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What Must be Done for Successful Payer Contract Negotiations?

The need for payer negotiations

In most cases, practices leave the contract negotiation in the hands of their medical director or manager. Even with hands-on experience with several payers for a number of years, they might not be aware of the bargaining power that they possess. The insurance payers are responsible to the stakeholders, contracted vendors (medical practices), and customers (patients). For better reimbursement rates, reduced denials, and improved contractual agreements, it is important to understand the need for successful contract negotiations.

What to understand before speaking with a payer’s representative

Firstly, practices must identify payers with whom they have reimbursement issues by analyzing the top CPT codes billed, and comparing the insurance reimbursement rates of all the payers. Consider this estimation as a utilization report from where all the inequalities can be detected through perfectly structured data.

Enter the frequency of the most commonly used CPT codes on a spreadsheet along with the number of times that specific code was billed to the corresponding payer and then multiply it with the existing reimbursement charge. Determine the break-even point by adding the provider reimbursement cost and overhead cost with the frequency of the codes billed and paid by the payer. Compare the result with the weighted average reimbursement rates. By doing this, practices can have more understanding of which payer contract requires attention and also identify payer organizations who are causing financial burdens.

Once the solid figures are drawn from the calculation, practices can use this to back up their negotiations by setting out the right range between the optimum and minimum target goals. The minimum range exhibits the bottom line rate that must be met and the optimum level reflects the ideal levels of the negotiation end. With this, practices can negotiate the ideal reimbursement rate with the payers for unsatisfactory deals.

Practices should always look out for any “evergreen” clauses in the payer contracts that renew only at the end of the year unless a termination notice is delivered before the contract renewal period. If the contract is new or a payer with whom the practice had reimbursement difficulties in the past, it is important to mention the out period to the contract (like 90 days). This way practices will be free from sticking to bad payer contracting.

Some payers often reject claims retroactively and then demand reimbursements, even for claims that are a few years old. The contract must contain language that forbids automatically withholding payments that are more than 120 days old unless there is a difficulty with the claim itself.

However, all these calculations, estimations, and comparisons could be a burden for practices, and for that very reason, it is best to choose a contract negotiation partner like Practolytics. That way, they can focus on what is more important- Patient Care.

Other aspects to be considered:

  • What do the payers mean by “covered services” and “medical necessity”?
  • Are the payer’s requirements for timely submission prudent?
  • Where and through whom must auxiliary services be supplied if used?
  • How is the utilization of the most-used modifiers defined (and compensated)?
  • What payment policies and pricing schedules do they employ?

Value-based reimbursement Vs. fee-for-service contracts in payer agreements

Without discussing the role that value-based services are beginning to have in reimbursements and contract renewals, no understanding of payer contract negotiations would indeed be accurate. The transition from fee-for-service (FFS) to value-based care is being largely influenced by MACRA laws, which also apply to coding and invoicing. Value-based reimbursement will be the new normal, so it is always best to slowly include value-based components in the fee-for-service contracts.

Chronic care management (CCM) and transition care management (TCM) are two examples of Medicare codes that no longer need in-person visits for care received outside of the office but still generate income. Additionally, practices must make sure that the contract reflects these coding and payment modifications.

Bonus tips for Successful Payer Contracting

Review all existing and proposed contracts with the assistance of an attorney with experience in medical provider/payer contract negotiations. Practices and the partner service provider should be aware of the contract’s conditions, rates of reimbursement, and expiration dates.

Know the regulations of the serving state: Regardless of who pays what for reimbursement, states have the right to govern how you conduct business. The services that may be covered, the filing deadlines, the amount of reimbursement, and other provisions may be impacted by state laws. The practicing attorney should be able to describe the connections between local, state, and federal laws as well as how they affect the practice.

Before meeting with payers, conduct a “SWOT” study of the practice utilizing information highlighting its strengths, weaknesses, opportunities, and potential threats. A practice’s strength, for instance, can be its capacity to spot and fix revenue cycle breaches without sacrificing patient care quality. The requirement to analyze the charge schedule, which is typically a percentage of Medicare’s fees, may be a drawback. Increased reimbursement rates might result from a thorough study of the practice’s costs, spending, forecasting, and cost management.

Review contracts well in advance of the renewal date so that the practices have time to inform the business of any modifications or cancellations. For instance, the Medical Group Management Association (MGMA) advises asking for a smaller annual rate hike of 2 to 3 percent rather than a larger one at once.

Know the market share: If the practice is the only one in the region performing a certain service and they receive good patient feedback, you will have more negotiating power and a better chance of getting higher payment rates. Patient satisfaction surveys can be used for the same purposes in more new practices.

Working with a reputable third-party billing firm can help your rate and term discussions by giving you a history of clear, reimbursable claims that satisfy all CMS and private payer requirements.

With access to cutting-edge revenue management technology, Practolytics’ skilled staff has successfully worked with a wide range of payers. Reach out to us at [email protected] or +(678) 940-8115 so that we can assist you with your contract negotiation needs.


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