Payor Contracting

Understanding the Provider Contracting Process

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The contract between the physician and the payor plays an essential role in the compensation that a provider receives and the process of keeping patients healthy and comfortable. However, these contracts can come with confusing terms, provisions, and stipulations that can bog you down and prevent you from providing proper care to patients and ensuring good patient outcomes.

Contracts can be intimidating and discouraging, preventing physicians from getting the most from a payor. Going into contract negotiations with as much knowledge as possible is the key to gaining as much control and freedom for your practice and maximizing potential reimbursements. A provider contract, with the right contract management, can be beneficial to both parties. Read on to learn more about the provider & payor contracting process.

What is the Provider Contracting Process?

Your contract can cover just about everything from a health plan to health care services for patient care. Most prominently, that means reimbursement rates, but it can also dictate provider networks, provider credentialing, and general cost-of-living expenses. This all ensures that a practice’s doors stay open and accessible to patients who need care, while also informing factors like claim denials and the actual services provided to patients.

Specific processes can vary from payor to payor, but the general steps to the contract process involve:

  • The initial request
  • Agreement review and credentialing
  • Corrections and approval
  • System loading and final document storage

Creating a contract is complex and time-consuming and usually requires multiple people. Of these steps, credentialing tends to be the longest during healthcare contract management. It involves the obtaining, assessing, and verification of a practice’s qualifications to provide care. This comprises documents and other evidence pertaining to qualifications, including licenses, education, experience, and outside training. Gathering and approving these documents can take time.

Terms and Components to Know

Part of what makes contracts so cumbersome and intimidating is the legalese, which can be hard to wrap your head around if you aren’t familiar. It is always recommended to talk to your lawyer or have your lawyer present when signing and negotiating new contracts. Here are some common terms and components that you may run into that are definitely worth knowing.

Allowed Amount

The allowed amount is essentially the maximum amount that a payor will reimburse providers for any healthcare services that are covered or in-network. This may also be referred to as payment allowance, eligible expense, or negotiated rate.

The allowed amount may not cover all provider charges. The difference between the allowed amount and the provider charges usually gets passed down to the patients. Under Medicare, allowed amounts for covered healthcare services are based on the Physician Fee Schedule and care setting. Most private payors use Medicare rates as the standard for their own allowed amounts.

Clean Claim

Clean claims are claims that can be easily processed without the need for any additional information. Essentially, they are claims that are complete and correct. Other claims may have incomplete documentation or coding, incorrect information, missing physician approvals, and other errors that often result in denials or reimbursement delays.

Providers can track their clean claim rate as a means of evaluating performance each revenue cycle. Higher clean claim rates may point to smooth billing, coding, and claim creation processes, which also means efficient revenue collection.

Fee Schedule

A fee schedule simply refers to the list of payments and fees for any given service or supply. payor contracts should have a fee schedule. If not, providers should push to request fee schedules from the payor. This is essential as it not only lists out all the negotiated rates, but also provides clear definitions for all the services that are covered. Fee schedules also factor into allowed amounts that are determined during payor contracting.

Dispute Resolution

Claims can come with a whole host of problems that can result in denials and dispute. Providers need to make sure that the payor provides some form of dispute resolution that clearly defines processes for arbitrating and mediating any potential claim disputes. Dispute resolution policies work to guide providers through the process of resolving claims and recouping any revenue that may be owed. This can include informal resolution processes to more formal, more complex litigation procedures.

Dispute resolution becomes even more important with value-based payor contracts. These contracts naturally come with higher claim denials and disputed claims. While guidance and instructions are important, experts do recommend forgoing language in contracts that legally binds practices to specific dispute resolution processes. This frees up providers and allows for more flexible processes that can change from claim to claim.

Furthermore, aggrieved parties tend to turn to litigation to resolve disputes. With contractual disputes, the aggrieved party tends to be the physician. Not having to stick with anything legally binding ensures greater flexibility and leverage.

Medical Necessity

Medical necessity refers to any healthcare services and supplies that are necessary in the diagnosis or treatment of illnesses, diseases, conditions, injuries, and symptoms. This is important as payors only reimburse physicians for services that are considered medically necessary. payors must define medically necessary services, which also deems what is actually covered in the agreement.

Medically necessary services have to meet an accepted standard of medicine. Some medical necessity clauses will also limit how often providers implement medically necessary procedures in a given time period. Providers have to understand the definitions of medical necessity as spelled out in the contract with the payor. In many cases, these definitions will vary slightly.

If providers bill for services or procedures that are not considered medically necessary in the contract, the payor can potentially investigate them for fraud and enact punishments.

Network Requirements

Network requirements define which networks that provider organizations can participate in and outline the credential requirements that providers have to meet to join a network. Joining the right network ensures good revenue and increases patient volume.

This becomes even more important in value-based care contracts, which allow for different networks for different products and services. Contracts will often allow payors to select specific positions for specific networks. Experts generally recommend not signing contracts that allow for this. Changing networks should only be allowed based on credentials.

How PayrHealth Can Help

Those are only just a handful of the terms that you can run into in a payor contract. With the wealth of confusing language and the complexities of payor contract negotiations, getting the right reimbursement rates and optimal funds for your practice can be a true hassle. This is where PayrHealth can lend a helping hand. As your managed care solution, PayrHealth provides provider-centric service designed to help you get better contracts, drive solid growth, negotiate higher rates, and expand your team, all while allowing you to focus on your practice and the patients you are caring for.

Our team advocates for providers, and through a proven process and an extensive network of payor contacts, we can get you the results you need. Much of this starts with collecting data. There’s nothing that payor’s love more than hard numbers and data, and with our best practices, we can provide payors with the right data and frame your value propositions to suit specific audiences.

Understanding the process of signing or renewing contracts can come with plenty of difficulties on your own. Consider working with PayrHealth to simplify the process and get exactly what you need. To learn more about managed care contracting and for help achieving your goals, contact us today.


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