#214 $44,400 a Year, Just From One Code

Most payer negotiations start with a feeling. This one starts with a number: percentage of local Medicare, the single most useful tool for comparing payer rates. 

• The one number: Percentage of local Medicare turns a raw dollar amount into something comparable across payers, localities, and codes. 
• Step 1: Pull 12 months of paid-claim data by payer and CPT/HCPCS code, using allowed amounts and units, not charges. 
• Step 2: Rank opportunities by payer, CPT, annual units, and revenue gap, not by frustration. 
• Step 3: Build a focused, five to ten code evidence package that pre-answers the payer's objections. 

Three actions this week: 

• Pull 12 months of allowed-amount data for your top 10 to 20 codes by payer 
• Calculate percentage of local Medicare for each using the CMS Physician Fee Schedule Look-Up Tool 
• Rank by annual revenue gap, not by which payer frustrates you most 

Episode breakdown 

• 00:00 Hook and EP213 callback 
• 00:45 The reframe 
• 02:30 The one number: percentage of local Medicare 
• 06:00 Step 1: pulling the right data 
• 10:00 Step 2: high-volume, low-rate intersections 
• 13:00 Step 3: building the evidence package 
• 17:00 The five takeaways 
• 19:00 Close and next episode 

Resources 

• Practice Revenue Leak Scorecard: eligibility.natrevmd.com/nrm-revenue-scorecard-v3 
• 30-Day Revenue Recovery Plan: eligibility.natrevmd.com/nrc/-30day-revenue-recovery-plan 
• Metrics Audit Review (free, physician-led): eligibility.natrevmd.com/metrics-audit-natrevmd 
• CMS Physician Fee Schedule Look-Up Tool: cms.gov/medicare/physician-fee-schedule 
• Previous episode: EP213, What's Actually Changing in Healthcare Reimbursement in 2027 

