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Why Contracting is Still Critical When Starting a Practice

When advising clients, we strive to put ourselves in their shoes as we believe that we can’t truly help without thoroughly understanding the situation.  Over the past 10 years, we’ve had the privilege of consulting with hundreds of provider groups across the country about revenue cycle challenges, practice start-ups, payer contracting issues and payer enrollment disasters.  Through these conversations, we’ve determined that a majority of the financial problems our clients were facing could easily have been prevented had they invested more in the foundation of their business. The initial investment, whether it’s in your billing partner or in the credentialing/contracting partner, will either cost you a small fortune or set your practice on a path to prosperity.  Most practice start-ups are so preoccupied with keeping costs down(which is understandable), that they fail to realize just how important their payer agreements and selecting the right partners are to their future.  I specifically would like to take a minute and address the payer agreements and how they will impact your practice for many years to come.

Oftentimes, groups go into the start-up process with a mindset of, “let’s just get a contract in place so we can start getting paid,” without ever realizing that they are literally making a decision that will typically cost them 10-20% of their professional fees from that insurance company for the next 10-20 years.  When you agree to take a rate of let’s say 85% of Medicare because you just HAVE to participate with this particular payer, please understand that you are not only locking yourself into this rate for the next 2-3 Man umbrella wireyears, but you’re also establishing this as your base rate which you’ll be negotiating from for the rest of your practice’s life.  Most payers give 2-3% at each contract renewal which means in 10 years, you will probably still be paid less than Medicare.  This is why we stress the importance of even a 2% difference which most would consider to be insignificant and not worth the fight.

As you may or may not know, insurance companies are not as dumb as they seem and they will take advantage of every opportunity to save money. Unfortunately, these savings are oftentimes coming from the small practice that just broke off from the big group in town or the doc fresh out of training that has dreamed of controlling his own destiny.  I hate that the insurance companies take advantage of the small guys, but that is just the way this game is still being played.  If the payer is working with a seasoned contracting company that is well known within the insurance community, do you really believe that they are going to give them the same agreement that they would send Susie, the front desk coordinator turned office manager (no offense Susie).  Or perhaps you think that you will just handle the negotiations in between your two latte’s and pedicure, yeah right.  No offense, but I have yet to see a physician who is able to commit the time needed to effectively negotiate a contract.  Even if he/she could, why would they when they can be working and generating revenue, something they are much better at and probably still enjoy.

Physician Practice Specialists was the first nationwide contracting and credentialing company(that we know of and yes we are boasting a little), and we came into existence because of a physician friend who was nearly bankrupted by a billing company that said they could easily handle all of his credentialing/contracting needs.  Fortunately, we were able to jump in and help our friend before he was holding a can, but it was pretty damn close.  It was through this frustrating and alarming situation, that we realized just how desperate the industry was for some individuals that actually knew what the hell they were doing.  Our intent with this article is simply to emphasize the dangers of cutting corners when starting a practice.  We are not attempting to generate work, as there are a lot of very qualified individuals & companies(we even refer to some in certain situations), however, we are telling you that there are a ton of consultants, billing companies, EHR companies and credentialing companies, that don’t have the slightest clue about what it takes to start and/or manage a successful medical practice. Regardless of who helps you start your practice, please just ensure they actually know what they are doing.  When it comes to contracting, one easy way is to validate a person’s experience is to ask for a reference from an actual insurance network manager.  Just see if they can come up with one, they’ll probably tell you that it’s all handled at the national level and it’s just an 800 number they call(this is when I turn on the sirens). Just be careful and do your best to work with someone who has actually done what you are wanting them to do.physician contracting

That’s enough venting for now, hope this helped someone.  Please contact us today if you’d like us to evaluate your payer agreements or if you would like professionals to assist you in the credentialing and contracting process.