A Guide to Payor Contracting for Providers

Managing payor contracts is one of the primary challenges that every healthcare provider faces. From varying reimbursements to issues accessing networks and managing hidden clauses, contracts represent a major hurdle that affects every provider, regardless of size.

Read on for a quick guide to managing and tracking payor contracts, including a step-by-step process for implementing a relevant healthcare contract management system.

Payor Contracting: The Challenge

For most healthcare providers, the key problem associated with payer contracting lies in the complexity of the process. Most providers are working with several different payors at once, with each contracted payor operating under their own terms. That means:

• Variations in reimbursement schedules
• Different rates between payors for the same or similar services
• Wide range of network participation
• Shifting requirements for reimbursement
• Contract language that is confusing and unique to each payor

The disparity between payer contracts is intentional and a major part of the payor contract process. In fact, many payors will deliberately change contract terms on a consistent basis to improve reimbursement conditions at the expense of healthcare providers. Generally speaking, this is permissible under the terms of payor-provider agreements.

Without a centralized payer contracting process for managing these contracts and tracking variations between revenue generation for each individual payor, healthcare providers are limited in their ability to understand whether they are being compensated fairly - which can have severe ramifications on their financial performance and revenue cycle management.

As a healthcare provider navigating the complexities of the contract management revenue cycle, reference the following step-by-step to simplify reimbursement processes across payors and gain more favorable contracts.  

Step-By-Step Guide To Tracking Your Payor Contracts

Despite the difficulties associated with healthcare payer contracting, it is possible to implement an applicable system for tracking contracts across providers to ensure fair terms. Of course, the process itself can be complex, which is why many providers opt to outsource these strategies to a third-party healthcare consulting firm, like PayrHealth.

The end goal when creating a process to track your payor contracts is to successfully enter renegotiations with payors and achieve better terms and working knowledge in the process. To do so, a provider organization should go through the following four steps:

1. Get a sense of the fine print within payor contracts
2. Perform a deep dive into your payor contracts
3. Build a centralized contract management system
4. Prep for negotiating managed care contracts

Let’s take a look at each step in-depth.

Step 1: Get a Sense of the Fine Print

When providers understand the terms of their payor contracts in detail, including the fine print, they are better prepared to identify terms that could put them at a disadvantage. That’s where you need to begin—providers must analyze each payor contract in detail. Start by getting a sense of the basics of each contract:

• How many days does the provider have to submit a claim for a provided service?
• How many days does the payor have to reimburse providers for a given service?
• What is a managed care contract and what are the payor services covered? (Make an entire list of eligible services.)
• What are the rates for each service provided?
• How are disputes handled under the terms of the contract?
• What is the notice period required to negotiate new terms or terminate the contract?

By achieving a full understanding of these requirements, providers can avoid any payment delays or inaccuracies, ensuring they enter renegotiation with each payor at the correct time.

Step 2: Perform a Deep Dive into Payor Contracts

After analyzing each payor contract, it should be somewhat clear which payors provide more attractive terms. However, payor contracts contain underlying complexities that must be investigated before evaluating the overall suitability of the contract for a provider.

To ensure the accuracy of results, providers should continue the process of renegotiation by performing a deep dive into the language of each contract.

Why? To protect revenue from potential pitfalls and enhance contract management, it is necessary to achieve a complete understanding of the clauses and requirements embedded.

Read through each contract and identify the following clauses, assuming they are present:

1. Unilateral Amendments – This clause enables payors to change contract terms at will, including payment rates, requirements, network participation, and contract language.  
2. Reimbursement – These policies are not always included in contracts but must be identified. If you cannot find the reimbursement policy within a given contract you will need to contact the payor and ask for a review.
3. Network Requirements – These clauses will list eligible provider organizations along with the requirements to be part of a given network. Payors tend to change these requirements often, which could potentially eliminate a provider from a network and effectively decrease the provider’s number of eligible patients.

Let’s dive a little deeper with each of these…

Unilateral Amendments

Unilateral Amendments come with a given notice period ranging from 30 to 90 days:

• Providers are under no obligation to accept a period as short as 30 days, which could put them at risk of being taken advantage of by the payor.
• Providers need ample time to review changes to contract terms, so should not accept a unilateral amendment with a review period shorter than 60 days.

When performing a deep dive into contract terms, make sure to pick out any payors that retain unilateral amendment rights and eliminate this option upon renegotiation.

Reimbursement

Many payors also retain the right to change reimbursement rates at will. Both providers and payors must adhere to these stipulations. Providers who fail to operate in line with a given policy face payment reimbursement denials.

One of the most important dynamics associated with proper contract management is identifying whether reimbursement policies differ across payors, including pinpointing which terms are more favorable to the provider.

Network Requirements

Patients utilize networks to select a healthcare provider, making it essential that providers monitor their participation in these networks.

In most cases, payor-provider contracts assign providers to networks based on two key criteria:

1. Provider Credentialing Criteria – Basic requirements for a given healthcare provider to enter into a network such as an adequate quality of care, proper licenses, and acting in accordance with laws and values.
2. Additional Criteria – Added measures that can exclude many providers from networks such as the availability of specialists on-site or specific physicians’ availability.

When reviewing contract network requirements, providers should remain aware of additional criteria. Because these requirements can be changed at the whim of the payor, providers are at risk of losing out on potential revenue by being excluded from networks for arbitrary reasons.

Renegotiations should aim to eliminate any additional criteria from payor-provider contracts.

Step 3: Build a Contract Management System

After completing Steps 1 and 2, providers should have a sense of which contracts provide more beneficial terms and which contain underlying clauses that should be reworked.

Because there are various payor contracts to keep track of, providers should merge the information into an accessible, centralized contract management system that can be monitored on a consistent basis.

1. Contact each payor and ask for access to all contract documents, including product line specifics
2. Implement a system to store and track each contract
3. Create email notifications for all auto-renewals, deadlines, and provisions that go out to every relevant staff member

Over time, every provider’s goal should be to standardize contracts and make them as similar as possible, while of course maintaining attractive terms. By building a system that tracks deadlines, providers can minimize the risk of a payor adding unwanted provisions or renewing contracts without notifying the provider.

Additionally, by monitoring and evaluating contracts across payors, providers can identify better terms and use them as a basis for renegotiation when ready.

Step 4: Prep for Renegotiations

Once your team is monitoring contracts across payors, providers can then begin prepping for the renegotiation of less attractive contracts. The enhanced understanding that has been achieved in steps 1-3 act as a basis for better payor negotiation tactics.

How should providers approach renegotiation?

1. Analyze fee schedules and payments across payors and assign a rating to each payor in terms of overall benefit.
2. Determine your revenue levels from each payor by service offering and check who pays you more or less for health care services provided.
3. Take into account contract values—with bigger contracts it will be more acceptable to have lower margins and vice versa.
4. Ask for input from executives, staff, and key stakeholders on their experiences dealing with each payor.
5. Decide which contracts require renegotiation and which should be renewed as is.

The end result of this negotiation process should be a coherent plan on accessing better rates from payors that are not contributing enough, and maintaining contracts with payors that are providing beneficial terms.

Outsource To Enhance Your Revenue

Even when following the above guidance, negotiating payor contracts for healthcare providers can be an extremely difficult task. Why not consider outsourcing this process to a third-party expert who will ensure you get the best possible contract terms?

PayrHealth is the payor contract management specialist. Take all the hassle out of tracking and managing your payor contracts and let PayrHealth take the reins with extensive payer contract knowledge.  With us, you will get better contracts and negotiate better rates, letting you spend money on what matters most—expanding your team and providing better healthcare services to your patients.