Key principles for negotiating with insurers, deciding whether to opt in or out of Medicare

Management in Practice

Maithily Nandedkar

Dr. Nandedkar is a member of the AAD Business and Operations Support Task Force who built a thriving solo practice.

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Contract negotiations with insurance companies and deciding whether to participate with Medicare are tricky topics — no one can claim to know exactly the right way to handle them. However, like most of us, I am an expert on my own practice. I know what my needs are for my bottom line and peace of mind (which is priceless). As long as you know what your needs are, you, too, can handle these tricky issues.

Before negotiating a contract with any insurance company, first look at the state of your own company. Why should any carrier negotiate with you? What makes your practice unique relative to your competitors? What do you have that the carrier wants?

Key principles to negotiating are:

  • Always negotiate from a position of strength.
  • Don’t even start negotiations unless you are prepared to walk away.
  • Know exactly what you want before you negotiate.
  • Medicare does not negotiate, so you need to either opt in or out.

Always negotiate from a position of strength

When I started my practice five years ago, there were few dermatologists in my city. This scenario could not last. I knew I could become the physician patients repeatedly choose if I proved to my patients that I cared for them as well or better than any other physician, regardless of my gender or specialty. Negotiating strength comes from robust patient relationships, which are the end result of great customer service. After two years of relationship building, I was prepared to negotiate. I negotiated for myself; however, there are numerous companies who will negotiate for you if that makes you more comfortable. Regardless, most insurance carriers will negotiate with you based on what you have to offer their customers. You need to know what your rating is from the patients who come from that particular insurance company. Whether you like it or not, you have been rated. The lower the rating, the less negotiating power you have. A good rating gives you more leverage. (The ratings are based on patient satisfaction surveys done by the insurance companies. In the past I have found out my rating from my patients because I have not been successful in obtaining it from the insurance carrier.) Great dermatology care is what you are offering their customers — nothing less.[pagebreak]

I tackled the insurance companies one at a time starting with the carrier that encompassed my smallest patient base. This gave me the least to lose. Small companies need you as much as you need them. First, I request a negotiation. Sometimes carriers refuse. If a carrier refuses to negotiate then inform the patients covered by that carrier and let them help you get to the negotiation table. When one carrier refused, I informed my patients that regrettably, I would be dropping their insurance because the company refused to negotiate with me but if they would like to keep me as their dermatologist please call their insurance company and request negotiations. That strategy worked. One carrier was suddenly ready to negotiate pay rates after patients called threatening to drop them. That scenario can only occur if there is healthy relationship between you and your patients. Most patients are loathe to change physicians. That is your strength, so use it.

Don’t even start negotiations unless you are prepared to walk away

One carrier, despite patient phone calls, still refused to negotiate. At that point, you need to walk away. If the carrier does not even care what their customers want, why would they care about what you want? When dropping an insurance, make sure you follow the rules of your contract and give a 60- or 90-day window for seeing patients depending on what the contract states. Always remind patients in your letter that you care about them. You are dropping their insurance but not them. You would be happy to continue seeing them and you will provide all the paperwork necessary for them to self-submit.

Know exactly what you want before you negotiate

All insurance companies will offer a fixed fee-for-service schedule. For some carriers, you may only be allowed to request a certain percentage above Medicare rates. Others may accept number values. Know what you need per code to survive versus profit. That is your ultimatum. Do you want to take managed care contracts? If most other dermatologists in the area do not take managed care, then you will have a negotiating advantage here. Managed care companies need physicians to see their patients and so are more willing to negotiate rates the fewer physicians they have.

Some consulting companies will advise you to focus on “revenue per visit” rather than the fee schedule. Why does this matter? It matters because not all visits are equal. For example, say you receive $100 per particular exam code from carrier X and most of your patients from carrier X are young, healthy, and will come only once a year, if that. Now compare to carrier Y who has an elderly patient profile and pays only $60 for the same exam code. However, this population may have more suspicious lesions and also develop more cancers. Now you are billing for repeated visits with destruction codes such as liquid nitrogen for actinic keratoses or actual skin surgeries. You may find that your average “revenue for visit” is the same and you do not need to negotiate because it all works out evenly in the end. Or you may find that the higher payer for a particular code is not worth the hassle because it rejects claims on a regular basis, increasing your administrative costs. The fee schedule will be the platform for negotiation. Your background knowledge will determine what you are willing to accept.[pagebreak]

To opt in or out of Medicare, that is the question

This is like a Monty Python sketch — “and now for something completely different.” No negotiating here — just decision-making. I wish I could say that if you commit to caring for our elderly then you take Medicare but it is not that simple. My practice looked at opting out of Medicare but concluded that it seemed unfair that Medicare is the only carrier that does not allow a patient to self-submit. Opting out means no one can submit not the physician and not the patient. What is the point of having insurance if you can’t use it and nothing even goes toward a deductible? So we continue to take Medicare as long as it is financially feasible for us. It really depends on what Congress does; Medicare is in such flux lately that making a sound decision rests not only on research but also fortune telling.

Opting out is a process. A word of warning to those who are fresh out of residency and have never taken Medicare: this same process applies if you see even one Medicare patient. You must have an opt-out agreement and a private contract in place according to CMS rules. A great “how to guide” can be found at or you can go directly to If you opt out as a participating or non-participating physician, you can still see Medicare patients but with numerous caveats for services rendered (see sidebar). You have to decide if it is financially and emotionally worth the cost for you.

Negotiating and decision-making are all about managing your practice in a manner that benefits both you and your patients. The ideal is when both are not at odds but in harmony.

Medicare: Opting in or out

  • If you are a participating physician then you have only four opportunities a year to opt out. You must inform CMS 30 days prior to the beginning of any quarter (i.e. Jan. 1, April 1, etc) that you are terminating your agreement with Medicare Part B and then you can opt out starting on the date the quarter begins. If you are a non-participating provider then you start the process by notifying your patients that you are opting out.
  • You must sign affidavits stating that you will not submit any claims to Medicare Part B and that none of your services are covered under Medicare Part B.
  • You must make the patient sign an agreement to enter into a private contract with you and agree to not submit any claims to Medicare.
  • You must never file a Medicare claim and also must not provide any information to the patient that would allow the patient to file a Medicare claim.
  • The exception for claim submission is for “emergency services or urgent care” but this may be tricky to determine. It is best to not submit under the guise of emergency services.
  • You have 90 days to opt back in as if you never opted out. After that, your agreement is in effect for two years and can be renewed at two-year intervals thereafter.



Medicare: Opting in or out
Medicare: Opting in or out