3 Tips to Negotiate Healthcare Payer Contracts Like A Pro

How well do you know your payer contracts? Understanding their terms and requirements are crucial to maximum reimbursement, but that’s no easy task. Confusing legal language and lengthy agreements are more than enough to cause discomfort and even reluctance to really delve deep into what each contract entails. However, you don’t have to be a lawyer to successfully manage your payer contracts. Here are a few tips that will help you negotiate your payer contracts in healthcare like a pro, in ways that will ensure that you’re operating a smooth revenue cycle.
  • Know your terms
  • Monitor changes with reporting
  • Create a payer matrix
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Know Your Terms

Medical Necessity - Your payers will only reimburse you for services they deem medically necessary to the patient. The definition can vary by payer. For example, for Medicare and Medicaid, the National Coverage Determinations and Local Coverage Determinations limit how often a provider can deliver a medically necessary service within a certain period. It’s important to know each of your payers’ definitions because billing for a service that is deemed medically unnecessary can result in fraud.

"Lesser of" - This phrase helps payers ensure that they can reimburse at a rate that’s favorable to them. According to an article by MGMA, this type of language could mean that you’re shooting yourself in the foot in terms of reimbursement. A contract may call for a lesser contract rate, a certain percent of billed charges or a determined percentage of a state fee schedule. If a proposed agreement includes this language, verify your state schedules against an existing contract rate and that your chargemaster is set high enough above the contract rates to ensure enough reimbursement.

Termination Provisions - Understanding the termination information in payer contracts in healthcare will ensure that you’re not wasting resources on contracts that aren’t beneficial to your organization. The contract’s period, under what circumstances you or the payer can terminate, and termination duties should all be very clearly defined. Sometimes, a contract’s period will renew unless one party initiates termination or takes some other action. It’s important to be aware of termination language and receive regular updates on provisions so that it stays on your radar.

Network Requirements - These will become more and more important as healthcare shifts towards value-based care. There is always language in contracts that states the credentialing criteria needed to join a network, but some contracts include language that allows payers to pick and choose physicians within an organization for the network. Be sure to specify whether this is the case in your current or future contracts. Network changes should be tied to credentialing criteria only.

Fee Schedule - Your fee schedule determines how much your organization is paid for services and allows your front office billing staff to calculate co-insurance and deductibles for patients who are paying at time-of-service. It will also help determine whether your payers are paying you at the agreed upon rate and if you’re charging enough for services. If a payer always pays the claim in full, consider raising your rates. Physician’s Practice encourages charging 20-30% more than your payer’s reimbursement rate. We will go into more detail on how to better track your fee schedule in the reporting section of this post.

Dispute Resolution - In the event of a claim denial or dispute, the dispute resolution policies in a contract outline how you should resolve the claim to recoup the revenue owed. According to the American Medical Association (AMA), providers should forego any language in a contract that legally binds providers to a specific dispute resolution process. The industry group goes into more detail: “Often the aggrieved party may need the leverage of litigation to get to a resolution of a dispute,” the group states. “In contractual disagreements between physicians and payers, the aggrieved party is often the physician, and the absence of language stating that these provisions are binding may give some wiggle room for this leverage. This isn’t the place, therefore, to argue for hardnosed language.”

Monitor Changes with Reporting

The easiest way to manage your payer contracts in healthcare and keep tabs on who’s paying what is through reporting. Whether your organization has its own reporting, or if you’re a practice that outsources to a billing company, consider these reports that many RCM leaders use to track their reimbursement rates. If you’re not tracking these metrics or unsure if they’re available to you, consult your software vendor or billing company for more information. Your payers will have their own metrics to negotiate contracts, you should too.

Charge Period Revenue Analysis - How long does it take to collect on charges? This report will show you if there are issues getting paid and whether you should reconsider payer contracts.

Cash Flow Predictions - This will show how payers have paid you in the past and how you can expect to be paid in the future.

Profile Exceptions - This helps you track if payers are paying you on the agreed upon rate, and whether you should reconsider contracts.

Procedure Reimbursement - Are your payers paying you at the same rate, a better rate, or worse compared to last year? This dashboard will help you determine if you should negotiate with payers in the future.

Receiving these reports on a daily, weekly or monthly basis will improve your ability to monitor payers and quickly respond to changes in a timely manner.

Create a Payer Matrix

Without a comprehensive list of your payer information readily available, it will be incredibly difficult to keep track of how you’re being paid. A payer matrix is a resource that holds all the key information you need from each contract – Reimbursement rates, billing guidelines, insurance verifications, contact information, etc. This tool acts as a database for the billing team to understand each contract and can serve as the foundation of your reporting. It’s also a very powerful tool for onboarding and training new employees. Here are a few steps you can take to start creating your payer matrix:

Create the outline
Consider the following sections as a starting point for your payer matrix:
  • Basic need-to-know information - Health plan names, types (Medicare, Medicaid, etc.), contracting representative, etc.
  • Areas of concern - What are your payers' medical necessity definitions? What are their definitions of clean claims?
  • Important dates and times - Effective date of contract, length of contract, termination dates, etc.
  • Deadlines - Timely filling deadlines, amendment provisions (including period in which the provider can respond), underpayment and overpayment recovery deadlines, etc.
  • Practice volume percentage
  • Preauthorization requirements
    Organize your data

    The most common platforms used to create payer matrixes are Excel and Access. Some providers invest in documentation management software. Consider how many employees will have access to the matrix and how many people may view it at the same time. Functionality of your matrix will be increasingly important as you give more employees access. Be sure to edit privacy settings and password protect the matrix if need be, so that no unauthorized changes are made.

    Documentation, distribution and training

    Before distributing your matrix, develop documentation on how to view, use and request edits to the payer matrix. This will be helpful when onboarding new employees and when updates need to be made. There is a myriad of reasons the matrix will need updating on a regular basis, so it’s important that employees with access and permission to edit the matrix have a defined process to follow to ensure information accuracy. Store the matrix in a centralized location for easy accessibility and develop short training sessions for new and current employees to stay abreast of what processes should be followed to use the matrix.

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