How to Successfully Negotiate Payer Contracts

Payer contract negotiation is a complex and often stressful process, but it is extremely necessary to ensure maximization of revenue for providers. Most healthcare practices leave the task of contract negotiation to their practice manager or administrator. However even managers with a number of years of experience running the practice may not realize that their practice has more bargaining power than assumed.

Knowing when contracts renew and when payers require notification from providers for negotiation is a significant first step to successfully negotiating payer contracts. It is critical to review contracts and make note of important dates so that they are not missed. Although it sounds simple, when a provider or facility has a large number of contracts in place, renewal dates can be easily overlooked. One important part of keeping up with these dates is knowing where payer contracts are saved so that they are easily accessible for review. Without having the contract readily available, one won’t know when to take action for negotiation.

Secondly, it is important to perform a payer reimbursement analysis on the key services offered or the higher frequency CPT codes used by your practice. One should calculate the revenue generated from the specific CPT codes and compare that to the practice cost inclusive of physician reimbursement and overhead costs. Identifyingpayers who paylower than contracted amounts for specific CPT codes is also a good way to find out where revenue is being lost. This will give you a better understanding of the payer contracts that need to be reviewed and potentially negotiated with the range of reimbursement expected to generate profit.

Thirdly, it is imperative to closely review the contract language and terms, especially the evergreen clauses. These clauses make the contract renew automatically unless a termination notice is given in advance of the term end. You should always try to negotiate a clause that allows termination of contract with a 90-day notice period to avoid being in a losing situation.

Another situation that can cause loss of revenue is retroactive denials resulting in demands for refunds on claims, including those that are several years old. It’s important to make sure that there is wording in the contract that prohibits automatically withdrawing payments older than 120 days unless there is a problem within the claim itself.