Contracting During a Recession

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By Judith Philipps Otto

It's definitely a buyer's market for managed-care organizations (MCOs) in search of O&P service providers, experts report. Providers unwilling or unable to accept the deeper discounts that MCOs are increasingly demanding have few alternatives to refusing the contract and turning away the patients it covers, a luxury few businesses can afford during recessionary times.

"Especially here in Minnesota, where it's fairly competitive, we don't really have any power when it comes to renegotiating," notes Greg Gruman, president and CEO of Winkley Orthotics & Prosthetics, Golden Valley, Minnesota. Although the company has never, in its 120-year history, given up a contract, they were on the verge of doing so at the time of this writing.

"It's just contrary to our belief system to give up a contract since contracts represent additional revenue, but when the reimbursement is so low or the requirements are so onerous, we just say no. It's a 'race to the bottom,' where the desperation to keep contracts sometimes leads owners into making bad business decisions. We're losing money now on most medical-assistance patients—and on a lot of procedures under Medicare. We're at the point where the reimbursement is not going to sustain our operation, so we have to make a choice. Either we make major changes to our operation—changing the way we deliver services—or we just make ourselves less available to patients."

The only power most small O&P businesses have is through their patients—something Winkley has never made a concerted effort to develop, Gruman says.


There are ways to put patient power to work when negotiating desirable contracts, says Cathie Pruitt, president and CEO of PrimeCare O&P. "If a patient finds out that they can't be seen by you when they've been referred to you by their doctor because you're not on contract with their insurance company, get some documentation from that patient while they're there and still unhappy about the situation. PrimeCare has developed a specialized patient advocacy form that members use to compile such documentation."

Compile a stack of these forms from these unhappy insureds, and also gather and add similar documentation from the unhappy referral sources whose patients had to be turned away from your facility. Take them to the appropriate insurance company to point out the fact that their insureds are unhappy with the lack of a provider contract with your company.

Pruitt also suggests that any unique product, service, or feature your business offers customers can be an extra bargaining chip when negotiating provider contracts. "Differentiate yourself, and be sure to market and promote those special benefits you offer," she recommends.


Once the contract is acquired, there are other dangers to watch for. Jane Edwards, PrimeCare's VP of operations, warns businesses to beware of negative options. Often, she explains, announcements regarding lower reimbursement rates appear in the form of bulk mail. The unwary may inadvertently discard as junk mail an important message that offered the opportunity to decline the changed rate. Through inaction, the recipient accepts the new lower reimbursement rate without knowing it because the lower rate is assumed to be acceptable unless the recipient responds to the contrary.

Pruitt also advises periodically checking on claims paid by your long-time contracts. They may be reimbursing at a lower rate than the agreed-upon amount. "It is wise to go in and spot check those claims to make sure that even on the small items, you're receiving the full reimbursement due you."