Some common pitfalls of payor contracting can be avoided just by following the steps below.
When Spectrum Management Services Company partners with you to fine-tune your payor contracts, we generally begin by reviewing your current contract language.
From there, we can help you develop strategies, which may include contract rate and terms negotiation, determine readiness for alternate payment methodologies or other program development. But for now, let’s look at how to avoid some of the most common pitfalls in the payor contract negotiation process.
STEP 1: Get to know your rep
It is important to know who your payor rep is, and even more that they know you. Set up meetings to give you a chance to discuss Payor Policies and claims issues, among other things.
Building a relationship with your rep will smooth the path for discussions when requesting inflators (annual incremental increases). They can provide you with insight on company goals and the direction they are headed, such as new policies and new payment methodologies that could impact your organization.
STEP 2: Get to know your contracts
Take a few moments to learn about typical contract elements. Let’s pinpoint a few issues that can arise when you’re not familiar with how your contract is structured.
Typical contract elements are, in no particular order:
- Preamble
- WHEREAS Statements
- Definitions
- Term and Termination
- Payor Responsibility
- Group Responsibility
- Notifications
- Disputes
- Hold Harmless
- Miscellaneous
One of the most common pitfalls in contract negotiation can be found in your “Term and Termination” section. Whenever possible, avoid “evergreen” contracts that renew automatically after their initial term ends. Payors like to “set it and forget it” and they will forget YOU to their advantage. If years go by without opening the agreement for discussion, it’s not necessarily their obligation to make it up to you.
Another common pitfall is not following the newsletters provided by the payors. Things change all the time, and they will say, “We gave you the required notification timing!” Make sure you review the “Notifications” section of the contract to find out exactly where and how you will be updated about policy changes and other pertinent information. Do they have the correct address and/or email address? Is someone watching for these?
One of the most frustrating pitfalls is to be caught without a plan because you haven’t been actively watching for payor policy changes.
Often dispute language merely states you will “meet and discuss.” The Payor can’t actually state in a contract that if you dispute the change, it won’t take effect. But they typically give you a window to notify them of the disagreement and/or terminate. This is to get the discussion going. Gather your financial impact and/or administrative impact documentation and be prepared to discuss it. For a financial impact, the payor may not prevent the policy from taking place, but they can make up the impact through a rate increase. This circles back to knowing your rep.
STEP 3: Negotiating Changes
Find out your payor’s negotiation process. Possible methods may include:
- Only opening the agreement during a specific window of time
- Only opening with a termination letter
- Redlines in the body of the contract
- Multiple versions
- Edits noted on a page in the back of the agreement
- Give-and-take
Learn what your must-haves are and be willing to let a couple things go. Pick several things you can compromise on. It might annoy you to give in regarding some items, but they should not be make-or-break essentials.
A simple, but important, way to avoid pitfalls is to stay organized. It’s up to you to stay as vigilant and organized as possible keeping multiple redline versions organized, status of what you’d like to change, what has been successfully negotiated, and what you put aside for now. Dozens of emails can transcend, so be organized.
As mentioned before, this is a great time to lean on the relationship that you established with your rep. When it comes to material changes, the payor typically cannot state in a contract, “If you disagree you are excluded from the policy or term.” They can merely state that you can discuss it. In these instances, reach out to your rep to “discuss.”
STEP 4: Payment Structures
This is probably the reason you’re reading this blog post. Payment is extremely important, no doubt, and there are times the rate can look good, and yet language and polices can chip away at the amount you actually receive.
Payment structures can include:
- % of current or stagnant CMS Fee Schedule (Fee-For-Service or FFS)
- % of Standard Fee Schedule created by Payor, typically varying rates within the fee schedule; know how this effects your codes
- P4P (Pay for Performance)
- Case Rates
- Bundles
FFS is still prevalent, so the CMS year is important. Changing from 2023 to 2024 can look like a 1% increase in revenue — or maybe it isn’t. It’s important to understand the difference. The 1% increase could be for a specialty that isn’t yours.
Anthem and Aetna typically have statewide fee schedules in which the codes do not follow 100% of Medicare. The trend is boosting office visits or other PCP codes. Request a full schedule or the code groupings that reflect your specialty and do an analysis.
As mentioned earlier, it’s up to you to be sure the inflators are built into the agreement and that they get renewed. So develop that good relationship with the rep ASAP and track the method for opening the agreement for each payor.
Other things to watch out for…
Conduct analyses to make sure you’re being paid according to contract terms. Hopefully you have a billing department that watches for recoupments and the date of service being recouped. They also need to alert you if any new types of denials are popping up due to errors in the payor system or the impact of new policies.
Watch for new policies. What do they mean to you? Sign up for the automated delivery of the newsletters. They are well organized and you can quickly skim through what is relevant to you. Know how to dispute new policies you don’t agree with.
Pay attention to contract re-opener timeframes or hard termination dates. Is it, for example, 90-days prior to a renewal date? That is a very specific window. Or is it 90 days at any time?
Have annual inflators and hard termination dates in your contracts. It is work but it’s work you will be paid for — as opposed to letting the agreements roll year after year with revenue slipping behind.
Reviewing and negotiating your payor contract takes a lot of time and effort, but it’s worth it. As the Director of Payor Contracting at SMSC, my team and I are confident that if we review your contract and find ways to improve your reimbursement, we can successfully negotiate on your behalf. We offer a performance guarantee for our payor contracting services: SMSC will only be compensated for negotiation services if we achieve the results that we guaranteed for you. Read more about our payor contracting performance guarantee here.
If you have any questions about the topics covered in this blog post, please email Amy Johnson directly here.
