5 Tips for Negotiating Payer Contracts

Your practice expenses are increasing, but your Medicare reimbursements definitely aren’t. And last time we checked, CMS wasn’t negotiating—that means your financial future depends on getting the best rates possible from your private payers. But negotiating payer contracts is an area where many practices—especially small ones—fall short. They either aren’t comfortable with the process, or they don’t even know where to begin. It is possible to up your practice’s revenue by renegotiating payer contracts—here’s how.

5 Expert Tips for Negotiating Payer Contracts

If you know how to tackle the renegotiation process, you can improve your practice’s bottom line and manage the process moving forward, says Penny Noyes, president, CEO, and founder of Health Business Navigators in Bowling Green, Ohio. At the MGMA annual conference in San Francisco earlier this year, Noyes offered several tips to help practices of all sizes renegotiate payer contracts to get the best terms possible from payers. Let’s make a deal!

Locate your contracts and agreements for each payer.

 Do you know what your fee schedules are for your largest payer or network? Do you know when they were last changed? What about how to find negotiation terms in your contract?

Do you even know where your contracts are?

Don’t panic if you can’t answer ‘yes’ to all—or any—of these questions. When it comes to payer contract rates and terms, the typical practice has no idea where they stand. “Blame whoever came before you,” jokes Noyes, “It’s probably their fault.”

The first step to renegotiation is gathering up all of your contracts, but if you can’t find them, don’t worry. “Don’t be embarrassed. Just request copies from your payer or network,” Noyes says. Start immediately and don’t expect it to be a clear-cut process. Each payer has its own, unique way of requesting fee schedules and contracts. “You can expect it to take two months to gather the required info if you’re diligent, and a year to complete your first few renegotiations,” Noyes says.

Ensure that the versions you have are both current and fully executed, meaning that they have been signed by the practice and payer. Make sure you have any addenda and amendments between the contract’s effective date and the current date.

Assess the value of each contract.

First, figure out your fee schedules for all of your codes.

“Payers put a lot of obstacles in the way of finding fee schedules, and if you think you’ll find it in the contracts you’re wrong,” Noyes says. “Payers have all sorts of ways to make code rates difficult to get: special fax and email requests, web portals that provide only a handful of codes at a time, or vague contract exhibits referring to undefined standard market schedules.”

Noyes suggests developing a spreadsheet for all of your codes with modifiers and places of service for each payer product, and sending it to your payer representative to populate for you. Hopefully, they’ll do so, but often they’ll just send you a full list of codes for you to search or direct you to a portal, she says.

“Do whatever the rep tells you to do. Go to the portal, send the fax in or email, but get the rates for everything you do,” Noyes advised. “Don’t accept that they’ll send you just a handful or the top ten, and make sure you get all of them.”

Once you have fee schedules for each of your payers, you can compare them figure out which contracts are benefitting you the most, and which are ripe for renegotiation. Noyes creates a utilization report to get a truer picture of each contract’s value.  “Ask yourself ‘what if each of these payers had all of my business,’ and weight it by each code, she says. “It’s the only way to get an apples-to-apples comparison of fees.”

Once you’ve decided to renegotiate a plan, contact your most frequent referrers and ask them how significant that plan is in their own practice. The less significant that plan is, the more leverage you could have during negotiations.

Play hard ball, nicely.

Negotiating with payers often means being more aggressive than you might be comfortable with, says Brenda Laigaie, an attorney with Wade, Goldstein, Landau & Abruzzo, P.C., who regularly presents at AAO and other industry conferences. Noyes agrees—warning shots fired in the form of a termination notice often begin the process, she says. Why? Most ‘friendly’ requests for term renegotiations are fruitless. “The most common response from payers is ‘Oh, we’re not negotiating at this time’, and that’s why you submit a notice.”

Keep your notice formal and simple, advises Noyes. She suggests plain language, like:

According to the terms of our agreement in <place your termination section here>, I can serve you notice at this time. Please know that the purpose is to renegotiate and not terminate, but if we don’t come to terms in 30 days, please understand that this is my termination notice.

You need to know how much notice is required to make any changes to your contracts. Search each payer contract to find the notice terms—they are frequently found in the termination provisions. Decide which to pursue first, based off of the notice dates and financial impact upon your practice. “Figure out your dates and figure out who has the worst schedules,” Noyes says. “Then marry the two and go after the weakest.”

“It might be a long time before [the termination notice] works its way to a human being,” says Noyes. “Send it to the notice party stated in your contract, then send it to your rep saying that it was sent by certified mail on whichever date, but you thought it was a courtesy to send it directly to them,” Noyes continues.

“Some payers say they don’t renegotiate under duress of termination. You can try without it, but there’s no sanction without the threat . . . set the clock, tell them you expect them to renegotiate in good faith, and that you expect a follow up.”—Penny Noyes

Push for negotiation.

You can expect most payers’ initial response to inform you of a moratorium on negotiation or a ‘not at this time’ message. “Don’t accept that. Tell them that’s not in the contract, then move forward on your mission,” Noyes said.

Typically, payers will then ask what you’re going for. Ask them if you need to base this on their proprietary fee schedule, or if you can propose something based on a certain year or percentage of Medicare. There may be something they can put together more readily.

“The payers are pretty darn stingy [about rate increases]” Noyes notes. “Like, smaller single digit numbers: two, three, maybe four percent.” But if those codes represent 30 percent of a small practice’s business, that can be thousands of dollars over a year.

“Tell them your providers are really disappointed with their offer, then ask to take whatever percentage seems fair and take a carve-out on certain profitable procedures,” advises Noyes. “Or, accept the offer if you can make it a three-year deal and put a 2 percent escalator in the contract.”

Tip: MGMA recommends against allowing payer contracts to go unchanged year after year. It’s easier to ask for smaller increases more frequently as opposed to a larger increase all at once.

Know where you stand. 

Ask yourself this very real question: are you willing to walk out on the contract and actually terminate if the network or payer won’t work with your terms? Select outdated or outmoded payer contracts, and be firm on the terms you want. It’s up to you to decide what to accept.

It’s important to create realistic expectations of potential rate changes for yourself and your physicians. Know that your major payers are more or less aware of each other’s rates when you try to leverage them.

 Tip: Beware of payers who try to shift money around. It may make it look like you’re getting a better deal than you actually are. For example, a payer might increase your E&M codes but decrease your drug reimbursement.

“You should be verifying your rates annually. Ask yourself, what if you get notice saying rates are changing in 60 days, and by not objecting within 30 days of notice you’re accepting them?” Noyes says, advising that you manage your payer contracts even if you don’t plan to renegotiate. “It’s good to have these on hand so you’re never crunched for time. You can’t ignore these things. Rates can change without you knowing, so keep your amendments in order and up to date once a year.”

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