Payor Contracting

Overcoming Top Challenges in The Payor Contracting Process

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Overcoming Top Challenges in Payor Contracting Process

Negotiating payor contracts—both big and small—is vital in keeping any healthcare facility open and generating revenue. As a provider, you want to make sure you’re getting the most beneficial contract terms between yourself and insurance companies.

However, the payor contracting process can be complex and difficult to navigate.

In this quick guide, we’ll take a look at some of the most common challenges providers face when negotiating payor contracts and discuss the ways you can overcome them.

Know All of the Basics

Anyone negotiating a payor contract should at least know the rates for their facility’s most commonly billed services. If your facility is an ophthalmology clinic, you’ll want to know the rate for an eye exam like the back of your hand.

That being said, there are more key points of your payor contract that you should be able to name off of the top of your head. The more familiar you are with these basic terms, the more prepared you will be to negotiate and implement a new contract.

Without diving too deep into the fine print, here are a few of the basic terms you should get familiar with:  

  • How many days you have to submit a claim after services rendered
  • How many days the payor has to reimburse you for covered services
  • A full list of the services covered by the payor
  • Reimbursement rates for all of those covered services
  • How to negotiate claim denials
  • The date your contract will expire and renewal procedures
  • How long of a notice period you must give to terminate the contract

Understand Legalese

Legalese, or confusing legal language, is frequently used in contracts in a way that can conceal what you’re agreeing to when you sign. In payor contracts specifically, there are several somewhat misleading phrases that insurance companies often include.

Let’s look at a few of those phrases:

  • “Industry-accepted” – This indistinct phrase is often used by payors to describe their reimbursement rates. The unclear nature of this description opens the door for payors to reimburse however they see fit, which probably won’t be in your best interest. If you’re going over a payor contract and you see this phrase describing their reimbursement rates, push them to use a specific number for their rate instead.
  • “Except as otherwise indicated herein” – This small piece of verbiage, or a similar version of it, can cause major headaches in the payor contracting process. Essentially, this phrase’s presence in a contract means that—for whatever ‘rule’ is being discussed—there is an exception to that ‘rule’ hidden somewhere else in the agreement. If you come across this phrase, push the payor to identify that exception precisely.  
  • “Hold harmless patient member” – At the end of the day, you deserve full compensation for your provision of any services to a patient. Therefore, the patient should be responsible for any costs that their insurance company doesn’t cover. These four words in your payor agreement could make it impossible for you to hold the patient accountable for money owed.  

Focus on the Details  

Even if the terms of your payor contract aren’t written in confusing legal language, you’ll still need to go over everything with a fine-toothed comb. Becoming familiar with all of your payor contract’s ins and outs can be the difference that helps you maximize revenue for your facility.

Unilateral Amendments

A unilateral amendment is a small clause in a payor contract that can completely change the terms at a moment’s notice.

payors often try to include clauses that allow them to change terms unilaterally. In other words, they can make alterations to the contract whenever they want, and without needing further permission from you. Some of the contract aspects that unilateral amendments can affect are:

  • Reimbursement rates
  • Requirements
  • Network participation
  • Contract language

It’s not difficult to see that these unilateral amendments don’t have your best interest in mind.  


In some states, payors are legally required to notify providers when they amend the contract terms. Other states don’t have any notification requirement. Even if the payor does give you a small window of notification—typically 30 days—that may not be enough time for your facility to adjust to the changes.    

If at all possible, you should avoid agreeing to a contract that includes a unilateral amendment clause. If it is unavoidable, you should at least push for the payor to agree to a longer notification window. An advanced notice—at least 60 to 90 days before contract changes go into effect—may give you a bit of breathing room while you figure out how to respond to the new terms.  

Network Requirements

One of the main aspects of any payor contract is the section that outlines network requirements. Generally, providers are added to certain networks based on their physicians’ credentials. However, payor contracts sometimes include language that allows the payor to arbitrarily determine what networks the provider can be included in.  

In an ideal payor contracting process, you should not agree to any terms that allow the payor to pick and choose which healthcare positions can participate in certain networks. These terms could enable the payor to drop you as a provider within a network you would otherwise be able to participate in, resulting in revenue loss for you.  

For example, let’s say your physical therapy facility usually participates in Network X. One day, the payor could redesign Network X, such that a new requirement for participation is having a spinal cord injury specialist on staff. If your facility does not include this specialist position among its staff, you could be dropped from Network X.  

Prepare to Negotiate

Once you understand how exactly a payor contract works, you’ll be in a much better position to utilize contract negotiation strategies to obtain more favorable terms. The most important part of the contract negotiation process is the leg work and research you do before making any demands.

Gather Your Internal Data

First, you should organize your recent financial data. Let’s say you have been under contract with payor A for one year. Gather the top 25 procedures your facility has claimed for reimbursement by payor A over the past year. Then, do the same for payor B, payor C, and so on, for however many payors you have been in business with that year.

Assemble a spreadsheet so you can easily cross-reference each procedure code with your reimbursement rate from each individual payor. For example, if code 99901 is an eye exam, you will be able to look up “99901” and quickly compare how much money payor A, payor B, and payor C reimburse you for an eye exam.

Decide Which Payors to Prioritize

Now, armed with that knowledge, you can easily see which of your payor contracts offers you the least favorable terms. From there, you can decide if you want to drop them or renegotiate.

It’s essential to keep in mind that, though crucial to revenue, reimbursement rate isn’t the only data point to consider when deciding which payors to prioritize. You also have to note which payors cover the highest percentage of your patients. You wouldn’t want to outright drop payor C, who covers 60% of your patients, just because they give you less than ideal reimbursement rates.

Instead, you can leverage the data you gathered on all of your contracts to argue that payor C is underpaying you and should offer a rate more in line with the rest of the market.  

Know Exactly What You Want From the Negotiation

Once contract negotiations actually begin between you and representatives from the payor, it’s critical that you go into the communications knowing what your demands are. You should be able to state these demands clearly and concisely. Here are some of the most common objectives providers hope to achieve from the payor contract negotiation process:

  • Increasing net revenue  
  • Eliminating inaccurate payments
  • Implementing harsher terms for late payments

Wanting a “better” reimbursement rate is not the same as demanding a 2% increase to reimbursement rates for specific procedures. Your use of firm and precise language will convey the seriousness of your demands and will show that you have done your research.

The most important aspect of these negotiations is that you go in prepared with data-driven and evidence-based responses to any possible rebuttals from the payor. They probably aren’t going to offer you more favorable terms just because you asked.

You have to prove that your demands are reasonable.  

Manage Your Payor Contracts More Easily

Okay, you can take a breath. The negotiations are done, for now.

Payor contracts are complicated enough on their own, but the reality is that providers are typically under contract with many different payors at once. To maximize your revenue, you want to organize all of these documents into one location so you can streamline your payor contract management.

However, simply assembling all of your payor contracts into a spreadsheet is not enough. You want a sophisticated management system that can index your many contracts, alert you to any changes in terms, and reveal which contracts are offering the least value. Both large and small healthcare facilities often rely on third-party contract management firms like PayrHealth to help negotiate, manage, and achieve higher returns on payor contract investments.


Rev Cycle Intelligence. Maximizing Provider Revenue with Payor Contract Management.

WebPT. How to Negotiate payor Contracts (Part 1): Making a Plan.

ICD-10 Monitor. payor Contract Negotiations: How to Improve Your Negotiating Skills.

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