How Managed Care Targets Imaging Centers—and How to Fight Back

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With the cost of advanced imaging technology always on the rise and reimbursement continually declining, now, more than ever, it is crucial that imaging centers negotiate optimal managed care contracts. Unfortunately, managed care is currently targeting imaging centers, owing to concerns about overutilization and escalating costs. How can imaging center businesses emerge from negotiations unscathed? To put it bluntly, imaging centers cannot afford to accept managed care negotiators’ opening offers. Contracts must reflect the realities of doing business in the post-Deficit Reduction Act market, including the price of advanced technology, high staffing costs, the need to remain profitable, and, ideally, the fiscal flexibility to grow the business through new partnerships and ventures. Center negotiators must arm themselves with a new set of negotiating tactics in order to engage effectively with payors. The Campaign As the cost of outpatient imaging exceeds $100 billion annually, increasing at a rate of around 20% a year, managed care organizations have an incentive to target imaging providers, and they are attacking imaging centers on all fronts: pay for performance, tiered networks, radiology utilization management, and accreditation are all platforms that, sensible as they may sound, work in service of the company’s interests—not the imaging center’s. Pay-for-performance programs ostensibly provide financial incentives to radiologists for meeting specific benchmarks in terms of quality, satisfaction, efficiency, and patient safety. In reality, they put imaging centers at a disadvantage by creating the optimal circumstances for tiered network arrangements, under which patients are given incentives to visit imaging centers with cheaper copayments (that is, imaging centers with highly rated radiologists). When radiologists are rated well for efficiency, patient care and equipment quality sometimes fall by the wayside. The simple truth is that these managed care ratings are often only a reflection of the cost billed per CPT code and do not reflect quality of equipment, training of the radiologists, or skill of the technologists. As a result, they can serve to direct patients to lower-cost centers that may be unable to produce a diagnostic scan; this can lead to having scans redone at another facility or to unnecessary surgeries or other invasive procedures. Early operational examples of this tiered network arrangement include the Aexcel program (Aetna, Hartford, Conn) and CIGNA Care Network (CIGNA Healthcare, Philadelphia). Blue Cross/Blue Shield (BCBS), Chicago, offers tiered networks in California and Washington, and the Massachusetts Group Insurance Commission introduced the Select and Save plan. Accreditation is another potential landmine. Some insurers—including BCBS and Highmark Blue Shield—require imaging centers to obtain credentialing or certification to be part of their networks. In the case of Highmark Blue Shield, all providers of diagnostic imaging services performed outside of a hospital setting have been required to adhere to new privileging guidelines for two years now. Again, on the surface, it sounds harmless enough, even advisable. What Highmark requires of its network, though, goes beyond reaching professional benchmarks: centers must be open 40 hours per week, one weeknight until 8 PM, and two Saturdays per month for at least four hours; they must always have an on-site radiologist available; five modalities are required at each location; and PET is only permissible in hospital settings. Accreditation was just phase one for Highmark, which, in subsequent years, enacted utilization-management measures including requiring providers ordering outpatient, nonemergency advanced imaging tests to provide notification when they order certain MRI, CT, and PET examinations. Highmark providers must also request preauthorization when ordering selected advanced diagnostic imaging procedures. The hazards of utilization management gone awry are well known to the imaging community: channeling to lower-cost centers, scan brokering, and administrative denials, including contrast denials and retrospective denials. What can imaging centers do to fight back? They must be ahead of the curve on credentialing, watch for the early signs of tiered networks, and develop a strategy in advance. They must foster relationships with referring physicians, work to gain market strength, and, of course, negotiate excellent outpatient contracts. At the Negotiating Table At the outset of negotiations, the managed care organization holds most of the cards: it employs negotiating experts, and it relies on the likelihood that the imaging center’s representative will be less skilled and informed. It is crucial for the imaging center to know its strengths and weaknesses before negotiations commence. Some factors to consider when assessing practice strengths follow. Hospital relationship: If the center is the hospital’s sole service provider, this may be a powerful negotiating chip. Market capacity: If available capacity is low, the managed care organization can’t afford not to have the center in its network. Relationship with referrers: The managed care organization won’t want to alienate its referring