5 Tips to Improve Payer Contract Negotiation

By Rochelle Glassman  |  December 8, 2014

Tweet this Kareo storyIt is common practice when a new payer contract or an amendment to an existing contract shows up that the manager takes the document to the physician or owner for signature. Often, this happens without reading the contract and understanding its terms and your obligations to the contract it is signed. Before you can approach a health plan to discuss the negotiation of your contract you need understand your contractual terms.

What is a payer contract?
In simple terms, it is an agreement that promises to the pay the practice or specific provider for “medically necessary” services it provides to the health plan members.

What are the terms of the contract?
It is important to know what the terms of your contract are;

  • Reimbursement rates. You need to know how much the health plan going to pay you for your services. Never sign a contract that does not have a fee schedule attached.
  • Filing deadlines. This is the amount of time you have after you have seen the patient to file the claim.
  • Payment deadlines. What is the amount of time the health plan has to pay you after receiving a “clean claim”. That is a claim that has been submitted accurately without any coding or demographic errors.
  • Dispute resolution procedures. These are the contractual procedures on how either party will work towards a resolution of a disputed claim
  • Notice to renegotiate. Most contracts spell out the notice period you have to provide them, in writing, of your intent to renegotiate the terms of your contract.
  • Notice to terminate the contract. This lays out the terms of how either party may terminate the contract either for cause or not for cause.

Read the contract carefully
There are often hidden terms in payer contracts that practices do not notice, but they are very important.
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  • What fee schedule is being used and how is it calculated?
  • How often is the fee schedule updated?
  • Are amendments unilateral or bilateral and how must notification take place if unilateral? (some sneak it in an electronic newsletter that is easily overlooked)?
  • Is there reciprocity in the agreement or does the plan put all the responsibility on the provider?
  • Are you being charged for referring patients out of network?
  • Is there a fine if you terminate your contract early? (some payers can charge back 2% of all payments paid the practice for the previous 24 months)
  • What are the compliance obligations and do you have the internal resources to implement and manage them?
  • Almost all the policies, procedures, quality assurance, and quality management prior authorization and referral programs are provided in a provider manual. Be sure to also read this manual.

It is important that you read, understand the terms and can abide by “all” the contractual terms before you sign the contract. The contract legally binds you to the terms of the contract and by signing it you are agreeing to perform and abide by the terms spelled out.

Tips to Negotiate Contracts
Once you understand the terms of the contract you can decide what terms you would like to change. Here are five suggestions to help you renegotiate: Remember, reviewing, renewing and renegotiating contracts is something you need to do every year. Also, be sure to update your practice and other fee schedules in your practice management system. Not doing this could result in lost revenue!

  1. It is easier to negotiate contractual terms and reimbursement rates before you sign a contract. Often, practices want to renegotiate terms within the first year of executing the contract. While it is possible to do so, it can be challenging.
  2. Payer contracts are one of the practices biggest assets. Therefore it is critical that you prepare a formal request to the health plan detailing what you would like to change in the contract.
  3. Make sure you have the supporting documentation to support any claim that you are making in the request.
  4. Identify the value proposition and how it benefits the health plan, health plan members, and your practice.
  5. Never be afraid to ask for what you want and be prepared to say NO if the contract does not make financial sense.

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