Preparing anImpactful Proposal Letter

The first step in the payer negotiation is preparing a simple but substantive proposal letter that is sent to the payer’s contracts’ manager which introduces the practice, the request for rate increase and, most importantly, the reasons for the proposed increase.

* Avoid over explanation and unnecessary content. Before understanding how to build an effective proposal letter, let’s first discuss avoiding the pitfalls of creating an ineffective letter. Perhaps the single biggest problem that occurs is sending a letter that is much too detailed and loses the key points in the basic message. Letters that state a resume or qualifications of a single Doctor in the practice, or even about the practice itself, lose their effectiveness quickly. Similarly, explaining the many subspecialties andeducational background of each Doctor can also distract from the purpose. The purpose is to get the payers attention to focus on who your practice is and why it should get an increase. An effective letter is no more than one to one and ½ pages long. Anything longer is an indication that there is too much content and not enough focus on the key reasons that the payer should consider increased reimbursement to your practice. Also, do not crowd the letter with a profusion of contract terms you would ideally like changed. Think about the two or three key items that will make a difference to your practice; the key item being increasing your reimbursement. You will have your chance to review the contract language when you receive a contract. But keep in mind, much of the contract language may be non-negotiable. If the goal is to get higher reimbursements, focus on that and make the case to the payer that your practice is a needed, critical member of their network, and why current reimbursement rates do not cover cost and provide a reasonable profit.

* What to include in the letter, the outline and content. Remember that this letter is a sales pitch. Write the letter as if you were the recipient, sitting on their side of the desk, making a business decision regarding your increase. Their thought is that you are asking them to redistribute dollars in their reimbursement ecosystem. That is, every dollar they pay your group is more they may have to collect from customers in the form of higher premiums, or less that they will have to pay other providers in the network, or less in their profit margin that increase their value to investors and shareholders. Ask yourself, “If I were them, what would it take to make me say yes?” Answer the question and make your case in your proposal letter that highlights your strengths.

* Important Note: Make sure your proposal letter is directed to the correct person and department in the payer’s organization. In most cases, with most payers, your market is assigned a network / contracts manager. These individuals have many titles: Provider Engagement & Contracting Representative, Contract Manager, Provider Network Manager, Provider Services Representative, and Contract Negotiator/Consultant. This person’s contact information may be identified on the cover letter or previous correspondence that you’ve received from the payer. If you don’t have correspondence, and don’t already know your local network manager, you can usually contact provider relations services for your local network management representatives. In many cases, the contact information that you need can also be found on the payer website. If you are contacting a provider network department, be sure to ask for the contract manager for your geographic area. In some cases, depending on where you practice, you may be directed to submit your request to a department, rather than an individual. In this case, submit your proposal and call the department weekly until you get the name of the person to whom your negotiation has been assigned, or until you receive correspondence from the assigned representative.

To get the payers attention, your letter needs to be clearly organized. Consider the following structure of the letter:

  • Introduction: - Start with demographics. In the introductory paragraph, state the name of your practice, years in business, history with the payer, revenue from the payer and number of the payer’s patients or cases you treatper year. The dollars the payer spends on your services and the number of patients you serve can work to your advantage if your patient base includes large employer groups. If you are in a rural environment, your patient count and revenue may not be your strongest attribute, but if you are the only provider who serves that area, you can capitalize on your geographic advantage. That is discussed later. In any case introducing your practice and providing background is the first step in gaining the payer’s attention.
  • Body:
  • Talk about your specialties and qualifications. Be careful not to go overboard. We all are passionate about what we do and why we are deserving of recognition. The point here is, in one to two paragraphs; at most, describe the accreditations, certifications, qualifications and/or special recognition of your practice, specialties and specific procedures you offer that make you different and unique from other similar providers in your area, if they exist.
  • Include geographic advantage, if there is one. As was mentioned earlier, being the only practitioner of your kind and/or specialty within 25 miles of your place on the map can put you at a distinct advantage in a negotiation, even if you don’t think your patient count and revenue are high enough to make a difference to the payer. Why? You may not know it but, it could be critical to the payer’s coverage strategy to have you in its network. In order for a payer to say they have a “network”, some states require insurance carriers to attempt to contract with medical providers in a way that offer sufficient access, so that the patient does not have to travel more than about 25 miles to get to a primary care provider or a specialist who is contracted with the patient’s insurance carrier. For this reason, it is always a good idea to remind the payer if you’re the only doctor in town!
  • Make the case for increased reimbursement. Tell the payer why your practice cannot continue to provide efficient, high-quality care at current rates. Prior to drafting the proposal, you will have done a complete analysis of your reimbursement from all of the payers with whom you want to negotiate. Your analysis will drive your proposal. In general, share the results of your analysis. If the payer’s fee schedule is not competitive with others, tell them! If they are not covering your cost, tell them! If you perform minor surgical procedures in the office rather than an ASC or hospital, point this out and ask for special consideration – either a higher global rate or a “facility fee” to compensate for the additional cost that you incur for room time and supplies. Whatever the case is for higher reimbursement, STATE YOUR CASE!

It is better form to include the fee schedule proposal in an appendix to the letter, that way the body of the letter is concise.

  • Closing: Remind them that you want to continue to work with them, and give them a “due date” by which you expect to receive their response. A good guideline is 30 calendar days from the date of the letter.
  • Appendices
  • Fee Schedule Proposal: Depending upon the structure of your agreement and your analysis, you may state that you are asking for an across-the-board 30% increase, or you may state that you are asking for 200% of local Medicare rates for your top codes, which represent the highest volume and revenue for your practice. Make your proposal match the reimbursement methodology of the payer.This will help you avoid delays due to incompatible format.

Ask for special consideration for any ancillary services you provide, such as CT scans, ultrasound scans, IMRT and other radiology services, in-office lab and pathology procedures, since many payer agreements exclude these codes. Don’t be timid. You will be armed with your empirical data to support your request, which will put you in a stronger negotiating position.

  • Providers and Office Location(s). Though you have a small practice, you may have more than one service location. Be sure to let the payer know this.

In summary, bottom line, this letter is a sales pitch, but don’t make the mistake of selling your fee schedule proposal. What you’re selling is the irreplaceable service you provide to their covered lives. Payers are business entities focused on profit generation; many are publicly held corporations which trade stock. They need to understand the business value of why your practice needs more money and why they should give you that money to keep you in their network. Do that, and you will increase your chances of success.