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Key Considerations for Provider Contracts in Healthcare

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Key Considerations for Provider Contracts in Healthcare

As a healthcare provider, you want to dedicate as much of your time as possible to serving patients and growing your organization. However, navigating complicated contracts with dense legal jargon can take up lots of valuable time and resources. To help your organization focus more on patient outcomes, receive timely and accurate reimbursement, and avoid claim denials, follow this quick guide that simplifies provider contracts in healthcare.

What Are Provider Contracts in Healthcare?

Although the language in a provider contract may be difficult to parse, it's easy to understand what the contract itself is, and why it's important for your organization's success. Basically, the provider contract is a document that sets up all the details of how a healthcare organization (the provider) and a health insurance company (the payor) will do business. The different types of healthcare provider contracts outline terms such as:

  • Services rendered
  • Reimbursement rates agreed to for each service
  • Claim denial dispute procedures
  • Term of contract

Providers can maximize their revenue and minimize distractions by understanding a few essential components of these contracts before they negotiate and sign on the dotted line.

6 Key Terms in Provider Contracts

Unfamiliar legalese can be one of the biggest obstacles when trying to get a better understanding of your contracts. Here are some of the most common terms in provider contracts, broken down in a way that's easy to comprehend:

  • Allowed amount - The allowed amount is the maximum amount of money a payor will give to a healthcare provider as reimbursement for performing a specific medical service. The allowed amount is sometimes referred to as an "eligible expense," "payment allowance," or "negotiated rate." This amount of money may not fully cover a provider's expenses, in which case it may be the patient's responsibility to cover the balance.
  • Fee schedule - A fee schedule is the list of covered services and the payments that will be made for each service provided. Ideally, this fee schedule should be a complete list that clearly identifies every single covered service, and includes detailed information about the payment rates for each.
  • Clean claim- A clean claim is one that can be processed without any additional information needing to be provided. Things like incorrect patient information, incomplete clinical documentation, and missing physician approvals can significantly delay reimbursement and even lead to claim denials. The provider contract should outline exactly what information is needed to ensure all of your claims are clean.
  • Medical necessity - Providers only receive reimbursement for services that are considered to be medically necessary. These are generally understood as services that are required to diagnose or treat a condition. The payor will have their own strict definition of medical necessity, and it is crucial to follow that definition so that services are always eligible for reimbursement.
  • Network requirements- These are the provisions that determine the healthcare networks in which a provider can participate. Typically, network requirements include some form of credential criteria that providers have to meet in order to be eligible for certain networks. It is usually not in a provider's best interest to agree to a contract that allows the payor to outright determine which network they must participate in.
  • Unilateral amendments - A unilateral amendment is a provision in the contract that means the payor can change parts of the deal without seeking permission or even notifying the participating provider. In other words, they can change the contract? unilaterally. From the provider's point of view, this could result in sudden and damaging changes to reimbursement rates, clean claim definitions, network requirements, and more.
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Analyzing the Results of Your Provider Contracts

Most healthcare providers are engaged in multiple contracts simultaneously. The best way to know which of your contracts to drop or renegotiate is to track and compare payment data across all of your payors through a provider contract management system. Here are some basic questions that you should be able to answer with simple data analysis:

  • How long does it take to collect on charges on average?
  • Are payors paying the agreed-upon rate?
  • Are payors paying at a better, worse, or the same rate year over year?

Organize this payment reporting alongside key data from each provider contract that you can easily compare and contrast. Relevant data points and information that you should have readily on hand include:

  • Health plan names and types
  • Contact information for payor representatives
  • Medical necessity definitions of each payor
  • Clean claim definitions of each payor
  • Length of contract and termination dates for each contract
  • Deadlines for amendment provisions, underpayment recovery, etc.

Contract Management Done Right

As a healthcare provider, you know that the patient's health should be regarded above all else. This is where the focus should be, rather than on navigating the murky waters of payor contracts. If you want to stop losing valuable time to provider contract headaches, it won't help to invest all of your time and energy into becoming a provider contract expert keeping meticulous track of every little detail. Instead, invest in healthcare contract management. Third-party contract management firms like PayrHealth negotiate provider contracts for you, so you can focus on patient satisfaction. You can achieve a major return on investment by letting PayrHealth manage and track your provider contract data, giving you helpful insights that will lead to more favorable contract terms.


Imagine Software: 3 Tips to Negotiate Healthcare payor Contracts Like A Pro? Mahony Law Healthcare Provider/Provider & Provider/payor (Reimbursement) Disputes? Leaders Healthcare Reform Driving Value-Based Provider Contracting?

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