Negotiating Payer Contracts

Posted by Practice Management Institute on Nov 6, 2018 4:51:29 PM
Practice Management Institute

Contract review is a delicate dance but doing your homework and negotiating for a better deal helps to achieve a better outcome, says healthcare attorney, Heidi Kocher.


Is the contract a good fit for your practice?

Many factors can play a part in your analysis. When evaluating contracts, it is important to read and understand contract provisions and consider things like patient-payer mix and contract arrangement benefits and drawbacks for your specialty.


How can we position strengths that can yield a better deal?

It’s a good idea to highlight strengths in terms of cost-reduction strategies. Look at your fee schedule. Evaluate what you can bring to the payer, such as good patient satisfaction scores and good quality outcomes data, and use these to make your case.


How should we address weaknesses?

Family practices tend to be a commodity, and a solo physician has a smaller patient base which may place you in a lower category as compared to a group. Poor or no patient satisfaction data also creates a deficit.

A good angle to address weaknesses is to find a way to differentiate your practice from others and improve the value-proposition to the carrier. Start by reviewing your fee schedule and do a benchmarking study to see where you are in relation to other practices. Take your top 25 CPT® codes and compare them across the top 10 payers so you know which contracts you want to negotiate with and which you want to drop. Compare payers to the Medicare fee schedule which serves as a benchmark because they are available to everyone. Data from trade groups like MGMA are also helpful.

Is your reimbursement a fixed dollar amount or is it based on a percentage of a benchmark?  A fixed dollar reimbursement will not increase over time. Can the practice change the fee schedule? If so, how much notice does the plan require? If renewing a contract, be sure to analyze the write-offs.


What is the best way to approach a payer for negotiation of a contract?

 I advise my clients to avoid taking an adversarial position. Make sure there are no unresolved billing issues going into negotiations and do not be combative as this can impede the process.

If you plan to terminate a contract, make sure you do so within the notice guidelines stated in the contract; usually 80-120 days before expiration. If you decide not to renew, make sure there's a plan in place to notify patients on a timely basis. Failure to renew on the short-term can cause problems such as a medical board action.

Contracts are not an area of practice management where you should be flying blind. A contract is a documented agreement between two or more parties that creates an obligation among the parties to do or not do things or related actions. A verbal agreement or one that is written simply is not the same as drafting a solid, enforceable contract that protects you and your business.

As a business grows, contracts become more important. Whether you are exchanging money or entering into a partnership, contracts are legally binding agreements. The practice's contracts and operational documents are key components that contribute to determining its success.


What other things should we consider?

When drawing up a contract, work with an attorney experienced in health care law who understands how provisions work to ensure that the contract is prepared correctly.

Remember that the more financial obligation is involved, the more important it is to have written, legally enforceable contracts that cover elements such as offer, acceptance, and consideration.

Do not knowingly breach a contract unless you consult with an attorney about the risks of such a breach.

When a contract is broken, a remedy can be monetary or an injunction such as when someone is using your image improperly and has not paid you for the right.

Lawsuits happen when both parties are in disagreement or in default of an agreement. Whether an agreement is verbal or written, they can be legally binding.


Kocher provides guidance for payer contracts and many other types of contracts relevant to a medical practice in her webinar, Contract Law for the Medical Practice Manager, recorded earlier this year and available on demand in PMI’s Online Training Center. The course is a must for anyone responsible for handling contracts in a medical office. Content includes employment contracts, sales, service and distribution contracts, confidentiality, non-compete contracts, real estate contracts, partnerships, and more.

The information contained in this article is intended for educational purpose only. It is not legal advice. If you have specific legal questions about a particular situation, you should discuss them with a licensed attorney.

 Heidi Kocher, JD, MBA, CHC, is a partner with Liles Parker, a DC-based Law Firm primarily representing healthcare providers and suppliers nationwide in Medicare, Medicaid and private payer audits, investigations and revocation actions.  She works with large and small provider offices on a variety of healthcare regulatory, compliance, and privacy matters. Her specialties include fraud and abuse, anti-kickback statute, Medicare reimbursement issues, AdvaMed, privacy, and Corporate Integrity Agreements. Call 202-298-8750 for a free Initial consultation.

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