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provider contract negotiation importance

The Importance of Provider Contracting and the Risks Associated with It

Managed care plans routinely ask doctors to enlist their networks in order to make sure that their enrollees have enough coverage. Since many patients are covered by managed-care insurance plans, doctors may believe that by refusing to sign a contract, their practice will turn away a large number of potential clients. Effective business model should be the foundation of the choice.

Upon signing a contract with an insurer, there are a number of factors to take into account; this data emphasizes on reimbursements. Each contract negotiation clause must be carefully read before being signed. Contract clauses or phrases that are frequently disregarded at the time of contract signing and could have a long-term negative effect on your practice.


Analysis of Reimbursement Rates

Every CPT code should be compared to the Medicare PFS Locality Rates and the rates charged by other insurers in the area, both individually and collectively. Continuously assess the accuracy of your rates, evaluate your reimbursements, and such.

How Business Modeling Works

Analyze the impact that different reimbursement rates will have on your overall revenue as well as each payer’s CPT code. Execute the pertinent financial analysis required to decide the best course of action for the medical practice.

Inventory and Negotiations

Keep the whole of your payer contract negotiations and associated fee plans in one convenient location. Utilizing the data in your contract inventory, functionalized payer demands, and pitches are automatically prepared and stored in your letterhead.

Payer Evaluation

Create notifications for renegotiations depending on payer contract agreements, make comparisons of reimbursement charges for all insurers instantaneously, verify payer proposals and your contract negotiations, and use offered models to develop and recommend measures to insurers.

What Do the Contract’s Revenue and Expense Requirements Mean?

Identifying your service costs is the initial step. Understanding your expenses will make it easier to decide if an agreement given by an insurer is financially viable for your practice or not. One must have a broad concept of the expenses and other costs associated with managing your practice, despite the fact that this isn’t a simple decision to make. You can lose a lot of money on the agreement if it does not provide compensation above and above your practice costs. Determine the cause of your perceived financial losses on certain contracts before renegotiating (or terminating) them.

What Compensation Do You Receive Under This Contract?

Should the contract give you enough details to figure out how much you’ll be reimbursed for services you render? Does it contain a detailed fee structure? If otherwise, request price rates from the insurer for the (amount) most frequently charged procedures. Additionally, demand that perhaps the payer give you specific details about their payment services. In order to figure out your compensation under the provider contracting, payer reimbursement policies ought to be clear. If they aren’t open with you, this could be a warning sign.

Could the Insurer Unilaterally Change the Terms of Reimbursement?

If yes, does the agreement provide that the payer must notify you of any modifications to your payment? Is there any way to end the contract unless you don’t agree with the modified terms of reimbursement? Unanimous changes must be avoided in the payer contract negotiations, especially when they concern fee structures.

Can You Be “Rented” to Other Organizations (Third-Party Administration) Under the Terms of the Contract?

It refers to “silent PPOs,” in which a doctor enters a discount service charge agreement with an insurer, and the insurer later “starts selling” or “renting” its provider group to a private entity, like a third-party operator, before disclosing this to the physician. Any discounts that the insurer and provider were able to work out benefits the third party. With the insurer, this needs to be explained.

One cannot sign a payer contract negotiation and “set and ignore it” without ongoing evaluation, even how challenging and complicated it can be. You won’t be able to identify that payers are not paying as agreed upon if you don’t keep a tight eye on reimbursements that will cost your practice money. Moreover, your office must regularly examine its bills and reimbursements (at least once a year), particularly after entering into a new contract.

What Does The Insurance Company Pay The Physician And How Is It Set?

Payment schedules for payers are frequently used to compensate physicians. These payment rates specify the compensation a physician will receive for rendering a service. Medicare, Medicaid, and commercial pricing schedules are the three main categories in general.

The commercial pricing structure can be easily negotiated. The least open charge schedules are commercial ones since payers don’t want to give their rivals an unfair edge.

For commercial payment schedule, the relative compensation price in relation to the Medicare pricing structure is often measured as a percentage of Medicare. A “specified” period, such 2020, meaning that the payer fee structure will always be determined on the basis of the 2020 Medicare prices (Evergreen Clause), as opposed to a “current year” period which means that the payer fee schedule will be revised in accordance with the yearly upgrades to the Medicare prices.

The insurer and the provider negotiate the commercial fee schedules. Inside its system of chosen physicians, an insurer will haggle over a pricing structure.

A physician may charge any amount; therefore, payers may pay lesser than the billed price while still permitting the physicians to be paid a percentage they think appropriate. Insurers will often assist in directing more clients (patients) towards the clinic as a covered provider.


Even while fee structures exist, neither insurers nor specific providers must adhere to the same insurer appropriate setting in commercial markets. In reality, fee schedule levels differ significantly within even within markets, ranging from less than 70 percent of total of the Medicare price in some to much more than 300% for certain major practices in others. The difference is caused by the fact that various medical practitioners and practices possess varied bargaining power, which may be related to things like the competition intensity in a certain area and the standing of a particular doctor’s practice.


Payers often account for the majority of practice income, yet most physicians are unaware of the details of their agreements.

We have already seen insurers cut their fee structures by 5% to 12% because of a lack of focus while dealing with medical groups from across nation; this is disastrous to your practice.

However, by controlling, evaluating, trying to renegotiate, and maintaining your payer contracts, you can break lengthy practices of paying little notice to contracts. We prefer a constructive rather than a reactive strategy.


Physician payment schedules will come under further strain as the world of managed care develops. In order to offer appropriate and acceptable compensation for the services rendered, practitioners will wish to enhance or retain fee structures despite ongoing pressure from payers to reduce them.

A medical provider’s primary concern is always making sure they get the most money possible. Yet we frequently discover that several providers are squandering income due to irregular and ineffective payer contract negotiations management.


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