Skip to main content

Framework for Negotiating Payer Contracts

October 12, 2016

Framework_for_Negotiating_Payer_Contracts.jpegThe old adage, “If you don’t measure it, you can’t manage it,” is definitely true when it comes to your insurance contracts. Collecting and maintaining data points, contact information, and contract details in one digital space, where it’s easy to extract information and compare metrics, is smart practice for group administrators. 

Sometimes called a “payer matrix,” these data collections help you visualize and monitor performance, quickly identify issues, and analyze data points between different payers. If you aren’t currently using a payer matrix, here are some ideas for what to collect for each payer and how to organize your information. 

Choose a format

Unless you prefer to use paper and file folders, there are two main approaches to storing and sorting your data: You can go with a basic spreadsheet or upgrade to a database if you want to do analytical deep dives into your patient/payer data. It’s strictly a personal decision, based on what you ultimately want to measure and track in your matrix. 

Select your payer contract data points

This is also based on personal preference, as well as your practice goals and objectives, but these are the most common, objective data points to consider:

  • Contract renewal date. Set a ticker to notify you at least 120 days in advance so you can begin to evaluate your data. Note whether there is an auto-renewal provision and any termination conditions/requirements. You might also include any fee schedule revision dates (again, set a ticker to give you 120 days notice). 
  • Timely filing and refund request provisions. This information is important for your internal documentation requirements. 
  • Denial rates. Once you establish a practice benchmark, you can use this information to identify potential problems. Keep in mind, the MGMA Better Practice Performance rate is 4% or below. 
  • Charge and payment percentage of overall payer mix. This will help you identify the payers with most financial impact in your practice. 
  • A/R breakdowns. Track percentages at 0-30 days and >90 days at a minimum. 

Identify and rate subjective payer criteria

After you’ve chosen hard data to track in your payer matrix, it’s usually a good idea to select the subjective criteria that has the most impact on your relationship with the payer. You can develop a ratings system, such as from one to 10 points, with one being worst and 10 being best, for example, to assign to each category. Here are some to consider:

  • Prior authorizations. You can track this objectively as a number of procedures that require prior authorization, or denials based on prior authorization (or lack thereof) if you prefer, but in many cases, it makes sense to treat this as a subjective measure based on your perception of the PA policy’s impact on your financial relationship. 
  • Medical policies/Medical necessity. This rating refers to the difficulty/cost to the practice of complying with medical policies. Depending on the complexity of your matrix, you can break this down by key policies and LCDs / NCDs for additional data points. 
  • Fee schedule rating. Again, you can use this as a subjective rating or move specific reimbursement data points into the objective section above for a more complete, in-depth payer matrix. 
  • Credentialing. Consider how difficult it is to add new providers to the practice, credentialing time line, and any key requirements in your rating. 

Again, the payer matrix can be as simple or complex as you need it to be to meet your objectives. You’ll find that in addition to measuring and managing key metrics, the matrix becomes an invaluable tool when it’s time to renew and/or renegotiate contracts. It also gives you a framework for evaluating any potential new relationships you may be considering — and gives you concrete evidence to present stakeholders when it’s time to make contract decisions.

M-Scribe providing medical billing services along with contract review and negotiate with payers. If you have questions about how to set up a payer matrix, or would like information about benchmark data for payers in your market, contact our revenue cycle specialists by calling 770-666-0470 or email me at today for free consultation.


Get the Latest RCM News Delivered

Receive practical tips on medical billing and breaking news on RCM in your inbox.

Get in Touch