What is Provider Contracting in Healthcare?

A provider contract is a document that represents the business relationship between healthcare providers and payors. A medical provider can be either an individual physician or a medical provider organization with multiple doctors on staff (such as hospitals). Healthcare organizations administer medical services to patients. Payors are often insurance providers, but can be individuals who are paying out of pocket for medical services. Payors pay for all (or at least some) of the cost of the patients’ covered services.

The provider contract is a vital element for any healthcare provider who wishes to operate a smoothly run facility with high patient satisfaction and on-time payments. However, there are many different types of healthcare provider contracts. Each is filled with lots of unfamiliar legal jargon and confusing clauses, amendments, and stipulations. Healthcare contract management can be costly and time-consuming, especially when it's essential to ensure compliance. But healthcare contracts are an essential part of managing a medical practice and succeeding in the healthcare industry as a whole.

To get a better idea of what to expect in a provider contract, and how to negotiate the most beneficial terms, follow along as we break down everything you need to know.  By the end of this article, you’ll also learn the benefits of using a healthcare contract management system for your healthcare facility.

Why You Need to Understand Your Provider Contract Provisions

To receive reimbursement for medical services, providers depend on provider contracts in healthcare. The contract details all of the information that needs to be collected by physicians from their patients before sending a claim for reimbursement to the payor. Reimbursement delays or denials can occur if the claim procedures don’t strictly follow the guidelines set up in the provider contract.

To ensure correct claim procedures and a steady revenue flow, here are a few essential details that will be outlined in any provider contract:

• Rates and other costs for billed services
• Timeframe within which the health care provider must submit a claim for reimbursement
• Timeframe within which the payor must reimburse providers once a claim is received
• Scope and type of health care services (and their medical necessity) that are covered by the payor
• Medical necessity clauses and requirements for medically necessary services
• Provider networks and network participation requirements
• The procedure by which the provider can dispute claim denials  
• How many days either party must notify the other before terminating the contract
• Specifics about regulatory compliance and other applicable laws

Important Questions to Ask Yourself Before Signing a Provider Contract

Before you finalize the healthcare contracting process with a payor, make sure you are familiar enough with the contract that you can easily answer these questions off the top of your head:

• What is a provider contract going to do for me? Payors don’t necessarily have your best interest in mind. Before signing, you should do some accounting and assemble hard data that proves the provider contract will lead to a positive financial outcome for your healthcare facility.  
• What is my responsibility for ensuring clean claims? A clean claim is one that doesn’t require any additional information in order to be processed and approved for reimbursement. Ideally, all of your claims will be clean, and you will always receive reimbursement on time. The provider contract will stipulate exactly what information needs to be included with every claim. Make sure you know what you need to do.  
• How can I dispute denied claims? Payors sometimes deny reimbursement to healthcare facilities for services provided. Often, providers feel they are entitled to that reimbursement and seek to reverse the claim denial decision. In some cases, you may have to rely on formal litigation to arbitrate your disputed claims. Be wary of contract language that forbids you from seeking legal recourse to claim disputes and relies on informal resolution processes. Know what your options are for recouping.  
• How will the contract end? Provider contracts should unambiguously state when the contract’s active period comes to a close. It should also outline if, and by what means, either party can terminate the contract early. Some provider contracts include a clause that states the contract will automatically renew until either party begins the termination procedure. You do not want to renew an unfavorable contract automatically.  
• Can the contract be changed? Some provider contracts contain what is called “unilateral amendment” language. If your provider contract allows for unilateral amendments, it means the payor can alter the contract without your permission. In many unilateral amendment cases, the payor may not even need to notify the provider that changes have been made to the contract. Avoid this if possible.  

How to Negotiate for Better Terms in a Provider Contract

The first step in any successful provider contract negotiation occurs long before you reach out to the payor with demands. Prior to engaging in formal negotiations, you should arm yourself with as much knowledge as possible. Familiarize yourself with your current contract and research the legalese to become more comfortable speaking the payor’s language.

Then, engage in each of the following best practices.

Gather Internal Data

Once you have mastery over the contract’s components, it’s time to gather internal data. Because most providers are contracted with multiple payors, start by reviewing your top 5 or 10 payors (this can be made easier using contract management software). Determine your most frequently billed services and compare the payment amounts you receive from each of your top payors. With this data, you can analyze the financial performance of each provider contract. Then you can set target goals for the negotiation.

You can also perform data analytics on your past claims to find out which payors reimburse you the least for certain healthcare services. With that data, you can argue in future negotiations that the payor should offer a reimbursement rate that is more in line with the rest of the marketplace.

Survey Patient Satisfaction

Another important data point to collect is the rate and quality of patient satisfaction. Because this data has some subjective elements, you may need to rely on patient surveys. Still, positive patient surveys can demonstrate your facility’s efficiency and effectiveness.

You can also survey other medical staff or physicians who refer patients to your facility, as well as any hospital administrators you work with. Systematically surveying the people in your business landscape can provide a clear picture of your value.  

Conduct Market Research

Think about your facility in the context of your surrounding area. Find out information on these key questions:

• Is there a niche service that your facility specializes in?
• How many other facilities in your area offer the same services as you?
• Do you have a good reputation among top referring physicians in your area?
• How does your facility compare in size and patient volume to those around you?  
• For how many residents are you the closest in-network medical facility?  

Suppose you can demonstrate that your facility is an integral part of your community, a unique healthcare offering, and a top option for patients. In that case, you will have more leverage in contract negotiations.

Prepare Specific Demands

When you finally sit down to engage in proper negotiations with your payor’s representatives, you should have ample data to back up your demands. Keep in mind that your demands should be specific and evidence-based. It’s much easier for the payor to deny a general plea for better contract terms than, for example, a data-supported demand for a 5% increase to your ultrasound therapy reimbursement rates.  

Things to Watch Out For in a Provider Contract

There will always be terms or conditions to look out for in a provider contract. Although such provisions may seem minor, taking up only a few words, they can still have a major impact on your business. Here are a few final things to watch out for:

Hold Harmless Clause

This clause states that one or both of the parties cannot hold the other responsible for financial or legal liability. Payors often try to include these clauses to shift liability from themselves to the provider. The hold harmless clause may also be referred to as an indemnification clause. These can lead to severe financial repercussions without liability insurance. Try to negotiate for a mutual clause where liability is shared between each party.  

Provider Credentialing and Licensure Requirements

Payors often include termination language that states the entire healthcare facility will lose its contract agreement if a single physician’s license is suspended. If your facility has 10 physicians and only one loses their license, you still have nine physicians who can work within the provider contract. Try to negotiate out of severe credentialing process and licensure requirements.  

With any contract, you should consider the common challenges in provider contract management and take a deeper dive into each challenge.

Managing Provider Contracts with PayrHealth

As a healthcare provider, the main focus of your time and energy should be patient outcomes. However, dealing with payors can be arduous and time-consuming. Preparing to renegotiate multiple provider contracts may just stretch you too thin to provide quality professional services.

Luckily, third-party contract management firms like PayrHealth can handle the contract side of business for you. PayrHealth will advocate for you in provider contract negotiations, ensuring you the best rates and highest returns on investment. Once you agree to a good contract, PayrHealth will keep track of your contracts, monitor them for any changes, and analyze data that will help your organization make smart decisions. For over 25 years, PayrHealth has been the managed care contracting solution. The PayrHealth team has successfully negotiated rates for more than 50,000 contracts in all 50 states.

If you want to sign better contracts, negotiate higher rates, and expand your team, contact PayrHealth today.