Wednesday, April 22, 2015

A Tool to Help Practices Compare What Insurers Are Paying

RVUs as a Tool
RVUs - The Right Tool
Physicians and their staff members have to slog through a quagmire of disparate payment schemes offered by a variety of third-party payers. Those differences make it challenging to compare contracts: Which ones are valuable? Which ones aren’t even worth the effort it takes to jump through the payers’ hoops to get paid?

Analyzing your own data—based on RVU data—not only helps you compare contracts, it can give you greater negotiating leverage when talking to payers who want to empanel your physicians.

The RVU (as defined by Medicare) has almost taken over the healthcare world as the primary measure of physician productivity, and it has by default become a standard way of measuring payment value. That’s because many managed care contracts offer reimbursement schedules based on a particular iteration of the Medicare fee schedule, which is driven by its Resource-Based Relative Value System.
One payer may claim its fee schedule represents 200% of Medicare’s 2013 reimbursement rates, while another may offer 175% of the 2014 pay rate. How do you compare these two offerings quickly and accurately?

Start with the 20 to 30 most common procedures billed by your practice. Create a spreadsheet that delineates the total RVUs for each. Next, create columns for your current top payers (measured in terms of how many patients subscribe to each plan), and enter actual payments from each payer for each code over the course of at least a month.

Try to ignore claims still awaiting adjudication, but include denials—they can help you identify problem payers. Divide total RVUs billed by total payments, and determine the practical “conversion factor” for each payer. If your data don’t compare well, you have reason to press your payers at the negotiating table—and evidence to back you up.

You can even use this method for valuing capitation contracts. While you can’t see what a capitated plan pays per procedure, you can look at the aggregate per-RVU payment, based on your own system data.

Negotiating with-out data isn’t negotiating. It’s begging! As an administrator, we started every new job with a practice doing this kind of analysis. In all honesty, we seldom saw even a shred of evidence that anyone had objectively analyzed contract offerings. Doctors often signed contracts out of fear of losing patients. Smart payers leveraged that fear (and even promised to bring a busload of new patients once the ink was dry).

Of course, no one should ever sign a contract out of fear. And no one should sign a contract blindly—without data to project the payer’s impact on practice revenues. But it still happens every day in medical practices across the country. Almost as bad, most of your payer contracts include “evergreen” clauses that automatically renew your commitment from year to year. Those auto-renewal clauses usually require you to notify the payer anywhere from 120 to 180 days prior to the anniversary if you want to quit them “without cause.”

We’ve been at this a long time—almost 30 years—and remember (almost fondly) those brighter days when medical practice revenue was so abundant that this kind of carelessness didn’t break the bank. But you know the margin for error is razor thin these days, and you can’t afford a laissez-faire approach to payer contracting.

Sharpen those pencils—or perhaps today we should say “fire up those spreadsheets”—and get busy.

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