physicians by losing the center. Payor mix: A diversified payor mix is as valuable as a diversified investment portfolio, for the same reasons. Market position: If the center is a market leader, the managed care organization will recognize that subscribers need it. Payor fee schedules: Managed care organizations must compete. Centers will not be able to get the largest plan to pay more than other, smaller managed care organizations. Assessing the managed care organization’s position is equally critical. Public information, including quarterly and annual financial reports and data from the state department of insurance, can be useful in sizing up the managed care organization’s strengths and weaknesses. Look for the following information. Market position: If the managed care organization is not a leader in the market, it should be willing to offer more attractive terms. Competition: If others are courting the managed care organization’s customers, it will work harder to strike a deal that keeps the imaging center in its network. Current performance: If the managed care organization’s growth is slowing, it probably cannot afford to lose more business. Intangibles: Other factors that might weaken the managed care organization’s negotiating position include problems with the department of insurance, a new management team, and similar detriments. Corporate mandates: If the managed care organization’s management has set benchmarks for keeping or growing business, this will influence its willingness to meet an imaging center’s terms. After assessing the respective positions of the imaging center and the managed care organization, it is important to define goals for contract negotiations clearly. The center must state what reimbursement fee it requires, along with its reason or reasons (the amount might be based on what other payors are offering, a percentage above what Medicare pays, or a detailed analysis of the center’s costs of delivering various services). It is also important to decide, in advance, which items are negotiable and which are not, as well as at what point to walk away from the contract. The center’s representative should come armed with relevant facts and hard data to support his or her position, including operational reports and market analyses. Be wary of negotiating tactics commonly employed by managed care organization negotiators, including those that follow. Limit of authority: The negotiator says, “I think you deserve it, but I have to clear it with my district manager.” This diverts the negotiator’s responsibility for refusing a proposal. Delay: Managed care organizations drag out negotiations indefinitely, hoping to wear the opposing representative down. Divide and conquer: The negotiator tells the referring hospital that he can’t increase its fees because the radiology group is so expensive. All products or no products: The negotiator says that the group must contract for all of the managed care organization’s covered procedures or for none, thus changing the scope of the negotiation. Indifference: The negotiator assumes a take-it-or-leave-it stance, pretending not to care whether the center renews its contract. Fortunately, there are also tactics that the imaging center can and should employ to level the playing field between it and the behemoth insurers. Musical chairs: The group notifies all its insurance companies that it is seeking to renegotiate contracts, forcing the managed care organizations to negotiate quickly. Patient communications/managed care organization report cards: The center notifies patients of the managed care organization’s past performance record, pressuring managed care organizations to do better. Capacity issues: Centers performing specialty imaging ask the managed care organization, “If we don’t do your work, who will?” Referring-physician disruption: The center points out to the managed care organization that losing the services of the imaging center will disrupt referring physicians’ practices. Finally, centers must know when to stop negotiating. If the group’s representative has discussed all the issues and made all the trade-offs possible, it is time either to accept a compromise or to walk away. Keep in mind the following tips for surviving managed care organization negotiations. First, never negotiate against yourself. Don’t suggest compromises until they are requested. Second, respond to offers, not questions. Refuse hypothetical questions; wait for sentences beginning with, “Here’s what we can offer.” Third, accept a partial concession to keep the negotiation moving. Don’t waste time on minor issues. Fourth, stay focused on the issues of the negotiation. If you want higher reimbursement, getting a good deal on something else won’t help. Fifth, consider exchanges. In negotiation, everything is a trade-off; you may have to give something up in one area to gain in another. Sixth, remember that when the negotiator says, “I can’t,” he or she probably means, “I won’t.” Ask why the negotiator can’t do something. There may be no reason, except that the negotiator doesn’t want to. In sitting down at the negotiating table with a negotiator from a managed care organization, know that this is a professional negotiator who has a great deal of experience and a long list of tactics. The imaging center negotiator must come to the session prepared.