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Successfully Negotiating Payer Contracts for Value-Based Service

July 12, 2018

Successfully Negotiating Payer Contracts

The reimbursement landscape is slowly but surely moving from fee-for-service to value-based in response to MACRA’s regulations, with their emphasis on quality of care, and the resulting changes in care delivery, as well as billing and coding. Major players such as Blue Cross and Anthem were reported to have paid close to 60 percent of their 2017 reimbursements through value-based contracts, with other payers moving in the same direction.

With CMS’s goal of fully 50 percent of payments coming through value-based contracts by 2018, its Quality Payment Program also moves this forward through incentive reimbursement based on outcomes. Looking ahead, Medicare payments to practices will either be increased or lowered up to 9 percent depending on value-added merits including outcomes.

What this means for most medical practices is that MACRA is succeeding in encouraging a value-based payer framework, which will in turn be reflected in new and renewed payer reimbursement contracts. The time for avoiding value is quickly coming to an end, making value-based contracts a reality.

7 Strategies for Successful Negotiating Payer Contracts

1. Review the contract’s terms and modifications well ahead of the expiration/ renewal dates: To determine how much notice you’ll need to request any rate changes, especially if the contract will auto-renew. Ideally you should designate an in-house administrator or attorney to review the terms of these legal documents before you sign. Because contracts are legal documents, any terms or legal language that may be confusing should be reviewed by an attorney or qualified administrator experienced with contracts.

Unfortunately, some insurance companies resort to shady practices such as tricking physicians into making an agreement or unintentionally modifying contracts. Your staff should use caution in signing paperwork, forwarding it instead to the proper personnel.

2. Know the laws and regulations of your state: These are as important as those of CMS and federal regulations. State laws, for example, can strongly affect how you do business, regardless of who is responsible for reimbursement. Consult with an attorney to review the contract, especially if anything appears one-sided or contains timely-filing rules, amendment provisions and other considerations. Know what procedures or other services are either not covered, have low reimbursements or require the use of a specific vendor.

3. Data quality makes the difference: Having the right technology available can make or break data collection and reporting. For example, a well-presented data analysis showing cost control and forecasting in managing ancillary services can give you more leverage at the bargaining table as well as demonstrate compliance and improved outcomes. The better the data, the more likely this could result in increasing reimbursement rates from three to 10 percent.

4. Perform SWOT analysis: Before beginning negotiations perform a SWOT analysis (strengths, weaknesses, opportunities and threats to the practice) as well as agree on metrics. An example of a practice’s strength could include proper utilization of expenses, revenues and other resources – all of which could be used to leverage better rates.You will need to set a range for bargaining including minimum and optimum (ideal terms) goals, as well as a target (the point where you want to be at the end of negotiations.)

If possible, advises Rathju Kurunthottocal, D.O., meet face-to-face with the payer’s rep to discuss the terms under consideration, where you or your representative can present clear, factual data for an immediate response. Understand beforehand which items can and should be negotiated and which will be harder to do so without more effort on the provider’s part. Remember that negotiating means giving up some concession. Just keep it as even-sided as possible.

5. Consider associating with a larger group affiliation, such as the ones below:

  • Independent Physician Association (IPA)
  • Accountable Care Organization (ACO)
  • Clinical Integrated Network (CIN)

The above groups are value-based organizations which let providers remain independent in the daily running of their practices while enjoying the benefits of collective buying, infrastructure enhancements and reporting. While the “pro” aspects are now in question as practices transition from fee to value-based care, there is still “strength in numbers” in giving independent practices the ability to leverage better terms in negotiating payer rates. Membership also allows providers access to more advanced data-collection technology, including population health reporting tools.

On the downside, according to Steve Selbst, CEO of the Salinas, California-based consulting firm HealthCents, some practices have problems with certain outcomes and metrics unique to their specialty. Remember, too, that even well-run IPAs can change over time, leaving its members with the only choice to opt in or opt out.

6. Make the transition gradually: From fee-based to value-based. “Value” may be on the horizon but still isn’t here for many providers: consider that the 2017 Physicians Practice Compensation Survey reports that as many as 65 percent of respondents have no compensation directly tied to value-based care, with 16.6 percent having just one to five percent of reimbursement value-based.

One way to prepare their practices for a smoother transition could include adding a value-based component as part of a fee-for-service contract. While most of the contract would be the usual fee-for-service, a small percentage would be based instead on efficiency-based as well as quantitative and qualitative measures.

In addition, CMS itself is gradually introducing CPT codes into Medicare that include value-based components. Two types of care – chronic care management (CCM) and transition care management (TCM) – will continue to generate revenue but without requiring a face-to-face visit for care provided out of office.

7. Partner with an experienced medical practice management and billing service: To boost your chances of better rates and terms when it’s time for negotiations. Here’s how: improved claims management is one of the keys to successfully collecting and reporting data – and gives you another bargaining tool. M-Scribe’s years of experience in working with practices of all sizes and specialties as well as access to top-flight technology, enables them to successfully work with payers and their varied contracts. Contact them at 770-666-0470 or email me at  for a no-obligation analysis of your contractual reimbursement needs and how your practice can improve its revenue cycle.


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