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Payer Merger: Protect Your Practice

April 10, 2016

The trend of major health insurance companies merging will likely continue in 2016, as Anthem & Cigna, and Aetna & Humana await approval of their respective mergers from the federal government.  The impact, once approved, will be huge across the board, and we wanted to take another look at what you should do about payer contracts during these mergers.

 

First and foremost, you cannot idle your time, you have to start taking steps NOW.  It is important to be proactive when the clear trend is payer consolidation, regardless of whether or not the mergers are finalized.  As a practice, it is important to build certainty into your provider reimbursement rates and terms and reduce risk. It is reasonable to assume that if / when a major merger consummates, the payer will seek business process simplification and streamlining. This means the payer is very likely to consolidate multiple contracts with the same entity / practice into a single payer contract. The timing of this change will be dependent on how quickly the payer modifies its contracts and the duration of the terms of existing contracts. The following 3 steps are recommended immediately:

 

1.Take a complete inventory of your current contracts and identify:

    -Term and termination without cause clauses and notification periods and whether or not those notification periods are anchored to be effective on anniversary dates.

    -The payer’s notification requirements with regard to material changes to the contract

    -Benchmark (compare your top revenue-producing codes across your agreements to local Medicare rates and the provider reimbursement rates from all of your other top insurance payers) the term of the agreement

 

2. Identify any agreements which renew in the next 12 months or which may be cancelled or changed in the next 12 months

 

3. Commence payer contracts negotiations to both increase rates on your top codes and, very important, extend the term of the new agreement to be a minimum of 3 years with built-in cost of living increases and, if possible, additional performance bonuses.

 

We cannot stress enough that it is critical not to wait for the merger to be complete in order to protect your practice.  Once the merger happens, the payer will likely do its own comparison of agreements and, where possible, terminate the higher provider reimbursement agreement(s) and offer to merge the contracts into the lower reimbursement agreement. By locking in long-term, multiple year, agreements, you will create a steady and predictable revenue stream from your current agreements and, in the future, put yourself in a better position to merge your payer agreements at higher provider reimbursement rates. Also, by waiting, you increase the risk that the payers who are merging will “freeze” negotiations until the merger completes, once the merger and transition is underway. Complacency will not be rewarded in this environment.

 

In this rapidly evolving reimbursement landscape, you will have taken the positive steps to increase revenue from your current agreements and establish predictable revenue streams to weather the changes ahead. So, why not get started today?

 

If your practice is being affected by mergers and consolidation in the health insurance industry, contact us for a free consultation.

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