How to gain control of contract negotiations

Managed care contract negotiations often trigger trepidation and fear. To eliminate these negative emotions, do your homework beforehand and realize that you do have control over the process.

The most important thing to remember is that negotiation means two parties are talking, says Vicki Axsom-Brown, administrator of Anderson Eye & Ear Associates/Medicus in Anderson, SC. Some same-day surgery managers dread negotiating a contract because they don’t believe they have a lot of control and that they will have to accept whatever the managed care company is offering.

This simply isn’t true, Axsom-Brown declares. "You can walk away from a contract if it is not good for your business, and you can offer to carve out certain procedures that are causing problems."

Many same-day surgery managers accept contracts just because someone says they need it, says Douglas Peter, vice president of managed care for Nashville, TN-based SymbionARC, which owns or manages 20 same-day surgery centers. "There is nothing wrong with saying no to a contract from a pure business decision perspective," he says.

How do you know when to say no or when to say yes? "Information and organization is the key," says Peter. Not only do you need to know your own business, but you also need to understand the market, the payers in your market, and which physicians are on the different panels, he explains.

Evaluate payers

To understand payers, look not only at their historical and current positions in your market, but also at the type of products they offer and the corresponding number of lives each covers, Peter says. "Do they offer HMO and PPO products, and how do benefits differ for in-network and out-of-network coverage?" he asks.

The difference between in- and out-of-network benefits is important because it shows how effective the payer can be in steering patients to you and other network providers, he says. Some payers offer small differences between the two types of benefits, so members don’t have incentives to see in-network providers. "Why should I offer a discount to a payer when there is no advantage to me?" he asks.

Also, know which physicians are on different payer panels, Peter adds. This not only gives you a chance to make sure physicians on your staff can continue to perform surgery at your location, but you might see other physicians you’d like to attract to your program, he says.

Gathering information about payers in your market requires a good relationship with the payers and creative thinking, says Axsom-Brown. If you can’t obtain information from the payers, physicians and family members of your surgery program staff can provide copies of benefits books and explanations of benefits (EOB) statements that describe benefits and physician panels.

Know who the decision makers are, says Axsom-Brown. "Be sure that when you start negotiations, you know if the person with whom you are talking is the decision maker or a messenger. The ideal situation is to talk directly to the decision maker, but that’s not always possible." If you are dealing with someone who has to get approval from others, be aware that the process will take longer, she says.

Strive for a positive, ongoing relationship, she advises. Talk with them throughout the year, not just at negotiation times. And let them know when things are going well with the contract, not just when there are problems, Axsom-Brown adds.

Don’t enter negotiations until you have analyzed your own business, advises Peter. Know the mix of surgical cases you handle and costs and net revenue per case, he says.

It is critical to know your volume for specific procedures as well as costs, says Axsom-Brown. You can’t look just at the dollar reimbursement for individual procedures, she says. "Look to see if the higher reimbursements are only for procedures you rarely perform and the lower reimbursements for high-volume procedures," she suggests. If the procedure for which high reimbursement is offered only is performed a few times a year, the extra revenue might not be enough to offset or justify the lower reimbursement for the procedure you perform the most, she adds.

Because a same-day surgery manager and a payer use different language, make sure you understand what is said during negotiations and written into the contract, says Axsom-Brown.

"If a statement is made that you don’t understand, rephrase it to make sure you are clear," she suggests. "Question anything in the contract you don’t understand, and ask for definitions of terms before you sign."

Don’t look only at rates when reviewing a contract, suggests Peter. Look at how you will get paid, what affects payment schedules, what time frame is considered prompt payment, and how assignments and amendments are addressed, he suggests. Also, be sure you understand the contract’s term, termination, and renewal time frames, he adds.

"This is a legal, binding document, so if someone is not comfortable reviewing the contract, he or she should have an attorney review it," Peter adds. 


For more information about negotiating with managed care companies, contact:

Vicki Axsom-Brown, Administrator, Anderson Eye & Ear Associates/Medicus, 1655 E. Greenville St., Anderson, SC 29621. Telephone: (864) 224-6375. Fax: (864) 716-7732. E-mail:

Douglas Peter, Vice President of Managed Care, SymbionARC, 3401 West End Ave., Suite 120, Nashville, TN 37203. Telephone: (615) 234-7900. Fax: (615) 234-7999. E-mail: