Payor Contracting

Successful Tips to Grow Your Managed Care Organization

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In recent decades, the healthcare delivery system has undergone significant and rapid changes.

If you’re a managed care organization within this highly competitive marketplace, finding ways to distinguish your operation and grow your business is no simple task. But with an aging American demographic, experts predict that it will become an even larger factor, what with the continued growth of Medicare and Medicaid.    

So, how do you take advantage of this rising demand for high-quality care at competitive prices?

To properly answer that, you must first go to the roots of managed care itself. Once those foundations are laid, you can then strategize ways to promote growth.


At its essence, managed care is all about providing better services for patients at lower costs. Typically this is accomplished via cost-savings practices such as utilization management, preventative care, and financial incentives. According to Health Affairs, there are four basic elements to managed care:

  1. Plans are based on arrangements with selected providers to furnish a comprehensive set of healthcare services to members.
  2. There are explicit standards for the selection of healthcare providers.
  3. These providers operate under formal programs for ongoing quality assurance and utilization review.
  4. There are significant financial incentives for members to use providers and procedures associated with the plan.

Managed care organizations (MCOs) are simply businesses that abide by managed care principles. Common managed care organizations include:

  • Ambulatory Surgery Centers
  • Ancillary Providers
  • Hospitals
  • Medical Equipment Providers
  • Physician Groups
  • Post Acute Care


Today, the managed care industry accounts for more than 75% of all healthcare plans. Of those, the vast majority will fall into one of two categories:

  • Health Maintenance Organization (HMO) – Prepaid, comprehensive health coverage, whether for the hospital or the physician. HMOs are made of healthcare providers and professionals to form a network. Members only receive reimbursement after they’ve received approval for the services or received care from a participating provider.
  • Preferred Provider Organization (PPO) – Open-ended plans that incentivize members to select a primary care provider. Out of network visits involve higher deductibles and copayments.  

Because they have fundamental differences, your sales and negotiation tactics will slightly vary depending on what type of organization you’re contracting with.  


Although the sales processes for HMOs and PPOs differ, there are several steps you can take in to convert either. They include:

Establish Top Targets  

Growing your managed care organization starts with research and analysis.

Your organization must identify key HMO and PPO payor targets in the area and then prioritize those according to your customer base and likelihood of conversion. Priority considerations in healthcare contract management include:

  • HMOs that have their HME contract ending within the year
  • PPOs with open panels
  • HMOs and PPOs that align with your service area and referral sources
  • HMOs and PPOs that have a history of ontime payments

More contracts doesn’t simply equal more value. Strategic growth is about finding the right contracts that fit your area, strategy, and unique offerings. But this winnowing process is difficult; many managed care organizations lack the resources necessary to commit to payor contracting.

This is why a growing number of care organizations are outsourcing this job to experts, such as those at PayrHealth, to identify the best contracts. The PayrHealth team uses best-practices to analyze your historical data, third-party data, and proprietary data to make sure that you are prepared for any contract negotiation.

Discover Who Makes the Decisions Within the Administrations  

Similarly, it’s vital that you single out the administrative and clinical decision-makers.

Although the contract negotiation process is most commonly done via contracting personnel, it’s also possible to meet with various clinicians to ascertain their needs, patient base, cost determinants, and service preferences.

Since these higher-ups have the ability to exert their influence to sway the process, it’s important that you win them over. How? By demonstrating to them that you can meet their client’s needs.  

PayrHealth focuses on contracting with the right people within a payor’s organization in order to make sure that things happen, and fast.

