Payer contracts don’t manage themselves, and treating them as something you do once and forget about can leave revenue on the table while putting pressure on already-tight margins. Adopting a deliberate, repeatable approach for reviewing and improving your payer contracts is vital for protecting your bottom line.
A great payer contracting strategy separates average practices from high-performing ones. Amid rising costs, you need to stay agile and flexible.
Payer contracting strategies are a critical yet complex aspect of healthcare revenue cycle management. Today’s blog outlines four essential steps for healthcare organizations that wish to streamline their payer contracting processes and maximize reimbursement rates.
For most practices, the vast majority of revenue flows through payer contracts rather than direct patient payment. That’s exactly why you need to know precisely what’s in those contracts.
Your payer contracting strategy will have an outsized impact on your bottom line. It’s up to you to decide whether that impact will be a net positive or a net negative for your business.
And that impact matters more than ever. Providers report needing rate increases of roughly 5%–8% a year just to keep pace with rising costs. However, payer offers typically run closer to 1%–3%. Taking a deliberate, evidence-based approach to your payer contract negotiations is more critical now than it was even a few years ago.
Allowing your contracts to passively renew isn’t a viable strategy. It’s a surefire way to fall behind, and it could happen more quickly than you realize.
You may not have a copy of every payer contract or even know whether you have favorable payer contracts. Collecting contracts is a major roadblock for many healthcare providers.
While it is your contract, with your signature, it can still take a significant amount of time (weeks or months) to obtain after placing a request. Once requested, it can take a diligent follow-up effort (phone call, emails, fax request, payer portals, mail, or direct rep outreach) from you and your team to finally secure the contract.
Thankfully, you no longer have to rely solely on requesting a contract copy and waiting. Under the federal Transparency in Coverage rule, payers are required to publicly publish machine-readable files of their negotiated rates. The rule has been in effect since July 2022.
Start reviewing market rate data to get a sense of where you stand relative to other providers, even before your own contract copy arrives. Pairing this public data with your payer contracts and fee schedules can offer you a more complete picture.
Now that we know how difficult it can be to obtain payer contracts, running a good process for compiling them is key. The following are a few tried and true tips to help you meet your goals:
Running a good process starts by targeting the payers you’d like to contact and defining the scope of how many patients make up your meaningful revenue. Before spending any time trying to contact payers, you’ll want to work to identify your top 5–10 payers first. You can measure this based on your time volume or revenue, recognizing that those payers where a small change might occur at a high volume are going to have a larger impact. You might also prioritize them based on when you are able to make changes (change notification period) or get an amendment to your contract.
You should revisit your prioritization process at least once a year instead of handling it as a one-off.
Patient volume fluctuates, and your payer mix will shift. Payers that made up just 5% of your revenue two years ago may now represent 15%. If you only prioritize once, you could end up expending effort on payers that are no longer as impactful as they once were.
Once you have identified your top payers, it’s time to work to connect with a person directly regarding your contract. Communicating with a live person is critical to creating a relationship with your payer where you can build rapport and trust. In turn, this relationship will result in an allyship once it is time for contract negotiations. The challenge here is that while some payers are good about publishing contact info for provider reps on payer websites/portals, it may require some creativity on your part to access the best person at other payers.
When calling the 800 number for payers with whom you do not yet have a relationship, begin by asking for someone in credentialing, provider enrollment, or network management. These contacts will likely lead to a conversation with someone who can lead you to the most relevant rep to discuss contracts. It may also be helpful to pull up your original contract, if available, and identify who signed it. You can then use this information as a starting point for researching the best contact, including reaching out on LinkedIn, if applicable.
Once you’ve found the right contact, protect the relationship. Payer rep turnover is common, and losing your point of contact can send you back to square one.
Document who you spoke to, what you talked about, and when. Keep a simple running log of payer conversations (even informal ones) so you don’t end up with a hard reset on your rep relationships.
Once you have made contact with a relevant rep, it’s time to build out a project map. Begin by defining the scope and your goals. For instance, you may only want to collect contracts and fee schedules, or you may want to collect contracts while leveraging some negotiation tactics. Whatever the reason to make contact, make sure it is defined.
Next, outline the best channels for communication. All payers are not created equal, and while some like faxes, others prefer phone calls, and some prefer emails to reps. Once communication is established, determine the frequency of follow-up and develop a cadence for contact. Finally, set up tracking and monitoring to keep yourself and the payers accountable. Track a history of exchanges for yourself and to show the payer if they are unresponsive. For additional in-depth exploration of payer contracting strategy, view Rivet’s free payer contracting webinar.
As you build out your project map, resist the urge to lead with a general appeal for better rates. You need to anchor each task or talking point in specific data. You can source this information from public-facing price transparency files, your utilization patterns for high-volume codes, and quality metrics that support your position.
When you make a request backed by hard numbers, it’s much more difficult for a payer rep to deflect. On the other hand, conversations about how a relationship “should” work are unstable ground for a payer contracting strategy.
Attempting to reach payers and obtain contracts can sometimes feel like David vs. Goliath. However, it is important to remember that you have a right to your provider agreement. They are your legally binding contracts, and you need to know the information in your contract to ensure contract compliance. You may even be legally in breach of contract and not even know it. Don’t give up.
Collecting and compiling payer contracts might feel like a daunting undertaking at first, but now is the time to take it on. You have a right to your contracts, and understanding what they contain will lead to more empowered decision-making and added value to your practice.
Before the Hospital Price Transparency and Transparency in Coverage rules took effect, providers were working in the dark. They often accepted what payers offered because there was no easy way to know whether it was fair.
That’s changed. Publicly available rate data has turned what used to be guesswork into something closer to an evidence-based process.
The scale of what this data has revealed is striking. In one market, researchers discovered hospitals negotiating inpatient rates ranging from roughly 221% to 319% of the Medicare fee schedule. The facilities were comparable and in the same city. That’s a huge variance, with one contract leaving a significant amount of money on the table.
Payers publish machine-readable files and update them regularly. Even if your rates looked competitive a year ago, they may have drifted since. With that in mind, make it a habit to pull and review this data periodically.
For example, if you’re going to chat with a payer rep, take a minute to review the data. When you work with the latest and most accurate rates, you can start from the right baseline.
The only way to know which side of the range your practice falls on is through benchmarking. Compare your contracted rates against what’s publicly available to set your benchmark, and download our free e-book “7 Steps to a Successful Payer Contract Negotiation” for more helpful tips on optimizing payer contracts.
Don’t let poor payer contract performance hold back your medical practice. Rivet’s payer contract management software reduces administrative burden and helps medical practices manage and make the best use of payer contracts. Schedule a demo today for more information.
Ask your payer rep for a copy of your contracts. Expect this to take anywhere from a few weeks to several months. Be persistent about following up. While you wait for your contracts, explore the publicly available rate data from payers’ Transparency in Coverage files and begin establishing a baseline.
There’s no set timeline that works for every practice. You should be reviewing your payer contracts at least once a year, but be open to quarterly or bi-annual contract reviews if your revenue cycle is complex. You can open negotiations based on your contract’s change notification period.
A change notification period is a window defined in a contract during which either party can propose changes or amendments. It’s the only time you have real leverage to request an update of the terms, outside of a full contract renegotiation.
Yes. Publicly published rate files allow you to see what payers are paying other providers in your market. That way, you can ditch the guesswork in favor of concrete data.
Even if it’s unintentional, you can be in breach. Payer contracts are legally binding, and “I didn’t know” isn’t a valid excuse for violating the terms of your agreement. Be proactive when reviewing contract language, and make sure you’re in compliance with those terms.
