Payer contracts determine what a healthcare practice gets paid for every service it delivers. They specify reimbursement rates by CPT code, define the provider network terms under which those rates apply, set claim submission deadlines, and contain termination and audit provisions that most providers never read before signing. In many practices, payers account for up to 80% of total revenue, which makes the payer contract the most financially consequential document the practice holds.
Most providers do not have a current copy of their payer contracts. Getting one requires direct outreach to the payer’s provider relations department, often with follow-up calls and emails before a copy is produced. That difficulty is worth the effort. A provider who does not know what their contract says cannot identify when a payer is underpaying, cannot evaluate whether their reimbursement rates are competitive with peers, and has no basis for a rate negotiation conversation.
This article covers what payer contracts contain, how to obtain yours if you don’t have a current copy, and the practical steps for evaluating and negotiating better terms.
Keep this in mind: Knowing your contracts can enable you to collect even more revenue and better protect your practice.
What are Payer Contracts, Precisely?
Payer contracts describe and make clear a provider’s reimbursement contract for providing healthcare services within an assortment of plans. Payer contracts include such items as reimbursement rates, provider networks and provider credentialing, all of which have an effect on negotiating rates, benefits, and more.
The main reason you may not have a copy of this contract with a payer or know what it contains is because getting a hold of a payer contract can be rather problematic. Yes, it’s your contract, with your signature, but it can take a huge amount of time to acquire, even after you’ve asked for it. Plus, once asked for, it can take an exhaustive follow-up on your part (phone calls, emails, faxes or direct outreach) to ultimately obtain a copy of the contract.
So, What Can You Do to Speed Up This Process?
- Establish a game plan. First, identify the scope and your goals. For example, you might only want to collect contracts or you may want to collect contracts as well as do some negotiating. No matter the reason, make sure you’ve identified it upfront. Next, summarize the best channels for communication. Some companies prefer phone calls, others might like faxes while others still desire emails. Last, set up tracking and monitoring to keep yourself and payers accountable.
- Prioritize and target your payers. Before you spend time making an attempt to contact payers, you should pick out your top 5-10 payers.
- Single out the best rep in your area. After identifying your top payers, it’s time to link up with the person at that payer company related to your contract. The challenge: while some payers are pretty good at disclosing contacts, it might demand some creativity on your part to contact the correct person at other payers.
- Be thorough. Always keep in mind that you have a right to your provider agreement, and that these are legally binding contracts and that you require the information in your contract to assure contract fulfillment. Don’t ever give up!
What to Do, After You’ve Received a Copy of Your Payer Contract?
Okay, you’ve made contact and got hold of a copy of your contract. Now, how can you go about negotiating a more favorable payer contract? Let’s see what Andrew Harding, co-founder at Rivet, a healthcare billing and payment company, has to say.
- Distinguish yourself. Let’s say you’re inquiring about a payment rate increase. You need to demonstrate to the payer what value you offer judged against your local peers. For example, are you the only practice that offers extended hours or telehealth appointments on weekends? Are you the only PCP in a 5-mile radius? A physician may dominant a market within a few-mile radius and not even know it.
- Pinpoint your volume of active patients. This is the number of unique patients you’ve seen in the past two years. Remind the payer that if you go out of network, the payer will have to inform patients that their designated primary care physician is no longer in network, which more than likely will upset patients when informed they have to switch physicians.
- Take into consideration an escalator clause. This is a contract stipulation that assures a precise payment increase during a definite period. For example, providers might negotiate a three-year contract but add in routine increases of one percent per year.
- Implement a payer analysis. How does one payer’s payment rates stand up to others? Is that payer paying below-market rates? If so, use de-identified information to build a case for higher rates. Talk with other physicians in your region to get a sense of their contracted rates, says Boyd Stewart, vice president of KLAS Enterprises, a payer-provider company.
- Negotiate carve-outs for high-utilization services. For example, your practice might be able to negotiate higher rates explicitly for office visits to boost revenue.
Summary: What Providers Should Know About Payer Contracting
The aforementioned content highlights a critical disconnect in healthcare. While insurance payers represent up to 80% of many providers’ revenue, most healthcare providers don’t actually know what’s in their payer contracts. The article uses an analogy of accepting a job without knowing your salary or work schedule to illustrate how problematic this situation is.
Getting Your Contracts
A four-step process:
- Establish a clear game plan with defined goals and preferred communication methods
- Prioritize your top 5-10 payers by revenue impact
- Identify the right contact person at each payer organization
- Be persistent, remembering you have a legal right to your own contracts
Negotiating Better Terms
Once you have your contracts, the article offers several negotiation strategies from industry experts:
- Demonstrate your unique value proposition compared to local competitors
- Leverage your patient volume as negotiating power
- Consider escalator clauses for automatic annual increases
- Conduct payer analysis to identify below-market rates
- Negotiate higher rates for specific high-utilization services
The key takeaway is that knowing and actively managing your payer contracts can significantly increase revenue and better protect your practice. At Medwave, we are a resource for providers who need professional assistance with payer contracting services.
Need more help? Contact our professionals to find our more about our payer contracting services.
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