Episode 36: Why Now is the Time to Renegotiate Payer Contracts

Payer contracts will continue to play a major role in shaping the business models of the future for practices, perhaps even more so in the post-pandemic world. Nathaniel Arana, owner and lead negotiator at NGA Healthcare, details why now is the time to gain a better understanding of how to negotiate reimbursement rates and navigate the typical obstacles that have prevented success in the past. At the end of the day, a world where providers are paid more for their work has benefits for everyone.

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Full Transcript

Announcer: It’s time to think differently about healthcare, but how do we keep up? The days of yesterday’s medicine are long gone and we’re left trying to figure out where to go from here. With all the talk about politics and technology, it can be easy to forget that healthcare is still all about humans and many of those humans have unbelievable stories to tell. Here, we leave the policy debates to the other guys and focus instead on the people and ideas that are changing the way we address our health. It’s time to navigate the new landscape of healthcare together and here’s some amazing stories along the way. Ready for a breath of fresh air? It’s time for your paradigm shift.

Michael: Welcome to the “Paradigm Shift of Healthcare,” and thank you for listening. I’m Michael Roberts here today with co-host Jared Johnson, and Scott Zeitzer. On today’s episode, we’re talking with Nathaniel Arana, president of NGA Healthcare. Nathaniel negotiates new and existing payer contracts for physicians and surgery centers all over the country. Nathaniel, thank you so much for coming on the show today.

Nathaniel: Thank you guys for having me.

Michael: Absolutely, absolutely. Let’s go ahead and dive right in then. You know, practices that we’re working with and just healthcare in general, there’s a lot of people right now that are scrambling because every single part of their business is just completely uncertain. It’s been turned upside down because of the COVID-19 pandemic. How should practices in particular be approaching their business after this?

Nathaniel: Practices are going to really start being more cognizant of their cash flow in particular. We have traditionally employed this model of just-in-time inventory for cash and even supplies. And look at the problem that it’s put us in now. I believe a lot of practices are going to look at this and say, “Well, you know what? We need to make sure that we’re a little bit more prepared for a disruption.” Never mind a disruption that’s a week, but now maybe a month or a couple months.

Michael: It definitely played a havoc with a lot of best practices on these kinds of things. As we get into this phase, you know, we are talking about cash flow, but do you think that there gets back to a business as usual kind of approach to all this, you know, minus the cash flow or are we gonna have to redefine everything?

Nathaniel: I think that there’s going to be a lot of redefining a lot of things, especially in healthcare. Recent reports say that payers are going to maybe raise premiums by 40%. What does that look like even from a practice’s standpoint that’s providing insurance benefits to their employees? Further to that, we’re going to see, I think even more of a surge in procedures that are done in surgery centers because, number one, that’s not only the less costly venue to provide these services but, number two, hospitals are really gonna change the way their protocols are and in the future.

Scott: I agree with you, Nathaniel. I was thinking a little bit about that post-pandemic world and you know, unless it’s like a magical ending to one of those movies, more than likely they’re going to be a lot of people out there that will need to be tested. That includes both patients as well as medical care providers. That includes patients as well as medical care providers. And it won’t be enough to simply say, “Hey, we’re open, you know, and this is what I do.” I think they’ll be talking about ambulatory surgical centers potentially as a safer place to be from the perspective of avoiding COVID-19.

Nathaniel: Right. Yeah, absolutely. You know, a lot of times patients that are going into the hospital for some of these procedures, they’re already sick as it is. You don’t want to expose them to COVID and other diseases. It’s just a lot safer to have these procedures done at a surgery center.

Scott: It also just take off a lot of the…there’s so much work that still needs to be done and so much pressure on hospitals to take care of the community as a whole, including COVID-19, with all of the pain points that you just brought up involving payment. But when you talk about an ambulatory surgical center pre-pandemic…I wonder if it’s how we’re going to speak from now on guys like, pre-pandemic, post-pandemic, pre-pandemic, you know, the idea of bundled payments was something that was coming on strong. Do you think that this is gonna make the idea of a bundled payment a little bit easier to comprehend, bring that out, so that more people get it and want to try to employ it?

