Payor Contracting

Getting The Most Out of Your Insurance Contracting | PayrHealth

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What are insurance contracts? These are contracts between a managed care organization (MCO) and a healthcare provider or professional. Maximizing the value of their existing portfolio of insurance contracts should be a top priority for healthcare providers trying to succeed in healthcare contract management. Though contracting is often seen as a tedious and contentious aspect of operations, it is also a necessary endeavor that can bring some surprising benefits.

Developing a better understanding of the contracting process, and how you can get the most out of your insurance contracting, can help make the process less contentious and more beneficial for the insurer. Let’s explore some of our top suggestions for maximizing the benefit you’ll realize from your insurance contract portfolio.

Leverage Data

Data is king in today’s world and you create significant professional liability for yourself if the effort isn’t made to collect and organize it all. This principle remains valid during the contract negotiation process. At PayrHealth, we follow the principle that if you can’t measure it, you can’t manage it.

When preparing for contract negotiations, it is worthwhile to take the time to gather data you have on essential services. That data can be used by the general contractor to negotiate more favorable contract terms. In particular, understanding patient demographics is crucial for creating a winning strategy.

Gaining a better view of your current patient base, as well as future patients, that you might capture through new services is an excellent place to start. Placing these within a geographic context to understand your reach with services and how it corresponds to the payor’s needs will provide key strategic insights. Combine this with a breakdown of your patient’s insurance plan mix, such as whether your patient receives coverage by a commercial insurer of a health insurance plan, or utilize Medicare or Medicaid, to begin developing a negotiating strategy.

Develop Payor Profiles

Taking the time to develop payor profiles is an essential step towards a comprehensive negotiation strategy. A key component of any payor profile is understanding who to contact to get the ball rolling. Generally, this will be the payor contracts manager within the contracting department for the state you are operating in. Avoid sending your contracts to another location, as this can introduce significant delays.

Part of your payor profile should be to understand better how the payor approaches their particular fee schedule. The payor methodology for fee schedules can provide an important backdrop for your negotiating strategy. Understanding how fee codes are grouped and how rates apply to that group will allow you to negotiate within the payor’s methodology for advantageous rates more effectively.

Developing payor profiles is a best practice that all providers should engage in to prepare for contract negotiations. By developing comprehensive payor profiles, you’ll be positioned to maximize your negotiating power when it comes time to negotiate a new contract or renegotiate an existing insurance policy contract.

Move From the Bottom-Up

In the world of insurance contract negotiation, moving through the payor’s bureaucracy with your proposal is the best approach. Submitting requests through the proper chain of command may take a bit longer, but it often yields better results than simply going straight to the top.

Bringing your contract proposal to high-level management rather than through the contract manager or appointed contact directly can have several negative consequences. Your contract may be rejected outright, and since the decision is being made at a high level, it’s unlikely you’ll get a second chance. For example, if your contract gets sent back to lower-level managers for a decision, your choice to go over their heads at the start of the negotiation alienated them and impacted your ability to get a favorable contract.

Starting at the bottom when negotiating insurance contracts with an insurance company gives you room to maneuver, make appeals of unfavorable decisions, and finesse negotiations in your favor with the insurance agent.

Understand the Market

Before negotiating a new contract or renegotiating an existing one, be sure to understand your position in the market.

Be aware of:

  • Who else provides similar services in your geographic area?
  • What is the demand for those services in your area?

The answers to these two questions are critical for insurance contract negotiations. To understand why, cast yourself into the payor’s perspective. payors assess their needs based on the market as a whole in specific geographic areas. The value you provide to the payor is directly related to whether there is a demand for your services. Additionally, the presence of direct competitors will impact your negotiating power.

Communicate Value

You know that you provide services that bring value to your payor’s network. But does the payor see it the same way? Communicating a compelling value proposition to payors is an essential component of successful contract negotiations.

Before beginning contract negotiations, take the time to ensure you have a strategy for effectively communicating your value proposition. What is unique about what you do? Does your service model result in better outcomes or lower costs? If so, how can you more effectively communicate that to payors during negotiations?

Start Early

To get the most out of your insurance contracting negotiations, be sure to set aside enough time. There’s no hard and fast rule for how long negotiations may take. While some can progress quickly, more often, negotiations take anywhere from six to nine months depending on the types of insurance contracts being dealt with.

Starting earlier will give you ample time to execute your negotiating strategy and leave you in a better position overall to reach a satisfactory conclusion to negotiations. One challenge with contract negotiations is that it is often more effective to use the payor’s bureaucracy to your advantage. However, that means the process may also take longer.

Approach the negotiation process as if it’s going to be for the long haul. Be prepared, be persistent, and have the right team on your side.

Compromise is Often Necessary

It would be best if you went into contract negotiations with a clear understanding that a successful negotiation will require compromise from both parties participating. That’s why it’s important to develop a negotiation strategy beforehand so that you have defined goals and an understanding of what you’re willing to compromise on in addition to terms you consider an absolute necessity.

Compromise isn’t a bad thing, but it can be harmful if it’s the provider that’s doing all of the compromising. Avoiding that position will require preparation so that you enter negotiations with defined goals, a clear strategy, and ample time to execute it. Be willing to compromise, but understand exactly how those compromises can be used to support and drive your larger goals from the negotiation process.

Work With a Contract Negotiator

One of the most effective ways to maximize your insurance contracting is to work with a third-party contract management firm. Signing better contracts and maximizing your contract portfolio is challenging, particularly in an environment where most providers feel that they are at a disadvantage in any negotiations.

Here’s where a managed care contracting solution like our team at PayrHealth can help. We can simplify and demystify the process while using the tools and data to generate contract-winning insights. Our relationship database ensures that your contract is routed to the appropriate party and not lost in the bureaucratic labyrinth.

Whether you are trying to get a first-time contract with a payor approved and keep running into obstacles, or you are nearing the end of your contract term and considering renegotiating, our team at PayrHealth has the experience and resources to help you achieve more favorable contract terms in your payor negotiations.

Closing Thoughts

Getting the most out of your insurance contracting can be challenging, but it isn’t a lost cause. You can make the most of your negotiations by preparing ahead of time. Starting early, gathering data on the market you are in and your position, and developing comprehensive payor profiles can help you create a defined negotiation strategy. This, in turn, can be used to help you achieve more favorable terms.

Take the time to understand what makes you as a provider unique, and how well you are communicating that value to payors during negotiations. While contract negotiations have a contentious history and compromise is often necessary, achieving your goals is possible.

Our team at PayrHealth can help! Contact us today to begin preparing for your next negotiation.


“Successfully Negotiating managed Care Contracts”

“Tips for getting the most out of payor negotiations”

“payor contract negotiations are often ugly, but they don’t have to be”

“Five ways to break down bureaucracies to get payor contracts”

“Contracting: Know your strategy”

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