Beyond the Rate: Payor Contracting for Radiology Practices

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Melissa McEachern-WilkinsFew business processes for radiology practices are as fraught as negotiating managed-care contracts. Their duration and durability put a significant level of both current and future income on the line, but small and medium-sized practices, in particular, might feel that they have little leverage in the negotiating process. The keys to gaining the upper hand are preparation and an understanding of the factors that influence payment (other than the negotiated reimbursement rate).

Melissa McEachern-Wilkins, MPH, senior operations manager for Medical Management Professionals (MMP), began her career working as a provider-relations representative for a statewide PPO network. “I got a firsthand feel for the perspective of the payors: what they are looking for and trying to accomplish,” she says. “Now that I have moved over to the physician side, I have been able to use that knowledge to help them understand the contract-negotiation process better.”

Preparing for the Conversation

Radiology practices’ processes should begin before the negotiations commence, McEachern-Wilkins says. “They need to look at a few things first,” she explains. “They need to determine what the key elements are that distinguish the practice from other practices in the area. For instance, is there a line of service that it is offering, such as PET, that is unique in the area?”

Next, McEachern-Wilkins says, practices should look at the requirements of their hospital contracts and determine whether the contracting department at the hospital can offer them support in their negotiations. “If a radiology practice finds itself in a position where it is not getting movement from a particular payor, having a hospital ally can help push that along,” she notes.

Practices should also assess their local markets to anticipate what the payor might need from them. “If it is a new payor in the area, it may be more likely to offer slightly higher rates and work on terms in the contract that might be more favorable to the radiology group,” she says. “If the payor recently picked up a new employer in town that requested the group’s facilities, it will have less incentive to negotiate aggressively.”

On the other hand, she says, if the radiology group is in the position of pursuing the payor, it might be forced to accept less-than-favorable terms. “This is the situation where we see the payors less interested in negotiating,” she says. “They will say, ‘Here is the contract. Take it or leave it.’”

McEachern-Wilkins recommends that practices determine their bottom lines before meeting with the payor. “The practice needs to understand the process and drill down to how far it is willing to push—and when it will walk away,” she says.

More Than Money

McEachern-Wilkins points out that one major mistake made by radiologists (and physicians in general) when it comes to managed-care contract negotiations is becoming too focused on rates. “There can be a lot of money left on the table through something as benign seeming as the term of the contract,” she notes.

She explains that contract terms historically were set at a year, but many payors now prefer three-year contracts. “This means that groups are locking into rates for a longer term than they are accustomed to,” she says. “If it is a so-so contract, or bottom of the market, they will not be renegotiating it in a year’s time. By locking into that for three years, they could be losing a lot of money.”

Assignment language is also increasingly critical, as payors merge with one another or purchase other payors. Based on the assignment language in the contract, in the event of an unexpected merger, a radiology practice could find itself being forced to take lower rates than those to which it initially agreed.

“You will see scenarios where payor A purchases payor B, which you have contracted with, and due to assignment language, payor A can assume your contract and assign it as if it were its own,” she explains. “You will hear language such as ‘augment our network,’ in which the new payor will use those contracted with the original payor as a wraparound. Now, the practice has a large volume of patients coming in at a not-so-good contract rate, and it is stuck until termination provisions roll around.”

A final factor to consider is the payor’s preauthorization requirements for imaging. “Radiology has become the center of attention, when it comes to overutilization, and payors are really examining their policies for