So, it’s that time again – your payer contracts are up for renewal and you need to renegotiate. Maybe you’re feeling like the reimbursement rates they’re offering are way too low. Or the administrative burdens and preauthorization requirements have gotten out of hand. Whatever the reason, you know you need to go back to the negotiating table.
But how do you actually renegotiate these contracts in a way that gets you a better deal? It can seem like an intimidating process, especially when you’re going up against massive insurance companies with whole departments dedicated to this. Don’t worry though – we’re here to demystify it all for you.
We’ll cover how to time these renegotiations properly, what data you need to arm yourself with, effective contract renegotiation tactics to use, tips for dealing with pushback, and alternatives to consider if you can’t reach an agreement. By the end, you’ll be ready to play hardball and get the contract terms your practice deserves.
When to Renegotiate
The first strategic consideration is properly timing when you renegotiate. You don’t want to be renegotiating at literally the last minute when your contract is about to terminate. At that point, you’ve lost all your leverage.
The payers know you can’t afford to go out of network and lose access to all those patients. So they can just stonewall you and get you to accept whatever lousy terms they offer at the 11th hour.
Consultants generally recommend giving yourself a minimum 6-month runway before the contracts are up for renewal. I’d argue you may even want 9-12 months of lead time if it’s a particularly crucial contract for your practice.
Why so much time? Because renegotiating payer contracts is a lengthy process. You need time to gather data, craft your proposals, schedule meetings, and go back-and-forth through multiple rounds. Payers also move notoriously slow, so you need to bake in plenty of time for their glacial pace.
You’ll also want to be strategic about negotiating one contract at a time, rather than letting them all come up for renewal at the same time. That way you can devote your full focus to each negotiation, without getting overwhelmed and lacking leverage.
So start that re-negotiation process early! Like 9-12 months out from the renewal date. Get it on your calendar and build in plenty of time for the whole process to play out.
Arming Yourself with Data
The old saying is “knowledge is power” – and that’s especially true when it comes to renegotiating payer contracts. You’ll want to arm yourself with as much knowledge and data as possible going into it.
What kind of data? Let’s start with your practice’s metrics and performance.
Those include:
- Patient volume / number of lives you’re providing access to for each payer
- Denial rates and accounts receivable stats
- Quality and cost metrics compared to peers
- Hot areas of growth or new services/capabilities
- Geographic coverage and market share
- Percentage of revenue from each payer contract
Having this data allows you to make a strong case for your value proposition to each payer. You can quantify the number of patients and services you’re providing them access to. And you can benchmark things like your cost efficiency and quality performance against other practices.
Beyond your own metrics, you’ll also want to gather intel on each payer’s market position and priorities, such as:
- Their geographic footprint and market share
- Growth areas they’re targeting
- New products or services they’re rolling out
- Public awareness around profits or excess surplus
- Policy positions from lobbying groups and reps
This information can help you understand the payer’s pressure points and bargaining motivations. If they’re in a turf war and need to offer competitive provider networks, that could give you leverage for higher rates. If they’re flush with profits, you can push for bigger increases than if times were leaner.
You’ll also want to gather data on the rates other practices are getting in your market and specialty. This is obviously highly valuable benchmark data.
One way to get this is by joining a practice management association, which frequently distributes payer fee schedules. You can also just ask colleagues what rates they’re seeing from each payer. People are often surprisingly open about sharing this intel.
No matter what, make sure you’re coming to the table armed with as much hard data as possible. Well-researched proposals grounded in facts make it much harder for payers to dismiss you out of hand.
Crafting Your Proposals
With your mountains of data compiled, it’s time to craft your actual proposals and negotiating positions to take to the payers.
While the specific proposal will vary for each payer based on the data, there are some universal priorities you’ll likely want to push for:
Fair Reimbursement Rates
This one’s obvious – you’re going to want sufficient rate increases to keep up with inflation and rising overhead costs. How much is “sufficient” will depend on your practice’s circumstances.
At a minimum, you’d hope for an increase matching the latest Medicare rate schedules each year. But will that cover your increases in rent, payroll, supplies, etc.? You’ll probably want to push for a few percentage points on top of that.
However, you don’t just want to settle for the payer’s standard fee schedule increase. You’ll want to negotiate higher rates for your top production codes. Or for any specialized or complex services that demand higher reimbursement.
