ensure its Medicare rates were in line with those of private payers by requiring some labs to report their third-party reimbursement data for tests on the Clinical Lab Fee Schedule (CLFS), the result has seen overall rates slashed as data was overwhelming pulled from large reference labs that can afford to accept lower reimbursement rates due to their testing volumes.
While PAMA is again being challenged by lab advocates through a reintroduced Saving Access to Lab Services Act (SALSA), its overall effect has greatly harmed the financial stability of small- and mid-sized labs. Add in the fact that independent labs don’t have the support of a health system behind them, and it becomes clear why many of these providers have their hands tied during contract negotiations.
“Independent labs are challenged because they’re not tied to a health system or hospital,” Lambrix says. “They often are competing against large reference labs that can afford to accept rates lower than Medicare because they have that economy of scale and quantity.”
Tools to bring to payer contract negotiations
If a payer is seeking to lower your current reimbursement rates, Lambrix says it’s important you first review your current contract language with an attorney or consultant.
- Tier-down structures
Once you understand the stipulations surrounding reimbursement, you may consider options such as negotiating a tier-down structure where your current reimbursement rate is reduced over time to the payer’s newly proposed rate. Having the backing of a health system or hospital administration can often help in this approach, according to Lambrix.
“If you’re a team player within a health system and you have a good relationship with your hospital administration, they may be willing to advocate for you and say this group can’t lose millions of dollars overnight,” she says.
- Offering an appealing test menu
Additionally, labs may present proprietary tests that could be beneficial to a payer’s patient population, making their overall test menu more appealing to that payer.
“We help our clients highlight and develop testing that could be considered unique or proprietary and present those services to the payers as a case for why they are a valuable part of their network,” explains Brennan Burns, VP of Payer Contracting for Lighthouse. “There are a number of plans we can get into if we present something unique and a value add to their network.”
- Can you go out of network?
Finally, going or remaining out of a payer’s network continues to remain a viable strategy, despite the limitations of hospital contracts or newer laws that limit out-of-network billing, such as the No Surprises Act.
“A lot of professional groups, their hands are tied because their health system contract says they must participate with any payer the system participates with. And guess what? If the payer knows that, they leverage that.”
Incentive programs and other revenue enhancers
Beyond just negotiations, there are also options to explore various quality and risk-based types of arrangements. For example, qualifying providers can receive annual bonus payments from Medicare Part B for strong performance in the Quality Payment Program (aka Merit-based Incentive Payment System). Additionally, some private payers, such as Blue Cross Blue Shield of Michigan, offer fee uplifts for hitting certain benchmarks.
If you’re looking for a partner to bolster your negotiations or seeking to enter a new payer network, don’t go it alone. Lighthouse’s RCM and Payer Strategy Solutions departments are ready to help you secure the best contract and reimbursement possible. Contact us today for a free consultation to learn more.