The start of a new year means that providers face a new wave of reimbursement pressures. To contend with these challenges, they need to have productive, collaborative conversations during payer fee schedule negotiations.
Optimizing payer contracts promotes stronger financial health and better margins. However, providers historically do not have enough information to confidently collaborate with payers to enhance contracts.
In this post, we'll explain payer fee schedule negotiations to help you enhance contracts during your next renewal period.
Payer fee schedules outline reimbursement rates that a health plan agrees to pay a provider for specific services. These rates are typically organized by CPT, HCPCS, or DRG codes.
Each fee schedule is contract-specific and can vary by:
Some of the most important terms you’ll encounter when dealing with payer fee schedules include CPT codes, relative value units, and reimbursement rates.
Payers determine reimbursement for services based on market conditions, network leverage, utilization trends, and Medicare benchmarks. However, there is some variability in these rates, which is where payer fee schedule negotiations come into play.
Some key triggers for payer fee schedule negotiations are:
Before you enter into payer fee schedule negotiations, you need to gather data to support your position. We all want to request higher rates: you are not an exception, even if your costs have gone up or you’ve been a loyal payer partner. You need to justify your query with high-quality insights.
Citing underperforming contracts can be particularly effective during payer fee schedule negotiations. You should also address compliance concerns, such as the need for clear reimbursement rates so that you can adhere to No Surprises Act transparency rules.
Traditional payer contracting strategies leave providers and health systems at a disadvantage. The good news is that you can put yourself in a stronger position by rethinking how you approach payer fee schedule negotiations. Here’s what to do.
Start by reviewing how each payer performs in terms of:
By identifying underperforming contracts early, you set the foundation for effective payer fee schedule negotiations. Focus your efforts on the contracts that demonstrate the most concerning underperformance trends so that you can recapture more revenue and protect your bottom line.
To complete this step effectively, you need quality analytics software that allows you to take in the full picture. Otherwise, you’ll have a tough time narrowing down which contracts are having the biggest impact on revenue.
Benchmarking helps you determine whether reimbursement gaps are normal for the market or if they are specific to a particular contract with them. Accurate comparisons strengthen your position during payer fee schedule negotiations.
The wider the gap, the more conversation points you'll have at the next negotiation discussion. The best strategy may be to target a few specific services as opposed to across-the-board increases. Focus on high-value service lines so that the contract will yield a strong return.
The most effective payer fee schedule negotiations are built around points you can prove with hard data. If you can demonstrate that a payer is persistently underperforming, it’s tough for them to push back against your bid for better rates.
Prioritize the codes that have the biggest influence on your margins. Model how specific changes in payment terms could impact your revenue across the next year. Run the models using a few different sets of terms so that you have a fallback if the payer denies your initial bid.
Payers respond when you can demonstrate value. Use the following data points during negotiations:
While payers are all about the bottom line, they also want to be perceived as fair and patient-friendly. Appeal to this desire during your negotiations.
Once you hammer out the terms, track how those changes impact your revenue cycle. You want to make sure that the changes are implemented correctly as you begin gathering data for the next round of negotiations.
View the on-demand webinar Modeling Revenue Implications for Changing Fee Schedules and Contracts to learn more.
When they’re not prepared, providers and health systems can lose a negotiation before it begins. Here are a few ways that healthcare organizations put themselves at a disadvantage:
To avoid these missteps, start with clean, high-quality data. Dig into all codes, not just those associated with your core service lines. That way, you can unlock hidden revenue and enjoy better leverage during talks with payers.
Most importantly, remember that you are entering into negotiations with a team, so you also need a team (and technology can be that team). They have these conversations every day, so be ready with counterproposals prepared.
Download the ebook A Streamlined Process for Getting Your Contracts and Fee Schedules to learn more.
Rivet’s payer contract management software allows you to visualize payments and contract variances.
Throughout the year, Rivet delivers real-time insights into payer performance to help you identify and address issues well before it’s time for negotiations. Our system also automates contract uploads and fee schedule comparisons so your negotiations team can see the whole picture.
Proactive payer fee schedule negotiations give your organization greater overall revenue and promote long-term, sustainable growth. By using data and benchmarking intelligently, you can turn contract negotiations into a strategic advantage.
Ready to empower your payer contracts? Schedule a demo with Rivet Health.