Nathaniel: The payment models for the most part are going to remain pretty similar both, you know, pre and post-pandemic. And I think that the reason for that is that the payers have difficulty innovating and implementing new payment models. We’ve heard this in the phrase in healthcare, which is “value-based care.” And we’ve been hearing this term for many, many years now and yet none of the payers are really starting to implement value-based payment models. And what’s the reason for that? Well, they don’t really know how to do it and they don’t know how to integrate it into their current system.

We were recently doing a negotiation for a pretty sizable EMT Group, and one of the payers that we were approaching, they said, “Well, we’d like to maybe consider a value-based payment model with your group, but do you have any with any of your other current payers and can we see what it looks like?” So, they have no idea how to implement them. And when we came to them, even with ideas of how they implement them, they came back to us and said, “Well, this doesn’t really work in our current payment system. We can’t really implement this.” So, I think overwhelmingly you’re going to see that payment models are going to remain the same. But that just means that you should be really looking at what the reimbursement rates are in your ACs in your practice and negotiating how much they’re paying you.

Scott: Yeah. You know, along those lines, we had a podcast. We were talking to Dr. Ballard, and Michael, if I remember correctly, he had the same pain point where he had to work very hard with the insurance providers to figure out a way to handle bundled payments. Do you remember that, Michael?

Michael: Yeah. Everybody along the process had to come together and figure out a lot of what seems like very simple things to resolve, but I’m sure are much, much harder once you get into the details of it. But yeah, he definitely struggled with that.

Nathaniel: All right. You know, bundled payments are overwhelmingly a difficult scenario to accept because not every patient, not every procedure is gonna be the same.

Scott: Oh, I agree. Yeah. How can negotiating reimbursement rates with payers be a big part of a practice’s post-pandemic business strategy?

Nathaniel: So, our approach has always been that the less costly venue for providing care, and the people in healthcare that can actually drive costs, are the independent physician groups. As a health network, those are the people that you should be incentivizing to save costs for you. You know, we know payers collude with hospital systems and PPO plans and then, you know, try and draw out as much benefit to their own networks as much as possible. But really, it’s the physicians that can actually save money for these networks. So, when you’re paying a physician group 80% of Medicare, you know, it gets to a certain point where the physician says, “Well, why am I busting my butt to be working for the insurance company when I can just go work for the hospital system, get a salary, I clock in at 9:00 and clock out 5:00?”

So, what that means is that physicians need to work with the payers and say, you know, “Look, you need to pay me more because I need to be able to get through situations such as this. I need to be able to have the support staff to schedule STAT patients that come to me instead of going to the emergency room.” We always show the payers when we negotiate with them why it makes sense to pay somebody more. In fact, we actually give the payers return on investment forecasts just by giving us more money. We do that in behavioral health. We do that in critical care. We can do that all over the place. Behavioral health for example, every dollar that the insurance company invests in their network comes back to them sevenfold because there are so many downstream costs and so many potentials for emergency room presentations and hospitalizations.

Scott: How do you find that right balance, Nathaniel? I mean, regarding getting more money for the doc but the doc accepting more risks, because that’s what this is all about, and just finding that kind of balance. How does that work to get the win-win so to speak?

Nathaniel: Good question. So, I think that there is a balance here that we have to look at when the physician is making 80% of Medicare and the hospitals getting 300% of Medicare. There has to be, you know, some movement on the part of the payer for the physician and get them, you know, a little bit higher up. Physicians don’t…obviously, if it’s a life and limb case, the patient should go to the emergency room. But 70% of those emergency room presentations were not necessary and those patients are discharged and directed to follow up with their specialists anyway. So, ideally, what we should be doing is we should be changing the delivery model and by changing the payment models you can help change the delivery model where the first and front line person, the physician, is able to dictate what the patient’s care’s going to be, not necessarily the emergency room where once you show up at the emergency room, they do a battery of diagnostic tests. They consult with different specialists, different experts, you know, you run up cost so much more quickly like that.

And, again, if we’re setting up a system where the patients inside can call up their ENT or call up their endocrinologist or have access to a specialist, then you know, we’re going to resolve a lot of those issues. But we can’t do that if we’re reimbursing them at the rates that we are now because the answer can’t be as it came from the AMA, “If you want to improve your practice, see more patients.” No, you should actually see less patients and we should start ensuring that patients are put into the right entry level in the healthcare system.