Maybe you can benchmark your rates to the 90th percentile level for your area. Or get creative and propose a shared-savings model that rewards you for reducing overall costs.
Updating Outmoded Policies
Over time payers get bloated with outdated rules, preauthorization requirements, and dense policy manuals. You’ll want to push for streamlining and updating these relics.
Perhaps you want procedures removed from the preauth list entirely based on your good track record. Or you want more flexibility for mid-levels and remote visits.
Anything that cuts down on administrative headaches and allows you to practice more efficiently should be on the table here.
Fair Call Share Provisions
Many practices get roped into excessive and unfair “call coverage” requirements in their payer contracts. Where they’re on the hook for a disproportionate share of emergency call coverage compared to other practices.
This is a major burden, so you’ll want to review these provisions carefully. Propose caps on your share of call, exempt certain specialties, or secure higher reimbursement to offset the burden.
Patient Protection Provisions
As part of aligning incentives, you may want to push for provisions that give patients more transparency and freedom to choose quality, cost-efficient providers.
Things like allowing patients to pay the differential for higher-cost providers if they prefer. Publishing quality metrics. And simplifying referral processes between providers.
These patient protection provisions benefit everyone – the payers, the patients, and you as the provider aiming to deliver quality care.
Value-Based Incentives
More and more, payers are moving towards value-based models that reward practices for quality and efficiency over pure volume of services rendered.
So it’s smart to get ahead of this curve and embrace value-based incentives from the start. This can make you look like an innovative, forward-thinking partner.
Perhaps you propose shared-savings financially motivating you to reduce duplicative tests or unnecessary ER visits. Or you get paid more for hitting certain quality benchmarks on core metrics.
Get creative about redefining the value proposition you’re delivering and realigning incentives around quality and cost.
Those are just some of the high-level priorities you may want to box into your proposals.
At the end of the day, your goal is to walk away with a contract that’s financially sustainable, reduces silly administrative burdens, and allows you to practice quality care efficiently.
Use the data you’ve compiled to build a bulletproof case tailored to each payer’s situation. But also don’t be afraid to pattern match your proposals off of other favorable payer contracts in your market that you can reverse-engineer.
Dealing with Pushback
Of course, the payer isn’t just going to roll over and accept all your demands right off the bat. They’ll push back and play hardball too. So you need to be prepared for the common objections and tactics they’ll use.
Rate Increase Objections
“I understand your constraints, but our metrics show our practice delivers X% higher quality at Y% lower cost compared to peers. We’re absorbing enormous increases in rent, staff pay, etc.”
“Our patients show a very strong preference for access to our services, limiting network disruption and leakage. Investing in adequate reimbursement will pay dividends on the medical cost side.”
“The standard increase may work for commoditized primary care. But our specialty services and complex procedures deserve carve-outs for higher reimbursement.”
Come armed with data proving your value-add over other practices in terms of quality metrics, cost efficiency, patient satisfaction scores, etc. Make it an apples-to-oranges comparison showing why you merit higher increases.
Policy Change Objections
When you start pushing for more common sense policies and fewer administrative headaches, you’ll likely hear:
“Our policies are intended to ensure affordable, high-quality care for our members.”
“Other practices haven’t voiced concerns about these requirements.”
“We’d need to pull together a cross-functional team even to explore potential changes, which would take months.”
Don’t let them use inertia and bureaucracy as an excuse.
Refute with:
“I understand the intent, but these policies create huge busywork that doesn’t improve quality. They’re stuck in the past and need a facelift.”
“Just because others aren’t speaking up doesn’t make the policies defensible. We’re taking a leadership position here on common sense reforms.”
“Let’s identity a few quick wins we can immediately. Then we can systematically improve over time with a process improvement taskforce.”
Frame it as an opportunity to be a forward-thinking, innovative partner improving affordability through reducing wasteful administrative costs.
Access Restrictions
On the flip side, you may encounter payers trying to restrict access to you by:
- Shrinking provider networks
- Raising patient co-pays and deductibles
- Adding more pre-authorization requirements
- Not publishing quality data
- Dissuading referrals
Their excuse will be things like, “We need to reduce our medical loss ratio and protect our members from overutilization and excess costs.”
