Payer contracts are a critical part of the healthcare system. They impact everything from provider reimbursement rates to credentialing. 

Yet, many healthcare facilities don’t receive the full reimbursement for services rendered, even when the payer and the provider have an agreed-upon rate. Contract negotiations with payers are vital, though the process can be challenging. 

Because the contract negotiation process can be contentious, it’s crucial that you approach the negotiating table fully armed. This will not only help you reach a favorable outcome but also establish a profitable contract that maximizes reimbursements. In this guide, we’ll go over the 6 key factors of contract negotiations. 

What Are Payer Contract Negotiations?

Payer contracts define the provider’s reimbursement arrangements for providing healthcare services to patients covered by a specific health plan. 

Contract negotiation is the process of coming to an agreement on some legally binding terms. In a healthcare setup, contract negotiation may include negotiating payer obligations, provider obligations, general terms and conditions, rate schedules, dispute resolution, and more. 

The 6 Key Factors of Contract Negotiations

Without further ado, here are the six key steps to a successful contract negotiation.

1. Prepare

Prior preparation is key if you want to have the strongest bargaining position. 

The first thing you’ll need to do is understand your strengths and weaknesses. Perform a SWOT (strength, weaknesses, opportunities, threat) analysis. Information to gather include:

  • Data on revenue, expenses, and utilization
  • Rankings of referring physicians, including the frequency of referrals
  • Quality measurements patient surveys

You must also establish your competitiveness in the industry. 

Establishing a reputation for patient satisfaction and quality care can help persuade the payer to agree to a reimbursement increase request. 

2. Define Your Objectives

Before you start making any demands, define your objectives. 

Start by getting a pulse of your current payer situation. In other words, pinpoint where you are and where you want to be. You’ll want to establish a:

  • Minimum point
  • Optimum goal
  • Target goal

The minimum is the conditions that must be fulfilled for you to sign. The optimum is your starting point—what you consider ideal for your organization. And the target point is the point you’d like to end up after the negotiations. 

3. Gain Clarity

Understanding the terms and conditions of a payer contract is vital to maximizing reimbursement and preventing denials. In other words, get a clear understanding of the terms of the contract. 

Many healthcare contracts are “evergreen,” meaning they’ll renew automatically unless one party requests a change to the agreement. 

That said, it’s important to keep tabs on the renewal/expiration dates and understand how far in advance you’re required to submit any proposed modifications. 

For the best results, experts advise requesting small rate adjustments consistently rather than asking for big changes at once. It’s easier to request a 2% increase yearly than a hefty 10% increase all at once. 

4. State Goals

Go into the negotiation table with a keen understanding of your goals and key priorities and how other risks or rewards rank. 

Do not rely on intuition; instead, use data. Get rid of personal biases and focus more on what’s at stake during the negotiation. Additionally, make sure your goals are reasonable. 

Ask questions about the other party’s interests before starting the negotiation process. By understanding their motives or needs, you can align your negotiations with moves that support your organizational needs while still meeting the payer’s interests. 

Emphasizing that certain demands align with the industry standards can be a powerful tactic to get the other party to give in to your demands.

5. Manage Expectations

Once you’ve set your goals, establish realistic expectations based on your past and future goals. Review your history by researching any product, network, or service inclusions that are no longer a part of your company. 

Once you have a glimpse of your old contract reimbursement rates, you’ll be better equipped to define your preferred rate increase proposal. You’ll also be able to use your past and current rates to determine your preferred future rates. 

6. Be Flexible

Last but not least, be flexible. 

If the payer can’t agree to the rates you’re requesting, be flexible to accommodate something that will benefit both parties. It’s also important to understand the payer’s position when making demands so you don’t press them too hard. 

Let the Experts at PayrAdvisors Help You

Do you want to sign better contracts or negotiate higher rates? PayrAdvisors can help you! Whether you’re an established healthcare provider or a budding group of care providers, we can help you manage payer agreements, negotiate existing agreements, and use our relationships with care providers to grow your network of accepted health plans. 

Get in touch with us today by filling out this form and we’ll be happy to help.