Determine Decision-Maker Needs

Every payor organization has different needs. If you don’t know what the decision-maker you’re contracting with wants, your sales tactics may fall on deaf ears. Typically, there are four primary types of general interests:

  1. Cost savings – Demonstrating that your services lead to cost savings can go a long way in contract negotiations. To prove this, you need documentation that covers utilization, expenses, and revenue. In addition, by contracting with fewer providers, you can also reduce their administrative costs.  
  2. Member satisfaction – Member satisfaction is paramount. Both HMOs and PPOs seek to keep members happy by providing unique services. One of the best ways to show member satisfaction is through patient surveys, national quality assessment programs, and physician referral rankings.
  3. Outcomes – This can refer to either clinical or administrative outcomes. Regardless, all HMOs and PPOs need hard proof—measurable outcomes your managed care organization is providing better-managed care at lower costs.
  4. Disease management – If you can, prove that your goods or services help keep populations (particularly vulnerable groups of patients) out of the hospital, particularly through proactive and preventative measures.

Much of your success will come down to relationships. It’s crucial that you establish open lines of communication. That way you will know what a payor representative wants and be able to keep contract negotiation civil and on track.  

Craft Your Unique Value Proposition

After you’ve determined the decision-maker’s needs, you can begin to tailor your messaging accordingly. This is your opportunity to show what you do that’s unique.

Negotiating higher rates (whether for new or existing contracts) ultimately comes down to preparation. As discussed, targeting payors and then doing your research allows you to create a sales message that clearly proves your product or service will benefit payors.  

If you don’t already bring something new to the table, it’s vital that you design your programs and services to do so. This could entail:

  • Highlighting programs that help reduce medical services, whether acute, emergency, or physician.
  • Finding ways to maximize your operational efficiencies, and thus cut costs.
  • Removing redundant or unnecessary products or services to lower your cost structure.
  • Subcontracting unprofitable services.
  • Discovering programs that you can jointly promote.

It may be necessary to establish a trial program to prove the efficacy of your service offering.

Aim for Long-Term Contracts

Although goals vary across organizations, one of your chief motives should always be to sign good payors to long-term deals.

Short-term contracts expose you to grey areas and loopholes, particularly if the payor is constantly seeking a way out of the deal. Further, they tend to be light on the details. So, if you do have a short-term contract, make sure that the rules are clearly defined and that the contract itself is airtight.  

Long-term deals, however, are much safer. They provide a guaranteed revenue flow for a set period of time. In addition, they’re inherently more flexible.

Renegotiate Contracts

An essential aspect of growing your managed care organization involves contract renegotiation. Too much money gets left at the negotiating table by organizations that are unprepared or don’t know what they’re worth.

So, how do you renegotiate better contracts? Steps to take include:

  • Prioritize Payor contracts – Your organization stands to benefit by concentrating on renegotiating certain contracts over others. It’s important that you take the time to focus on those most likely to be successful, or that would provide the most marginal advantages.  
  • Understand your own organization – A strengths, weaknesses, opportunities, and threats (SWOT) analysis provides your organization with a clear picture of where you excel and struggle. It not only informs your unique value proposition but prepares you for what the payor negotiator might argue.
  • Analyze your competition – To strengthen your position, it’s vital that you’re able to distinguish your service offering from those you compete within the market. The more information you have, the clearer picture you can paint. According to Physician News, common quality indicators include:
    • Cost per patient for a particular series of diagnosis codes
    • Surgeries performed as a percent of patient encounters
    • Usage of ancillary services
    • Lengths of stay in the hospital
    • Specialist referrals as a percent of patient encounters or by diagnosis codes (for primary care doctors)
    • Number of repeat visits due to surgical complications


In a hypercompetitive marketplace, growing your managed care organization is a complicated and taxing process. Many organizations simply don’t have the time, resources, or expertise to find the right targets, let alone land the contracts and then maximize them.

This is where PayrHealth can make the difference. Whether its signing better contracts, negotiating higher rates, or helping you expand your team, we can help you:

  • Add value through outsourcing
  • Evaluate payor portfolios via insights
  • Negotiate new and existing contracts
  • Get better rates on contract negotiations
  • Get more patients
  • Expand wisely  

As your partner, we can take your managed care organization to an entirely new level. Want to see how? We’d be happy to show you.


Health Maintenance Organization Act of 1973.

Health Affairs. Change and Growth in Managed Care.

The Motley fool. What is Managed Care?

Science direct. Managed Care Organization.

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