Transcript

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SPEAKER_00 0:05

So most practices have a payer contract. It was signed when the practice was smaller, you had less volume, and even had less leverage than you do today. So that contract may be five years old, may even be 10 plus years old. Now the rates in it have not been renegotiated, and every single claim you submit is being paid against a rate schedule that was built for a version of your practice that no longer exists today. Welcome to NatrevMD, a podcast where we share tips on optimizing medical billing and improving practice efficiency so you can have the business of your dreams. I'm your host, Dr. Heather Signorelli, founder of Nat RevMD. Let's get started. Today we're going to talk all about what it costs you and exactly how to fix it. So let's talk about stale contracts because we work with a lot of groups that maybe you started out as a solo practitioner, you've grown to two, to three, to four physicians. Maybe you've got multiple facilities, maybe you're up to 20 or 40 physicians. Either way, that growth impacts your ability to negotiate better contracts. That's why large group organizations that do contracting for many different groups or many different physicians have better rates than, say, a practice with just a single physician. And when you think about this, it works the same in group purchasing organizations, right? Large group GPOs have an ability to negotiate larger discounts when it comes to any supply or any vendor or any service because it's easier to manage a larger book of business than it is to manage a single book of business, which is why the larger group you belong to, the better contracted rates you're going to get. And it's important for you to think about the math when you don't ask for rate negotiations either when you're able to or when you grow. And when you grow, it's about taking that growth and framing it in a way to where the insurance companies not only want to give you a higher rate, but they feel like they have to give you a higher rate in order to keep you. And they want to keep you because you serve more patients. So when you signed your payer contract, your practice was doing a certain volume. Volume in this case is leverage. So if your volume volume has grown significantly and the contract has not been renegotiated, you're basically providing the payer more value today than you were when the rate was set. Now, you're also being paid at an old rate, and that's every single claim you submit. Now, we all know this isn't theory. This is actually something that compounds every single day. So we really want to think through a calculation for you to understand where there's opportunity. So the key here is really looking at your top five commercial payers by collections volume and pull your allowed amount for those, you know, 10 highest volume CPT codes within each of those payers and then compare those to the local Medicare rate for that code. So any payer running below that 100% of local Medicare, you know, rates is an opportunity for renegotiation. So obviously you may not always get that. There are some commercial payers that are paying less than that. We all recognize that. But this just gives you a way to start framing out, okay, of my top five payers, let's look at my top, you know, 10 to 20 codes so that I can figure out where there's an opportunity for renegotiation. Because even a 5% rate increase across one commercial payer at $800,000 in annual collections from that payer could be up to $40,000 per year. So that is recurring revenue as well. It's not just a one-time event. So a practice doing $3 million in annual collections with three significant commercial payer relationships renegotiated for an average 8% rate is going to add close to $250,000 in annual recurring revenue. Now, 8% is an aggressive target, but let's go big. Now, some patients, some providers, now this is all with the same patients, the same providers, the same clinical work, just a different rate. Now, let's talk about why you got here, right? So, first and foremost, nobody assigned ownership of contract management. It lives within either a file cabinet or some old stale folder, or maybe with an employee's old email box and that employee no longer is with you. So practices need to have leverage. So practices that so volume that has increased, that is the prime opportunity to make sure that you are showing how you've grown within their membership so that you get better rates. Now, this process does feel like a pain. Practices that have tried sometimes get a letter back saying rates are competitive in their market. Now, that is not a final answer. It is just a first response. So the practices that stop there are going to be leaving money on the table. Now, so we're going to talk about some of the strategies you can put into place and again be that person who goes back to try and negotiate over and over again. Now, we have to be able to prioritize this work because not all payer contracts have equal renegotiation opportunities, as you know. So you're going to want to prioritize using these criteria. So obviously, volume with the payer. The larger your annual allowed dollars with a payer, the larger the dollar impact any rate negotiation, obviously. So you're going to want to really make sure that you have the data to understand total allowed dollars per payer over that last 12 months and then rank them and then start with the payer where the dollar impact of the rate change is the largest. And obviously, this may not be the payer that prostrates you the most, but it's a good place to start. Now, another mechanism to evaluate payers and prioritization is a gap to local Medicare. So payers that pay below 90% of Medicare rates may be another target that you want to go after first. So this is just one way for you to benchmark your payers. Obviously, we've talked in the past about services like payer price. Again, I have no affiliate or financial relationship with them. They're just a good way for you to get benchmarks on your payer rates compared to your peers. You just want to be careful that when you are comparing to your peers, that you're not comparing, you know, you to a large university or you to a large IPA. So just make sure that you're