How hard are your managed care contracts working for you? Could payer contracting even be working against you? Payer reimbursements are the foundation of your practice revenue, but unfavorable contract terms can cost you thousands of dollars. Many providers find payer contract negotiation — or renegotiation — to be a complex and even uncomfortable task, so many of these unfavorable terms slip in to contracts under the radar.

Every payer is a little different, but the contracting process and the language included in contract documents is fairly consistent across the board. Below, you’ll find valuable payer contract negotiation tips out how to combat some of payers’ best-kept secrets for tilting contracts in their favor. These contractual responsibilities will negatively impact your practice, so you must identify and fix them BEFORE you sign the contract.

Payer Contracting Negotiation Tips:

Tip 1: Think Before You Accept a “Percentage of Medicare” Rate
Be careful if a payer proposes reimbursing you, for example, at an average of 160 percent of Medicare. It sounds good, but they are likely quoting from across your fee schedule of 500 codes or more.

When you examine the codes you’re reporting most frequently, you may find that these specific services and procedures are paid at only 90 percent of Medicare. You must examine the codes that drive your practice’s income to have a clear picture of how the contract will affect your practice’s overall revenue.

Tip 2: Make Sure Your Billed Charges Are Higher Than Your Contracted Charges
Payer contracts often include a clause allowing them to pay the lesser of your billed or contracted charge. So if you’re billing patients at a lower rate than you’ve contracted with your payer, the payer can choose to pay the lower billed charge rather than the one they’ve contracted with you to pay. This could significantly undermine your income forecasting.

Tip 3: Be Alert to the Burden of Timeframes
During the payer contract negotiation process, some contracts impose a 30-day filing limitation, meaning you must file claims within 30 days of the service. Failure to file within this time can result in withheld payments. This strict limitation can be challenging, especially under circumstances where your practice is understaffed.

If it’s not possible to completely avoid this type of limitation, negotiate for a clause that excuses late filings during special situations such as personnel changes.

Some payers include a time limit on your ability to file for appeals. Under this provision, it’s common for your practice to be given 30 days or fewer to identify claims processing errors and report them to the payer for correction and payment. Again, this limitation places an undue burden on your practice that could result in nonpayment of provided services.

Tip 4: Carefully Review and Analyze Any Hold Harmless Clause
Also called an indemnification clause, a hold harmless clause is a common contract provision. It states that one or both parties agree not to hold the other party responsible for financial or legal liability.

A payer frequently uses this type of clause to shift financial liability from itself to your practice.

It can significantly increase your level of liability under the contract and lead to substantial financial losses for your practice.

Negotiate for a mutual clause where you and the payer share any liability. Point out the inequities of a one-sided agreement and assert that a reciprocal clause more fairly represents the interests of both parties.

Tip 5: Check the Arbitration Clause for Booby Traps
An arbitration clause requires your practice to pursue any and all contract disputes through arbitration — a method of settling disagreements outside of court. Carefully review these clauses, because they often benefit the payer. Here’s how:

Don’t let the payer have sole discretion in choosing an arbitrator. You want to be confident that the decision-maker is impartial. Instead, negotiate to add verbiage to your contract that allows you to use a professional arbitration organization like the American Arbitration Association.
Pay attention to any required geographic location for the arbitration. You do not want the burden of traveling long distances when trying to resolve a dispute.
Arbitration proceedings can limit the legal options available to your practice. Look for this type of limiting language in the arbitration section of your contract, and don’t be afraid to negotiate with the payer to achieve terms that are more equitable for your practice.

Tip 6: Beware the “Evergreen Clause”
Your payer contract may also include an evergreen clause that allows the payer to automatically renew your contract at the end of each term. Review this clause in detail and take specific note of the requirements for ending the contract.

This type of clause can trap you in a contract that negatively impacts your practice and profitability, especially as the rates outlined in the fee schedule age without being adjusted. The payer relies on your ignorance of its contract and evergreen clause to continuously renew the agreement year after year.

By removing the clause, you ensure a set time to consider contract renewal and renegotiate the terms.

Tip 7: Pay Attention to Restrictive Credentialing and Licensure Requirements
Many payer contracts state that ANY clinician’s loss of licensure immediately terminates the entire practice’s agreement. You should definitely negotiate this provision.

If your practice includes eight clinicians and one loses licensure, you still have seven practitioners in good standing who can continue to provide services under the contract. Your contract should adequately reflect your practitioners’ ongoing ability to continuously perform under the agreement.

Payers commonly require you to notify them regarding any investigations or situations that could lead to a loss of any clinician’s licensure.

Be careful with this type of provision. Providing information prior to any official determination or indication of wrongdoing places your practice at risk of losing a payer without justification. Therefore, you should negotiate to remove this provision from the agreement.

Tip 8: Beware of These Payer Contracting Negotiation Tactics
Negotiators often ask hypothetical questions to gain some insight into your state of mind. These questions are not actual offers, and you are under no obligation to answer them. Reserve your responses for genuine contract offers.

Also, uncomfortable silence is common during the negotiation process. Don’t cave in to discomfort—the payer is counting on you to offer premature compromises.

Tip 9: Prevent Termination Uncertainty
Most payer contracts allow you to terminate the agreement either “for cause” or “without cause:”

“For cause” generally means a breach of the contract’s material terms. Example: If the payer fails to provide timely reimbursement, this may be a breach of contract that allows you to terminate with cause.
“Without cause” means terminating the contract even if there is no breach or wrongdoing. Example: If your practice decides that the payer is not a good fit, you may terminate the contract without cause.

The problem? You and the payer may not agree on what constitutes “cause.” Insist that the payer include specific examples of actions leading to termination. You should also negotiate for an opportunity to fix the perceived breach before the payer can terminate the contract.

A payer may also terminate your contract when you make changes in your practice that don’t fit into the payer’s plan (unless your contract states otherwise. For example:

You add a service location or county
You add a provider
You get a new Tax ID
You expand by adding services (i.e. Pharmacy, DMEs, additional specialties, etc.)
Your practice has a change in ownership

If you’re planning any upcoming changes (and even if not), you should ensure the contact won’t restrict you from making those changes and staying within the payer network.

Tip 10: Avoid Post-Termination Liability with Payer Contract Negotiation
Generally, once terminated, payer contracts require you to continue providing services for members until they are reassigned to a new provider.

In addition, you may also have a legal duty to properly transition patient care, which often includes follow-up treatment and completing outstanding medical records.

Consequently, you must negotiate a post-termination reimbursement period that allows you to complete these tasks, because failure to do so can result in medical malpractice liability for your practitioners.

Thirty days likely won’t provide sufficient time to accomplish those tasks. If you are unsure about a proper post-termination period, the seriousness of the situation may mean you’ll need to consult with a legal professional to set a proper deadline.

Tip 11: Finally, Confirm the Accuracy of Contract Terms
Contracts contain substantial legal jargon and fine print. You should have at least a basic understanding of some of these terms. Take time to read every single word in each section.

If you don’t understand a particular provision, conduct some research or consult an attorney for clarification. Most experts suggest having an attorney review any contract before you sign.

Don’t place your blind trust in the hands of the payer and assume that everything you’ve negotiated has actually made it into the contract. If you do, you may find out later that the contract provisions don’t match the terms you agreed upon previously.

Make sure that you receive a copy of the entire contract, including any addendums, attachments or exhibits. Review each document carefully to ensure that it accurately represents what you agreed upon.