Jared: I understand like this whole concept in general, this is something that a lot of practices do at least think about on a regular basis because it is their livelihood. And when you think about if you can, I’m just fascinated by this whole concept of the value to both sides of being reimbursed more. So, if you can do the exact same amount of work and get paid more and have more control, it seems like there is maybe more of a balance there than I at least first realized where there’s benefits to everybody there. What’s, kind of, a good starting point? Like, say there are definitely providers listening to this and practices and practice managers who are listening to this and thinking, “Yeah, I’ve been thinking about this for a while and I don’t even know where to start.” Like where do they start to build that relationship with the payer so they can even get to the point to negotiate their rates?

Nathaniel: Sure. So, every payer has different levels that you work with. A lot of times a lot of groups are familiar with their provider rep who, you know, sometimes is helpful, sometimes they’re not. A lot of times if you negotiate with the payer, you’re working with the provider rep and then the provider rep goes to the contractor and then the contractor goes to the network committee and then the network committee answers to the vice president. So, when you have that many layers, when you’re trying to negotiate, you want to try and move up to a least the contractor level to say, “Hey, I really want to have a talk, you know, with you about what my reimbursement rates and I want to explain to you why an increase is important to my practice.” You know, you can’t really just call up the payer and say, “Hey, I’d like an increase.” You have to demonstrate to them why it makes sense for them to give you an increase. And that’s what we overwhelmingly work with our providers to do. And again, identifying the ability to expand an innovative model and to capture those STAT patients that otherwise would go to the emergency room, etc.

Jared: I see. Yeah. So, that’s, kind of, a good starting point even just recognizing, I guess, that they have to prove that or build a case for it at the very least. Has the pandemic at all affected that ability for a provider to do so? Where are payers, kind of, standing these days as everything’s, kind of, being flipped on its head?

Nathaniel: That’s a very good question because, you know, we have different clients in very many different situations. And a lot of times it depends on specialty, of course. Practices have declines of 30% to 75% but medical care is not inelastic, meaning, you know, these elements don’t go away. These patients are going to have to come back eventually, right? And it just means that I think a lot of physicians have a little bit more time on their hands while a lot of their cases are being postponed to really look at their reimbursement rates and realize, “Hey, you know, they’re really not paying me the way that they should.”

Scott: It’s a very valid point. I think most doctors, surgeons, etc., that I’ve been speaking with, first of all, it drives them crazy that they’ve got extra time on their hands, if they do. So, first of all, for all the healthcare providers that are out there on the front lines taking care of COVID patients, a big round of applause from everybody and sincere appreciation. For those practices that are out there kind of waiting, you know, and doing their best just to stay on the sideline. It is a good time to figure out what’s the best way to take care of people that I need to take care of right now without getting in everybody’s way, with all best and due respect. And then whatever extra time you have, start thinking about, “How am I going to take better care my patient? How am I going to get better paid for my patient?” Because they honestly go hand in hand.

You’re right about that whole AMA statement of like, “Let’s just see more patients.” It’s like, no, that’s really not the answer. I winced when I read that. It is about getting the right patient into the right door, taking good care of that patient and getting paid appropriately. It’s that simple. Everybody will be happier for how you’re going to be taking care of patients post-pandemic. I think it’s going to be a critical thing and I also believe, just as you mentioned, knowing how you take better care of them will also allow you to do your job better because you are going to be saving a lot of pain and a lot of money for everybody. It won’t be enough that you’re the best in the area, so to speak, whatever that means, it’ll be more about, “Not only do I do a good job doing whatever, but this is how I’m keeping you safe and this is how I’m keeping my staff safe and this is how we all win.” It’s going to have to be part of the new process.

