Sometimes relationships, either personal and public, just don’t work out. The provider/ payor relationship is no exception. All that hard work done during the provider enrollment process has gone for naught. According to a survey conducted last year by the Medical Group Management Association more than half the medical practices surveyed said they were renegotiating or eliminating payors they had identified as problematic. Which was, by the way, a significant increase from the year before. The primary rationale used to label them a problem were: reimbursement fees were too low or their policy/procedures simply were not worth the hassle (I suppose just another way of saying their fees were too low).

But one needs to ask oneself when faced with a breakup …what exactly is “too low”. Many times the the definition of “too low” and the subsequent decision to drop an insurer has a heavy emotional content and hard fast number analysis takes a back seat. A problem occurred or the provider was unhappy with how the payor approached a particular issue can drastically alter the definition of what exactly “too low” means. So rule number one when faced with drop/keep decision is…this is a business decision and needs to be approached calmly and methodically using numbers not emotions to guide you through the process.

So what is the process? Step number one is to conduct a payor assessment. This entails comparing your targeted problem payor with others similar sized payors you’ve a relationship. It’s an assessment that should include input from all those staff members who deal with the payors on a frequent/regular basis. Some questions you need to address are:

• What are the reimbursement rates and how do they compare with other payors?

• What does the insurer pay versus what you billed?

• How long does it take to get paid?

• What is the denial rate and how does it compare with others?

• How does the preauthorization procedure and frequency compare with other payors?

• Are there any issues that make this particular payor more difficult to deal with?

The key here is to convert the answers to these questions into actual dollars and cents. For example, if it takes an extra 30 days to get paid, you need to calculate the actual carrying costs associated with those additional 30 days. Lay out a comparison chart of all your providers. It will quickly become clear where the relationship problems lay and the financial impact on the practice. (It may also uncover problems you didn’t know you had).

The next set it to look at the number of patients/revenue that would be affected by dropping an identified problem payor. The logic to apply here is, you wouldn’t want to drop a payor that represents a large percentage of your clients/revenue even if they were a problem. The large firms in your area like Aetna and Cigna are pretty much exempt from this exercise. Experts agree that 15% is a good dividing line. If a payor represents more than 15% of your client/revenue it may be difficult to make up the loss in a relatively short period of time.

OK you’ve identified a problem payor and it doesn’t represent a signification part of your business, what’s next. The best thing is to dig out the contract and examine two sections. The first is the termination clause. Most contacts require that a simple termination notification be sent and after a waiting period the relationship is ended. But there may be other issues involved, timing or the format that the letter must take, for example. The second is the grievance procedure. Before parting ways, you may want to discuss the issues you’ve uncovered during your analysis with the insurer. They may offer to rectify the problems or to adjust the fee schedule. If you do enter discussions be sure to come armed with facts and figures not opinions and anecdotes. Finally, don’t be acrimonious, demanding or threatening during the discussions. Even though you may end the relationship now, there’s a good chance you’ll find yourself dealing with them again in the future. Perhaps even going through the provider enrollment process all over again. So keep it pleasant and professional.

In the next post we’ll discuss the procedures you need to follow once you’ve made that fateful decision to terminate a relationship.