Legion Healthcare Solutions

Essentials of Payer Contract Negotiations

To protect practices from surprise policy changes that lead to lost revenue, we shared essentials that will be required at the time of payer contract negotiations.

Reimbursements are a significant source of revenue for healthcare practices. Yet, many of them don’t receive the full reimbursement for delivered services, even when the payer and provider mutually agreed on a rate. Unfortunately, keeping up with payer policy changes is difficult and most practices don’t have a payer contracting expert who regularly analyses payer contracts. To protect practices from surprise policy changes that lead to lost revenue, we shared essentials that will be required at the time of payer contract negotiations.

Essentials of Payer Contract Negotiations

Analyze Current Contracts

For any practice, payer reimbursements make up around 70 to 80 percent of total practice collections. Interestingly, practice owners are not aware of what’s in their contracts. By not knowing your current payer contracts, you might be keeping a lot of money on the table. You don’t want payers to take advantage of your ignorance. Analyze current payer contracts. If you don’t have the copies, request them from payers (it might take up to months’ time). Meanwhile, you requested payer contracts, and analyze the claim payment history. Looking at a payment history for every payer will give you a good understanding of reimbursement rates for various procedure codes. Analysis of current payer contracts could lay the groundwork for further payer negotiations.

Analyse Fee Schedule

The base of any payer contract negotiations is the billed amount. While billing, practices need to make sure that they are charging the lesser amount to payers. To get an understanding of industry pricing, check reimbursement data for various payers against procedure codes and compare them with Medicare payment rates. Generally, Medicare pays less than other insurance carriers. While comparing fee schedules, you might realize, some commercial payers may have rates that are higher than 150 percent or even 200 percent of your Medicare rate. You won’t be billing less for such payers with this fee schedule comparison. Also, watch out for factors like the COVID-19 pandemic and the rise of telehealth services while analyzing fee schedules.

Know Your Value

Payers always rely on facts and data. So knowing your value and being able to quantify all aspects of your practice can go a long way to helping you bargain for higher reimbursement rates. Private practices that present their facts, figures, and data during negotiations may end up with contract terms that are up to 10 percent higher than those practices that go off of word of mouth alone. Use comparative data that shows your practice against a similar practice in your locality and/or medical specialty. Emphasize your payers with outstanding quality metrics, patient satisfaction scores, and other numbers that show the success of your practice.

Include Cost-of-Living

Payers are always hesitant to increase reimbursement rates and its practice owners’ skill to agree on them on the same. To agree on payers for higher insurance reimbursements, you can share statistics about cost-of-living in your area. Cost-of-living expense head includes office rent, staff salaries, and overhead costs. If you managed to convince the payers about increased overhead costs, they are likely to lend a hand. Payers don’t want you to go out of business as that would lead to a loss of patients and decreased revenue.

Other Guidelines for Payer Contract Negotiations

  • Payers may change their policies without discussing them with healthcare practices. To avoid these hidden policy changes, practices should include specific language in their contracts that require the payer to notify and discuss the alteration with the health system before the contract is updated.
  • To ensure payment and avoid a denied claim, practices would reach out to a payer for prior authorization. However, payers will sometimes still deny a claim even after they have authorized the procedure. Look for the prior authorization clause and update the wording accordingly.
  • Each and every payer contract has an opening window in which you can update or even terminate the ongoing contract. So, it’s really important that you plan your analysis and contract negotiations activities within these deadlines.

Legion Healthcare Solutions is a leading medical billing company providing complete billing and coding services. We shared the essentials of payer contract negotiations for reference purposes only. You can consider the above essentials as general guidelines as every payer contract is different. In case of any assistance required for payer contract negotiations, contact us at 727-475-1834 or email us at info@legionhealthcaresolutions.com

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