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Assessing the Payer Landscape when Negotiating Payer Contracts

This is an excerpt from our webinar “Unlocking Revenue Through Contract Negotiations”, part of Rivet’s Revenue Cycle Webinar Series. Watch the webinar on demand here.

During this unique time where your practice may be experiencing decreased patient volume, it might be helpful to look for opportunities to generate revenue. One of those areas might be to compile contracts (see our article on successfully compiling contracts here), and another might be negotiating those contracts. 

Prior to entering into negotiations with your payers, it’s important to assess the two components of the payer landscape: internal vs. external (payer facing). This evaluation will help you determine the readiness of your practice as well as the payer’s readiness. To accomplish this, we’ll start by looking internally and determine the steps you should go through to ensure you are ready to begin negotiations. 

Determine Your Internal Readiness 

1. Who will be handling point on the negotiations?

When deciding who will be handling negotiations (i.e. you/someone from your team), it’s important to choose someone who has a track record of consistent follow up. You’ll also want someone who is comfortable speaking to payers/payer reps and who is not willing to take an initial “no” for an answer, since the payer’s first inclination is generally to say “no”. 

2. Who are your payer reps?

Prior to beginning negotiations you will want to make sure you have identified the right contact at the payer and that you have worked to develop a relationship and rapport with them. It is critical that you work with a dedicated individual so that you can hold them accountable. 

3. What are your internal goals?

Do not enter the negotiation unless you know what you want to accomplish. (i.e. change baselines, add scope of services, etc.) 

4. How do you define a successful outcome?

Work to determine a specific % increase with the cost to negotiate in mind. Make sure the time invested will pay positive dividends.

5. What do you really know about your practice?

Have a good grasp on what your practice does, as well as your strengths and weaknesses. Knowing what you bring to the table will be an asset when communicating with the payer. 

Determine Your Payer Readiness

The biggest element that will indicate whether a payer is in a good position to negotiate is timing. Payers have specific windows (change notification period) where you can make changes or terminate your contract. As a result, it’s crucial that you know when you can actually make changes to your contract and when you should take action. You should also determine: 

  • How old is your contract? 
  • Do you have your current contract? Work to obtain a physical copy. This will be helpful for knowing current clauses and timing. 
  • When are you able to make changes to your contract? Be sure you know the dates. 
  • How old are the components of the fee schedules? For example, are they based on 2009 CMS rates? 
  • What are common market baselines for comparison? This can be a tricky data component to compile. Here are two possible ways to do it: 
    1. Compare your internal fee schedules to determine what is good/bad. 
    2. Compare common payers against CMS. 

Preparing Models and Proposals 

It may feel a bit intimidating to enter into negotiations. However, by preparing your proposal ahead of time, you can better ensure your success. Here are our tips for putting together a strong negotiation: 

1. Get All Current Information:

Begin by defining who you will negotiate with ahead of time and work to gather the necessary information to help you understand what you are currently getting paid. The preferred way to do this is by getting an original copy of the fee schedule from the payer, keeping in mind that this can take up to 30 days to obtain from calling/portals/etc. You can also gather this information by looking at claims history. The downside with this mBethod is that there are adjustments, depending on modifiers and multiple procedures, that could impact your allowables from claims. However, if you don’t have the ability to access payer portals this is a good first-pass at obtaining allowables.

2. Gather Supporting Data:

Gather the payer, plan/product, date of service, POS, CPT/HCPC, modifier, and volume so that you can accurately allocate usage of CPT codes. Then, pull a fee schedule that has a list of CPT codes or HCPC codes and rates, and allocate your volume to that specific CPT code. From this information you can build out a dynamic model that will give you revenue feedback to see where you might be able to increase percentages. This allows you to apply volume, at the specific CPT code level, to understand how changes would impact your revenue. 

In addition to modeling, it is critical that you know your value. Are you rated as a good provider? Do you have positive reviews? Gather any formal feedback or qualitative data around your patient experience so you can communicate your value back to the payer. 

3. Revenue Impact Analysis:

There are three components to every good financial model. First, is it accurate? Does the model produce correct values and are the codes grouped correctly? Next, is it automated? Does revenue impact dynamically shift based on inputs? Lastly, is it actionable? Does the model give you valuable insight that shows you what needs to be addressed?

4. Qualitative Assessment:

No one knows your practice better than your team, and payers won’t generally have a good understanding of the success of your practice. To help your payer understand your value, it may be helpful to go through a brief questionnaire with your team to determine real ways your practice is improving the network for patients. Possible areas to consider are: 

    1. Availability of care and accessibility 
    2. Internal operations
    3. Unique procedures/unique methods
    4. Quality and outcomes
    5. Credentials/board certifications
    6. Network cost containment

Your chances for success when negotiating with payers will only increase as you focus on preparation. By investing time in gathering pertinent information, building a strong model and identifying your value to the payer, you can expect a positive outcome when you begin negotiations.  

For more resources on negotiating payer contracts:
Watch the full webinar
Article: Running a Good Process when Negotiating with Payers