How To Successfully Negotiate A Rate Increase With Commercial Insurance

Solo practice is tough. Hell, its very very tough sometimes. One of the hard lessons you may learn after starting a practice is that your commercial insurance rates are most likely not going to be great. This is especially true for those who are not a specialist. Eventually you will have to negotiate a rate increase from your commercial payers to keep the business profitable.

In fact, your commercial insurance rates are most likely going to be under Medicare. Some insurance companies are notorious at low balling reimbursement rates (not to say names but we might be….united….in our thoughts on who I am thinking of.)

The main photo is a drone photo with long exposure I took this weekend.

My Worst Payer

My lowest payer was paying 80% Medicare when I opened my practice. I’ve heard other horror stories of the same payer having reimbursement as low as 60% Medicare to some other small practices.

In the beginning when you start your practice, if you are like me, then you are eager to see patients. I wanted to get revenue coming in as quickly as possible. Afterall, I have bills to pay. One way to bring in money is to accept commercial insurance plans and become a part of their network.

I knew it hurt accepting such a low rate for a payer at 20% less than Medicare. However, I figured some money was better than no money when I opened my doors.

Once your practice takes off, you start to really feel the financial stress of making at least 20% less seeing one patient compared to another patient just because of insurance contracted rates.

The Bad News

Unless you are in a very isolated location or are quite specialized, you most likely have no negotiating power when you open your practice.

All of my insurance contracts when I opened were a “take it or leave it” contract. My lowest payer told me that if I do not like the rate they proposed, they are happy to withdraw the offer since they do not need me in my area. I recall the network representative telling me exactly how many other doctors in my specialty were in my surrounding area.

The bad news does not stop here.

Once you sign a contract, many of these contracts are written in that you can not re-negotiate them for often THREE years.

But Wait…There is More Bad News

Your low reimbursement rates will be stuck not only low, but often based on a previous year. I opened in 2018 but my rate for my lowest payer was pinned to 2016 Medicare….just because that’s what they only were willing to offer.

I opened in 2018 but started my contract negotiations in 2017. When I opened, my lowest payer not only paid me 80% Medicare, but 80% of 2016 Medicare! For some reason they would not budge my contract from 2016 rates. Again, a take it or leave it situation.

Now, Medicare only went up about 1% in payment from 2016 to 2018, but my rate was locked in at the 2016 rate until 2021.

I wish I could pay 2016 rates for anything. Hello inflation eating away even more of my potential profit.

According to US Inflation Calculator…Cumulative rate of inflation from 2016 to 2021 is 11.3%.

My 80% Medicare fee schedule when I started has eroded to 71.9% Medicare fee schedule for 2021 accounting for inflation. Ouch

Difficulties You May Run Across When You Negotiate A Rate Increase

Insurance companies sure do not make it easy to ask for a rate increase.

Below are some of the issues I came up against when trying to ask for a rate increase:

• Insurance companies often times do not list on their website how to ask for a rate increase
• There is no clear contact information on who to contact for a rate increase on insurance websites
• Once you find your network representative (if you have one), turnover is high. My rep has changed 8 times for one of our insurance payers in only 2 and a half years!
• After signing an initial contract, you may have to wait 2 or 3 years before re-negotiating a rate increase.
• Each time your rep changes, you have to find out who they are and start the process all over again.
• Your representative will often be out of the office. During my negotiations, it seems that my rep was out of the office every other week. (Funny since they are working from home during the pandemic so are they just not home as well?)
• Many insurance companies have a “window” on when you can apply for a rate increase. Often it is only limited to a 30 days window. Miss that window…you have to wait until next year.
• They can have carve outs on what they will and will not cover. Some things will pay well, others will pay terrible. For example, IVIG for me pays 150% for my worst payer while certain DME pays 30% Medicare rates. Makes no sense.

Steps To Negotiate A Rate Increase

1. I went to the website of the insurance company and searched for credentialing or googled “credentialing *my state* with *insurance plan name*”
   • There you can often find an email address for help with credentialing / contracting. You will have to often start there if you do not have your representatives email. They will set you up with your representative if you have one.

2. Once you have your representative you have to email them your name, tax ID, all the providers NPI and ask when you are eligible for a rate increase.

