Be the Master of Negotiations With Third-Party Payers

Practice management coding, Practice management revenue, productivity, productivity benchmarks, Improve Practice Productivity


Insurance companies keep consolidating, but that doesn’t mean you’re helpless when it comes to earning revenue. Start now to consider your next round of third-party payer contract negotiations. Remember, it can take up to a year to complete a contract with a payer. Plan the process in advance by establishing a timeline for completing the contract negotiation.

Getting It Started

Adopt an attitude. Remember, the payer needs you, so keep that attitude in mind as you approach the negotiations. Don’t let the third-party payer intimidate or bully you. Determine how many patients in your region you stand to gain by becoming a participating, or par, provider with the payer. If it’s a very small number, it may not be worth your while to pursue the relationship.

Build your team. You’ll need a main contact person in your practice, plus several other team members to review the contract, including the provider, office manager, medical biller if the biller is your reimbursement expert, and an attorney with healthcare law experience for contract review.

Here are six tips to help you be the master of the bargaining table without extensive contract negotiation experience.

1. Don’t accept boilerplate!

Expect the initial contract from the payer to be no-frills and basic, favoring the insurance company over you. Look at it as a first offer, and don’t accept it without some bargaining.

2. Make sure the contract is with the right party.

For example, if your group practice includes many physicians, make sure the group is identified as the provider, not an individual physician.

3. Figure out the right fee schedule.

Your practice management revenue depends on your knowing the fair and reasonable reimbursement amounts for your specialty codes. Keep in mind that insurances create their own usual, customary, and reasonable fees (total charges) and will try to tell you what they are. Research fees for other providers of similar specialties in your geographic area to understand if your fees are comparable. If not, adjust them accordingly. Then negotiate reimbursement based on those fees. Create a reimbursement grid showing other payers’ reimbursement amounts, along with your total charges, per procedure code. If a payer offers you a fee schedule with reimbursement that is less than other payers, or don’t align with total charges in your region, use yours grid as a bargaining tool. Payers may also want to pay you a flat amount per CPT® or HCPCS code, or your total charge, whichever is less. Be sure your total charge per service is equal to or more than the reimbursement rate so you won’t lose money.

4. Ensure the contract identifies claim filing and processing limits.

Clarify the filing limit for claims submission, or how long you have to bill the insurance after the date of service. You may be able to negotiate exceptions, such as for claims “not on file” when you can prove through clearinghouse reports, that the payer received the claim within the filing limit. Also, verify how much time the payer has to process the claim, and ensure the time limit adheres to state law. You can check with your state’s Insurance Commissioner to find out how many days insurances operating in the state have to pay or deny a claim.

5. Obtain the payer’s preauthorization and precertification requirements before you sign the contract.

These requirements should be specified in your contract, not referenced in some document that you never receive. If there are other payment procedures in a provider manual, make sure you review the manual before you sign the agreement.

6.  Include a definite period of time for the contract to be in effect.

Remember, all things must come to an end, so make sure your contract includes a definitive period of time that it will be effective. You can include provisions for automatic extensions, however, as long as the contract provides how and when you can terminate the contract.

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Susan taught health information and healthcare documentation at the community college level for more than 20 years. She has a special love for medical language and terminology. She is passionate about ensuring accurate patient healthcare documentation through education. She has a master's degree in healthcare administration, is a certified healthcare documentation specialist, and serves as immediate past president for the Association for Healthcare Documentation Integrity (AHDI).

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