Payor Contracting Renegotiation Tips

Payor Contracting Renegotiation Tips – September 26, 2019

By Courtney Stevenson

Renegotiating payor contracts is important but is a practice often put off by busy administrators and practice managers. Many practices don’t renegotiate as often as they should because it can be a timely and complicated process. However, contract renegotiations are crucial to the future success of your organization to ensure accurate and fair reimbursement for the services provided.

Prior to beginning the negotiation process, whether you are handling the negotiations yourself or working with a consultant, it is essential there is a good understanding of the current market. How saturated is the market with your specialty? Do you offer a service or product that is unique to your competitors? It is important to be realistic when developing your strategy, what your financial end goal will be, and whether the services you provide hold any sort of leverage.

Many payors will not proactively outreach to renegotiate. When it comes time to review current agreements, practices often find that contracts are based on fairly old RVU years, and depending on what conversion factor is reimbursed, payors are more often than not reaping the rewards of lower reimbursement. Data plays a huge role in the contract negotiation process and is essential to understanding how your practice is currently being reimbursed. And while there is the ever-present need to reduce healthcare costs, providers still need to be fairly reimbursed for the services they are providing.

When it comes time to engage in negotiations, payors will model your claims data and it is important that you do as well, so that you understand how much additional money your organization will potentially earn (or not). If the payor proposes first, do not accept the first offer. Do your due diligence to ensure your counteroffer is realistic and will positively benefit your organization.

If the payor expects the first proposal to come from you, one such negotiation tactic is to propose a higher rate than your real desired rate. Often the payor won’t accept the initial proposal but will counter, which may result in a range in which there is a potential agreement with the payor and the opportunity to meet in the middle. This type of tactic is commonly known as “bracketing.”

As you develop your pitch and strategy, keep in mind the following:

• Review the top CPT codes billed and current reimbursement compared to your costs. Are you making or losing money?
• What are the lowest acceptance rates your organization will accept?
• What has previously been a sticking point with the payor?
• Are there administrative burdens that would be worth discussing if the desired rates are not mutually agreed upon?
• Review your payor mix to understand how important a certain payor is to your organization.

As with most things in life, if you don’t ask, you’ll never get it. Payors are more willing to work with you than you think, so be creative, yet realistic, for what you are asking. Do your research ahead of time and be firm on your non-negotiables.