understanding how you're comparing yourself. And again, comparing yourself to those Medicare rates is an easy way for you just to understand, okay, where am I at today? Now, obviously, even if you are, you know, between 90 or 100% of Medicare rates, it's still negotiable. And even if you're under over 100%, again, you may still have an opportunity to continue to negotiate. Depends on your subspecialty, depends how big you are. Contract age is another thing for you to assess. The older the contract, the more practice cost inflation has eroded the real value of that rate. And so that's another target for higher prioritization for the older contracts. Now, a contract that has not been touched in five, 10, 15 years is going to be places where you absolutely want to make sure that you're taking a look. Now, if you take the age of the contract plus volume growth, that's going to be your strongest combined argument to go after higher rates. Now, there are network exclusivity. So, how many other in-network providers of your type are in this payer's network in your market? So looking at your neighbors and understanding what that competition is. So again, the higher volume of those patients you have in your area, or the higher or the more rare of a specialty you are in that area serving those patients, the higher likelihood that you're going to have to renegotiate these. So if you're the only cardiologist or the only orthopedic surgeon or the only high-volume primary care group in a specific geography, obviously your network adequacy leverage is going to be significant. So payers have regulatory obligations around network adequacy. So a gap in their network is more expensive to them than a rate increase to you. So again, the more you're able to spell this out in a negotiation letter, the better you're going to be. So things to bring to a negotiation. And I want you to be prepared to have lots of emails back and forth. Don't just stop at one email. Don't just stop at one no. Keep pushing. And sometimes this can be 10, 15, 20, 25 average emails with a single payer just to get these rates increased. So a rate increase request with no data is going to be easy to deny. Now, a rate and quite increase with data package is a negotiation. So you're going to want to think about the components of a strong negotiation package. Obviously, your current allowed amount versus your Medicare rates, really focusing on those top 10 CPT codes. You're going to be one of looking at your payer allowed amount divided by Medicare allowed amount for the same code in your local area. So then this converts the conversation from we think we're underpaid to we're being paid X percent of Medicare and we are requesting X or Y percent. Now, a specific request is going to be harder to reject than a general one. So you want to put together your annual volume with this payer, total allowed dollars, total claims, total unique patients over the last 12 months. Volume is really going to be your leverage. And so you want to make that visible. So if your volume has grown since the contract was last negotiated, show that growth. We've grown 40% in claim volume with your network over three years, and our rate has not changed. That is a strong opener. Obviously, you know, local and specialty peer benchmarks, like I talked about, there is the federal transparency and coverage rules that require most health plans to publish in network negotiated rates. Now, files exist, they are massive, they're a pain in the rear end to get to, but there are lots of new tools coming onto the market to take that data and actually show it to physicians. So you can go and pay for that data. And that allows you to see the uh pair, the CPT codes, and what other physicians are getting paid or other peers in your network are getting paid. You can look at this by state, by specialty. You can even get even more specific in your local region. And you just want to be careful that you're comparing similar size groups to one another. So things you can say to the pair are your network shows that you're paying orthopedic groups at 118% of Medicare on average, yet you're only paying us 91%. That is a fundamental different conversation than just, hey, I want my rates increase. They haven't been increased in three years. So the other thing that you can pull together are quality metrics. So patient satisfactions, readmission rates, cost of care data from maybe an ACO participation if you participate. Payers are increasingly building quality incentives into contracts. So if you know that you have some specific for different payers or your subspecialty, bring them. And that allows you to again show that you are a strong partner for them to give higher rates to. The other thing is you are going to want to be specific. So not a request for a broad 15% increase across all codes. They're not going to agree to that. So five to 10 specific CPT codes with specific target rates grounded in your benchmark data. And you can be more specific and narrow, which will make it harder to reject those requests. And you may be back and forth a couple of times on this. And so really understanding your data. So you're not saying yes to something that in true at the end of the day isn't going to get you an increase in overall revenue across your book of business. Now, let's talk through how to run this conversation. So there are many negotiation firms that are out there. If you want, I'm happy to connect you with members who do this regularly, but it's important for you to understand the process because it can take nine to 12 plus months in order to get this done. So you've got to be prepared that you may need to keep pushing back on them. Don't say yes to negotiations that come through once. Keep going, ask for escalators and make sure that you are working with individuals who have experience doing this, or you are prepared to do the homework yourself so that you can get this done. Obviously, there are tools that you can use to help make this process better. So number one is requesting a provider relations call, not a rate negotiation call, but a provider relationships, a relations call. Framing this as a relationship conversation gets you a different contact and a different tone than leading with I want a rate increase. Rate