Nathaniel: And I hope that if anything good comes out of this pandemic, it’s that physician groups realize that they need to assert themselves against the payers. The payers have gone unchecked for decades. There’re some physician groups just sitting on contracts that are 10, 15 years old. And when you consider inflation of 2% to 3% a year plus cost of doing business, if your contract is 10 years old, then you’re sitting on a contract that’s 20% to 30% less than what you were making 10 years ago. And in no other business does that happen? You know, there are some insurance companies, such as Blue Cross, that implement fee schedule changes and according to them they are to the benefit of the physician. But if you look at those historical increases, they are anywhere between 0.5% to 1% increase per year. And by the way, they’re not increased in the rates that actually matter to the physician groups, such as the evaluation and management codes. Yet on the other side, Blue Cross and other payers are going to their employer groups and saying, “Well, we can’t control costs. We have to increase premiums by 7% this year or 12% or 15% or who knows, maybe even 40% next year.” The money doesn’t translate into being trickled down to the physician groups. It’s going somewhere else. And it’s going into insurance payers’ interests. And it’s not going to the right people.

Michael: Nathaniel, one of the things that we’ve been seeing a lot with some of the practices that we work with is different ways of trying to fight against this sort of trend and trying to do things like, you know, consolidating practices and bringing together several groups. How much of an impact does that make when you come to the negotiation table with, “Hey, now we have three practices that are in the same group, same network”? How helpful is that? And should more practices be looking at that kind of model? Or are they just leaving money on the table right now?

Nathaniel: The problem with that is whenever you take multiple practices and you go against the insurance company, they’re going to tell you that you’re price-fixing, right? So, insurance companies themselves have the ability to price-fix and are exempt from federal price-fixing regulations. Yet physicians that are negotiating against them don’t enjoy that same benefit. So, if you had, you know, an entire network of medical practices that went up to the insurance company, they did block you off immediately and say, “We’re not gonna let you price-fix.” I think instead, we should be looking at models that don’t even bother working with the insurance company and work more directly with employer groups and individuals. And I think we are gonna see a big movement toward that reality, which I think is great. But, you know, right now, payers are doing everything they can to reduce any sort of leverage that a physician has.

Michael: So, even under the model of like…and this is really to help me understand for all this, so even under the model of like, hey, practice A and practice B are now merged and called practice C, that there’s the risk of getting that price-fixing kind of labels slopped on that?

Nathaniel: Right. Unless they are truly under the same tax ID and organization. But if they are different organizations, they are gonna suggest that you’re trying to price-fix.

Michael: One of the things that small practices have been hearing for the past, you know, decade is small practices are disappearing. There’s no chance for them. They’re not going to make it because they have to consolidate, they have to get bought out by other hospital, whatever that thing is. And so, what I’m hearing is like, hey, there are other ways, there are other things that you should be looking at to be able to make better money as a practice.

Nathaniel: Yeah. You know, certainly, you can add different revenue sources. You can look at ancillary services, but the major one is always going to be your reimbursement rates. And, even now, even after we negotiate old contracts for our physician clients, instead of going back to them after three or five years and negotiating again and trying to get another 10% or 20% or 30% increase, we’ve been working with them to negotiate each contract on an anniversary basis so that we can get, essentially, what we call a cost of living increase of, you know, 2% to 5% so that, again, you’re not sitting on the contract 10 years from now that’s lost 30% of its value. You’re ensuring that your revenue and the increase of costs of doing business is keeping pace instead of letting it just go bad for a number of years.

Michael: Would you say that this practice of just not getting back to your contracts and not paying attention to them enough… is that the main issue that you see with practices? And then, what would other mistakes be that you see with practices?

Nathaniel: I would say not paying attention to contracts is one of the major issues. The other thing is credentialing, which is another major issue that physician practices encounter. We’ve had physician practices come to us and say, you know, we wanted to bring on board a new doc, but it took us a year to get him or her credentialed. And the reason it takes that long is because the payer knows that the longer it takes for them to credential a physician, the more patients that the physician is going to see for free and they’re never going to have to pay for.

So, when we credential physicians, we submit the paperwork, obviously. We document everything. Everything is in writing. The effective date is in writing. We send it. We follow up every two weeks and we say, “Hey, we submitted this. Where is this?” We follow up in another two weeks, “Hey, we submitted this, you know. Where is this? When is this going to be done?” And we stay on top of the payer to get it done because otherwise they just take most of these applications for credentialing and they just, kind of, let them fall off the desk. And you go back to them after three months and ask, “What’s going on with this?” And they say, “Oh, well, we needed, you know, an additional piece of information and we reached out and we didn’t get it so you’re going to have to resubmit.” So paying attention to your contracts, paying attention to your credentialing, holding the payers accountable.