3. Before your window of negotiations is open, email them to ask the exact process of how to formally ask for a rate increase. Important to do this ahead of time since they might have hoops for you to jump through that will make it very difficult to do in 30 days if it takes a week each time to hear back from your representative.

4. Once you have that window open to re-negotiate and you know exactly what to say…send it to your rep. For me it was often Practice legal name, Tax ID, address, all providers names and NPI and exactly what I am requesting increased.

5. Wait to hear back and start the negotiation process which often takes 1-2 months.

Things I Provided To Insurance Companies That I Believe Helped Me Negotiate A Higher Rate

1. I was always kind, professional, and direct on what I was looking for. No rambling emails, no fiery language that was derogatory.
2. Every email included my name, practice name, and Tax ID
3. I collected a list of lives that we care for under their insurance plan and presented them with that number, the growth that we have had, and how many examples I could easily find of keeping their patients out of the ER. Basically I was showing them how I was saving them money.
4. I showed them the growth of my practice by numbers of patients I’ve seen including information of me opening a second location and my value to their patients.
5. I jumped through their hoops and got everything well ahead of time so I knew exactly what they were looking for when it came time for a rate increase.

Direct Primary Care

Do you have a headache yet from just reading how ridiculous this whole situation is? For many doctors, they opt out of this process and chose to not accept insurance. I can not say that I blame them. It is a LOT of work to get in network and then negotiate contract rates.

The explosion in direct primary care I believe is partly due to the difficulty it takes when negotiating rates with insurance companies.

I spent dozens of hours on negotiating with one insurance company. Just imagine how much time it will take to do this every year or every other year with every insurance company.

Taking the insurance company out of the equation for some makes sense. However, expect your growth to be much slower than if you take commercial insurance.

Joining An IPA (Independent Practice Association)

Lots of physicians will look to join an IPA to avoid the headaches I listed above.

Joining in IPA can have many benefits. You can take advantage of a larger network and most likely better reimbursement rates. You also can often put the responsibility of these rate discussions to the IPA so that it does not waste your time.

The downsides of joining an IPA is that for some IPA the fees or restrictions on what you can not do may be burdensome.

I chose not to join one since my goal was always to grow a large practice and see how big I can make this. I knew that my rates would suck in the beginning but as I get bigger, I can argue for better and better rates. That is exactly what I am doing now.

There are other downsides about IPA’s that is beyond the scope of this article. Just know that organizations exist that you can join up with to get better reimbursements for solo practices. They all come with some kind of catch or many fees.

A Changed Man On My Views On Commercial Insurance

Before I opened my own practice I was adamant anti-single payer. I was always told how terrible Medicare pays and how much better commercial insurance was to deal with. Go to any website with doctors in a forum present. I bet you will hear how bad Medicare is and pro commercial payments.

Now, I don’t want this article to devolve into pro or against single payer. However, I can not go without at least bringing this topic up after spending dozens of hours trying to negotiate a rate increase.

It sucks that I can not negotiate with Medicare. It sucks big time. You need to have some kind of negotiation or else you have no power. That rings true for most things in lift.

Medicare make the rules and what they say goes. If they decide to cut pay 50% across the board, there is nothing I can do other than stop taking Medicare. If there is no competition, then usually the one who controls the market controls everything.

Commercial insurance ping their rates to Medicare. If Medicare lowers rates, then commercial insurance usually follows along.

Wasted Time

The time and waste of manpower that goes into both sides of these negotiations is mind blowing. You can’t help but see the waste and inefficiencies. I probably sent in and replied to 50 emails for this process. That is 50 emails that at least two people had to read and respond to just for my practice for one insurance payer.

I admit, I probably would be singing a different tune about this process if I was getting 150% Medicare from all my commercial plans. However, that is definitely not the case for outpatient non specialist practice.

Medicare is not perfect but I do like that they pay fast, they are super easy to get in network with, and they pay decently well in our area.

I’m not saying that I’m 100% single payer. However, I think we can all agree that the system is totally broken with everyone losing except the insurance companies.

Luckily, this was one step in the right direction for my practice. I am no longer losing money each time I give one of my lowest payers commercial patients a vaccine.