increase. So use the first call to ask questions. Who reviews our contract? What is the renegotiation process like? What data do you use to evaluate these data requests? Basically, get all the intel to so that you can come prepared when you do request a rate increase. Now, get the name of that person or team that actually makes those rate decisions. Provider relations is not all going to be that person for the most part. Now, then you're going to want to pull your data and send the data package before the negotiation call. And a network representative who has seen your data before the call is a different in a different position than one seeing it for the first time. So give them time to pull their own internal data and confirm your number numbers. And you really want to be able to help get alignment here that you guys are at least seeing the same thing, which is going to help move that conversation forward. So when they say rates are competitive in your market, ask specifically, competitive compared to what benchmark and for which CPT codes and how are you comparing us? Don't just accept a general statement. Make them be specific. And if they cannot be specific, that tells you that they do not have a strong answer. Now, when they say no, ask when the contract is up for renewal and request to schedule a formal review six months before that date. Ask whether there are quality-based incentive programs that you're not currently enrolled in. So even if you do do all this work and you still get to a no, that is not a no forever. So you want to document the conversation, set up a follow-up, and come back. Now, know what to bring for outside support. For payers representing more than, you know, $500,000 in annual collection, the ROI on a professional contract negotiation firm or consultant is almost always worth its money. So meaning, go pay for somebody to help you do this. Again, these are tips that I've had given to me over the years for folks that do this regularly. And I will tell you, we have seen some extremely strong contract renegotiations performed, but they do take time, they do take money. And you have to decide if you can do this on your own or if you or if it's it's time to hire somebody else. Again, a 5% rate improvement on, you know, say $800,000 in annual payer volume pays for consultant engagement in year one. And then that recurs every year after, especially if they can get an escalation clause in the contract so that you get, you know, an increase in rate even after the negotiation is done. Now, again, all right. So most practices do negotiate a rate and ignore everything else. So you do want to make sure that you're thinking through other things that you may be able to negotiate. And again, not all of these are up for negotiation all the time, but just things for you to think through. So clean claim deadline and appeal window. How long does the payer have to process a clean claim? You know, 30 days is a pretty narrow window. We do see that at times. We see other contracts that allow 45, 60, or even 90 days, or even, you know, 365 days. So understanding what your appeal window after denial is and if it's, you know, below 90 days, which is a common, you may be able to ask for that to be improved. And again, some of these things may not be up for negotiation, especially for your larger payers, but worth asking. The other thing you can ask for is payment terms. So, what does the contract say about when a clean claim must be paid? Is there a prompt payment clause? Does it have teeth in it? Contracts that are vague on payment timing and give the payer flexibility to slow down payment without breach. Now, audit rights are another thing for you to look at and really understanding overpayment and recruitment terms. So payers can and do audit claims and demand recruitment of payments. They claim were made an error. So how about how far back can they go? Two years is a common and some contracts allow even further. So the other question you can ask is do you have the right to audit their payment accuracy against your own contracted rates? Obviously, you should. We have seen errors happen. And some contracts include a clause that says if you agree to a lower rate with another, with any other payer, that lower rate automatically applies to this contract. Now, that is very infrequent. I've not seen that a ton, but we did get that brought up to us as something that was going on with a past client. So just important for you to understand these and ask these questions. And again, you could be asking these questions for a consultant that's working with you, reading the contracts yourself, or using AI to help you really understand what you're agreeing to. Because I think when you first start out a practice or even renegotiate your first or second time, you're negotiating in a different business business than your business is today. So really just thinking through understanding what you're signing and thinking through a process by which you can get better rates moving forward. All right. So in the show notes, we do have a couple tools that you guys can use to understand where billing is at today, how things are going, see what your metrics are. As we start to close out on quarter three and head into quarter four, I want you guys to really be thinking about setting yourself up for 2027 appropriately. What are your metrics showing? What are your billing teams sharing with you in terms of KPIs? Are there things that your practice needs to be working on? Patient AR, et cetera. So if you do not have a billing team that is willing to sit down and think about these things with you, please consider making a change. It doesn't have to necessarily be us, but I really want you to make sure that you are setting yourself up for success into 2027. So if you are curious and wondering what the heck is going on with my metrics, we are happy to take a look. It is not a sales call, it's just a way for us to see what's going on and offer a few recommendations. So head on over to our website at notrevmd.com and that top right hand corner will show a free medical billing metric audit. And if you guys haven't been to our website lately, we did have a recent refresh. So go take a look and hopefully you guys have a great rest of your week. Thanks so much.