How to Negotiate Physician Payer Contracts

July 12, 2022 by Antonio Arias, MBA, CHBME

Topics: Medical Billing, Practice Management

Ask any healthcare provider about some of their biggest gripes, and — without fail — insurance reimbursement will be somewhere at the top of the list. Issues often arise for a myriad of reasons, including incorrect patient information, errors in medical codes, or coverage that was denied for a seemingly arbitrary reason by someone with no credentials to make decisions about what would be adequate treatment. 

Despite this unfortunate reality, the fact remains that healthcare costs in the United States are exorbitant, and most people would not be able to afford them. So medical practices are faced with entering into payer contracts. But what, exactly, do these agreements entail? And what should you keep in mind when considering whether a contract is right for your practice? 

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What Is a Physician Payer Contract? 

The “payer” in a physician payer contract is the entity that is supposed to pay for medical services rendered. This can include: 

It is also possible to enter into these types of agreements with a third-party administrator. 

Factors to Keep in Mind When Evaluating a Payer Contract

Each payor has different processes for reimbursing physicians. Typically, these include coverage eligibility, varying timeframes to submit a claim, whether there’s a deductible, the types of services rendered, and fee schedules, among others. Therefore, it’s crucial to look at the small print and keep several things in mind as you choose whom to do business with. 

Network Requirements

Payors will have a list of requirements for a physician to be included within their network. This includes things such as licenses, continuing education, regulatory compliance, quality of care, having at least one full-time physician, emergency care, etc… Healthcare providers should look at all requirements, whether they are able to continuously maintain all of them, and whether the payer agreement includes language stating that these terms can be changed unilaterally and with no prior notice. 

Definition of Medical Necessity

A healthcare payor will only reimburse costs of medical procedures that are medically necessary. The problem is that what one physician may deem as necessary may be different from what the payor considers necessary. By the same token, it’s possible that a payor will agree to reimburse your practice for a specific service, but up to a limit, or up to a number of times the services are rendered. Make sure you’re both on the same page prior to agreeing to a contract — and that the agreement includes detailed definitions of what is considered a necessity. 

Fee Schedule

Different payers are willing to pay a specific amount for services. If you’re dealing with a government program, these are standard and that’s what you will receive. However, private insurance companies often negotiate rates. Pay close attention to their fee schedule, as well as other relevant factors, such as whether this varies by geographical location. 

How to Negotiate Physician Payer Contracts

Physician payer contracts are drafted by attorneys who are looking out for the best interest of the payer. Therefore, it’s crucial for healthcare providers to incorporate language that protects them as well. While this will vary depending on each practice, there are certain elements that should be considered across the board, including: 

Changes Should Always Be in Writing

Be wary of entities that explicitly tell you they can modify the terms of an agreement whenever they feel like it. This defeats the purpose of having a contract in the first place. In the alternative, your practice should be notified within a specific time frame before the change takes into effect and given the option to opt out of the contract. 

Include Language Regarding Unlisted Codes

Medical codes ensure that there’s uniform documentation of diagnosis and treatment. Using the correct codes ensures proper billing and a recurring stream of revenue for the medical practice. If you offer services that are not included in a payer agreement, look into whether you can include codes for unlisted services. Then verify the value of procedures that accurately represent the unlisted codes. 

Take a Close Look at Code Rates

Speaking of codes, take some time to research your available options and what the current rate is for each of the procedures and services your practice regularly renders. It is entirely possible that a payor agreement establishes a rate that’s lower than what you’re currently receiving. If you notice such a discrepancy, request a rate that would keep your practice profitable or look for another option. 

Consider Hiring a Consulting Firm

There are many variables and nuances when it comes to contracts — especially those within the healthcare industry. Hiring experts who are well-versed in industry practices will ensure that your interests are protected. These professionals also stay updated on current rates and any reimbursement challenges and trends you should be aware of when entering into a new contract.

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