We’ve had circumstances where the payers say, “Well, we never credentialed this physician.” We go back and we show them documentation of when it was submitted, communication, yes, we did and you have to go back and you have to do a claim project and you have to get all this reprocessed. Again, it’s an issue of standing up to the payer bullies. That’s what’s going to help a practice survive because the payers are the ones that are trying to, believe it or not, create this consolidation. Because at one point, while it may be bad, another thing to consider is that they may want some of it to occur because they are colluding so much with hospitals that they would rather see these physicians become employed by the hospitals, buy up the hospitals and then own the system both vertically and horizontally. I don’t want to give such a grim outlet to this, but this is why, you know, this becomes so important and why we have so many physicians that you know, are looking for us to help them.

Scott: Yeah. That was going to be, if anybody’s listening to this from the practice side, one of the most important things to take away out of all this is that you’ve got to stand up and if you could do it on your own, that’s great and if you can’t, you gotta find the right partner that’s going to help battle with you. It is not an easy process and you’ve either got to have people in-house or you’ve got to hire people to help follow up with this. To your point, Nathaniel, it is not in the interest of the health insurance company to quickly credential somebody. I would be curious, one of these days we’ll get some people from the healthcare insurance side and they’ll talk about what their issues are. And I’m sure that they’ve got some very good points to make. But if you’re running a practice, making sure that you’re getting paid appropriately, fairly, and that credentialing is part of it, getting paid at the right rates is part of it. Your idea about meeting once a year, I could just…there’s so many surgeons that I’ve known for a long time who just bemoan the fact that they have to look this stuff up and I’m like, “Guys, if you don’t, nothing’s gonna happen.” And that’s the worst spot to be in.

Nathaniel: Right. You know, and to your point, you know, a lot of the people that we work with at the payers, I’d say the overwhelming majority, are great to work with and a lot of these directions are coming, you know, from the top-down. You know, that’s not to say that you should still consider that when you’re working with them. We oftentimes will try and negotiate with a payer and we’re told no, immediately. They say, “We’re not accepting reimbursement rate requests at this time.” And I say, “Well, when you are, do you put a sign up at the outside of your building and say you’re accepting them now?” And so, you know, we’re used to making moves within the payers and their red tape. And if we have to work with somebody else, if we have to move up to the top, you know, in many cases, and I’d say in all cases, we feel so strongly about what we’re doing that we’ll get into anybody’s ear at the payers and explain, you know, the importance of this.

Scott: That goes back to that initial thing of, like, in some ways, it’s just easier to say no, and your initial point way back when it was like, “Guys, if you pay…” I think you brought it up specifically on the mental health side, that if you pay the doc $1 more, you’re actually going to make yourself $7 more because…right? And so, that’s where this conversation, it’s like it’s very easy to get into this very stance where you’re battling each other and it’s like building trust so you can have an open conversation to say, “Look, I get it.” You don’t want to talk to them about rate increases. That being said, it’s in everybody’s benefit. Here’s why. The quicker you can get to that conversation, the quicker everybody’s better off. Would you agree with that?

Nathaniel: Yeah. Absolutely. You know, the narrative needs to be you’re not wasting money, you’re making money. Or the loser has to be, you know, the hospital. We need to restructure our delivery method and model that we have in the United States because it’s so unaffordable for so many people. You know, when you have a procedure that’s done at the hospital at cost of $30,000 and somebody has $10,000 or $15,000 deductible versus the same procedure that can be done at a surgery center at a cost of $6,000, well, that makes much more sense.

Scott: Without a doubt.

Michael: Nathaniel, thank you so much for coming on the show. There’s so much more, obviously here, that we could talk about and I really do appreciate your depth of knowledge on this. We thank you and wish you the best, obviously, as everything’s going on. Guys, thanks so much and thank you for listening today.

Scott: Everybody stay home. Stay safe.

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