Maximizing Commercial Payer Reimbursement: “Dealbreakers” When Negotiating Payer Contracts

Kathy McCoy, MBA January 31st, 2012

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Be sure to consider these "dealbreakers" when negotiating payer contracts.

When it comes to getting your practice paid, the payer-provider agreement is critical, and providers/practices are wise to protect their interests in contract negotiations. Penny Noyes, founder, president and CEO of Health Business Navigators, offered a number of key considerations when negotiating payer contracts, concentrating on the “dealbreakers,” in her presentation at the recent MGMA annual meeting

Dealbreakers: Know what they are, and be ready to stand firm

Dealbreakers — provisions that are a detriment to practices’ business interests — exist… and not just in first-draft agreements. They commonly end up in finalized agreements, which is why practices must be proactive:

  • Read the agreement.
  • Negotiate the needed changes.
  • Understand the commitments you’re making and identify the dealbreakers.

Also, be prepared to walk away from negotiations over dealbreakers. But be realistic and understand when laws apply and when they don’t. (Do the research as to state laws on timely filing, timely payment, offsets, correction of under- or overpayment.)

Be aware of how laws do and don’t apply

In most markets, 60 to 80 percent of group health plan members covered by provider-payer agreements are in self-funded plans. Self-funded plans are not subject to the same laws that apply to insured plans. So providers could end up with obligations and processes for self-funded plans that differ from how they work with insured plans.   

While state law may specify requirements about timely filing, timely payment, responsibility to pay, etc., these should not be assumed to apply to self-funded plans. These plans are governed generally by states’ labor departments, which have few rules to help providers. Therefore, practices are wise to protect themselves by negotiating specific contract language that will define terms and responsibilities in line with the rules that govern insured plans.

Some payer-contract provisions are just plain bad for your business

There are a lot of potential dealbreakers in payer-contract language these days. Some apply to some practices and not others. Hospital-based practices and clinical practices do things differently and should have different payer agreements. Sleep centers and ambulatory surgery centers have special considerations, as do solo and group practices. But there are dealbreakers that pertain to virtually any practice, including:

•     Reimbursement – For any reimbursement model, make sure to ask the questions about how the model is applied. Insist on clarity and don’t accept vague descriptions (e.g., “industry-accepted”). Beware the absence of language that could lead to payer discretion about reimbursement. Get clarity and concrete commitments. And push for a CF that’s 100% or more of Medicare, which is low enough already.

•     Amendment provisions – Don’t accept language that allows payers to amend your agreement without your written consent. Beware of “except as otherwise indicated herein,” which can mean there is an exception in some other provision that affects amendment of agreement. Your practice may agree to regulatory changes needing 60 to 120 days notice, but with the option to terminate the agreement should the regulatory change render the agreement no longer worthwhile. Also, be sure that notification for amendments is specified clearly and requires delivery receipt.

•     Products or plan types included – Payers should not be free to add any plan to their agreement at any time they please.

•     Timely filing & timely payment – State requirements, again, don’t apply to self-funded plans. For filing, insist on 180 days or the state’s minimum time period (if it’s longer). Do not agree to language that allows self-funded plans to dictate a time period different from the contracted time period. Also, beware of language that may be hidden in other provisions allowing another plan or program to supercede in a conflict with the agreement. And don’t forget to build in language about patients’ ultimate responsibility to pay for services rendered. For self-funded plans, agreements lacking language about timely payment mean there is no timely payment obligation.

•     Hold harmless patient member – Resist language about holding patients harmless. If a self-funded plan goes “belly-up,” the practice should still get paid. Be sure the agreement includes language about the patient’s ultimate responsibility to pay.

•     Contract conflict (Which contract prevails?) – While the negotiated agreement may say something clearly, there are instances where another agreement/contract can prevail. You don’t want these.

•     Term & termination – Don’t accept language that ties termination to the anniversary of the plan. (If you must, accept it only for the first year of the agreement.) Also, don’t accept language that requires very long lead times for written notice. In other words, “at least 180 days prior written notice” is a long time to be stuck, as Noyes put it, “in a bad marriage.”

•     “Medical necessity” – In some agreements, self-funded plans may include “unless otherwise specified by the health benefit plan” in their definition of medical necessity. Eliminate this language. Companies and unions have no standing to define medical necessity. For insured plans, medical necessity is defined by law. This should be the definition for self-funded plans as well.

•     Affiliates & assignments – Make sure affiliates are well-defined, assigns are specified and there is a clear understanding of responsibilities in the event of mergers and acquisitions.  

In future posts, we’ll revisit the topic of payer reimbursement and contracts. What tips and advice do you have for those negotiating payer contracts?

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