But you need to aggressively remind them:
- “Ultimately patients should have full transparency and choice over their care. Hiding quality data breeds mistrust.”
- “Putting up more barriers goes against all industry trends toward greater cost transparency.”
- “Your network and plan becomes less compelling to employers and patients if you restrict access to quality, cost-efficient providers like us.”
- Remind them you’re on the same team working towards better outcomes at lower total costs. Restricting access to top quality providers like you is completely antithetical to that.
Stay Firm & Explore Alternatives
Ultimately, you shouldn’t make concessions just to get a deal done if the contract truly won’t work for your practice. Payers often expect you to cave at the last minute, so you need to hold your ground.
“This reimbursement rate and policy package just isn’t tenable for our practice. We’re prepared to explore other options if we can’t reach a balanced deal.”
And mean it! Don’t be afraid to walk away if it’s truly a lousy deal.
You may even want to force their hand by being prepared to trigger the termination notification deadline if they don’t get serious. This makes it very disruptive to their patient access and network if they don’t shape up.
Of course, walking away from a payer contract is always a double-edged sword that impacts you as well. So it should never be an idle threat, but rather a last resort if all negotiating avenues are truly exhausted.
Potential Alternative Options
So, what are those “other options” you could explore if push really comes to shove in your payer contract negotiations?
Walk-Away / Go Out-of-Network
This nuclear option is leaving the payer’s network entirely and going out-of-network to see their patients.
It has major pros and cons to weigh:
Pros
- No more being beholden to their terrible rates and policies
- You set your own pricing and rules
- Patients may still choose to pay out-of-pocket to keep seeing you
Cons
- Disruption for existing patients
- New patients filtered out by being out-of-network
- Higher billing hassles and accounts receivable challenges
This option is highest risk but preserves your independence and sovereignty. Just be prepared for the patient access challenges.
Out-of-Network Option
A more moderate step could be to get an out-of-network option officially attached to their plan. Where you’re not officially in-network, but still get reasonable reimbursement directly from the payer.
This gives you more leverage to set your own rates and rules. But is still generally lower reimbursement than in-network.
Join a Different Network
Another alternative is jumping to a different payer’s network entirely that may offer better rates and terms. This lets you escape a toxic situation.
But make sure you thoroughly evaluate the grass isn’t just as green or worse on the other side. And anticipate major patient disruption during the transition.
Direct Contracting
You could also explore cutting out the bloated payer middleman entirely. And contracting directly with employers or third party groups to provide care for their employee populations.
This direct-to-employer model lets you set fair market pricing without the payer bureaucracy. But requires you taking on more of the administrative burdens typically handled by payers.
Cash Practice Transition
For those truly fed up with the insurance ballgame, you could consider gradually transitioning to a cash-pay practice model. Where you get out of working with any payers at all.
This does require a more affluent patient population able to afford periodic membership fees or pay out-of-pocket each visit. But it eliminates all the payer headaches and reimbursement fights.
Joining a Provider Union
A more novel approach could be strength in numbers by banding together providers into a negotiating union of sorts. This gives you much more leverage than trying to renegotiate payer contracts one practice at a time.
Such unions could represent hundreds of providers across a region, wielding their combined patient volume as leverage. Similar to how labor unions aggregate worker negotiating power to push for better terms.
There are already a few start-ups experimenting with this provider union model. It will be interesting to see if the model gains momentum as a way to equalize the negotiating field.
Get Creative & Stay Persistent
At the end of the day, successfully renegotiating better payer contracts requires creativity, stamina, and a willingness to explore alternatives.
Come prepared with well-researched proposals supported by data. But stay flexible and get creative in finding common ground with the payers on new incentive models or value-based frameworks.
And if they refuse to budge, don’t be afraid to walk away rather than getting stuck in a terrible deal. Have a Plan B identified whether that’s going out-of-network, transitioning models, or finding alternative payer partners.
Healthcare reimbursement is wildly inefficient, which both disciplines and creates opportunities. With some strategic thinking and moxie, you can tilt the playing field more in your favor.
The persistent ones ultimately get the better deals over time. As the old adage goes, “You miss 100% of the shots you don’t take.” So start shooting your shot on these contract re-negotiations!
