How to Manage the Upsides & Downsides of Payor Contracts

Payor contracts can make or break a healthcare provider’s operation regardless of size. Understanding the fundamentals, the pitfalls, and where you can leverage upsides can ultimately mean more revenues and less risk to your bottom line.

What is in the contract?

Contracts lay out the terms and conditions for the payor to pay the practice for medically necessary services that the health plan provides to its members. That contract also lays out the responsibilities of the practice in terms of seeking reimbursement, which include:

• Reimbursement rate – how much the health plan will pay for your services
• Filing deadlines – the amount of time you have to file the medical bill after seeing the patient
• Payment deadlines – the amount of time the payor has to pay you after receiving a “clean claim” (a claim that has been submitted without any coding or demographic errors)
• Dispute resolution – procedures on how the practice and payor will resolve a disputed claim
• Notice to renegotiate – the period of time for you to inform the payor in writing of your intent to negotiate terms of your contract
• Notice to terminate – terms of how either party may terminate the contract
• Term – how long the contract is in force

Payor contracts are an important part of your practice’s
financial health and should be managed carefully.
Effective revenue cycle solutions require reviewing,
renewing, and renegotiating contracts every year.

Read the contract

Be sure you have all payor contracts in one location and review them to understand all of the terms and conditions. Make sure you understand your obligations in order to maximize your payor reimbursements. Take particular note of the following:

• What physician fee schedule the payor is using
• How the fee schedule is calculated
• How updates to the fee schedule are communicated
• Charges for referring patients out of network
• Fines for terminating the contract early

Consider negotiating before signing

Negotiating contract terms can be challenging, especially if you are locked into long notice periods. It is often easier to negotiate a new contract before signing than renegotiating later. Once you’ve reviewed the contract, prepare a formal request to the payor listing changes you’d like to see in the contract and provide any supporting documentation. Don’t be afraid to say “No” if the contract does not make financial sense for your organization.

Payor contracts are an important part of your practice’s financial health and should be managed carefully. Effective revenue cycle solutions require reviewing, renewing, and renegotiating contracts every year. As part of that yearly review, also update your fee schedules in your practice solutions system so you can monitor if the payor is living up to their promises.