Payer Contract Management: How Physician Groups & MSOs Can Push Back on Insurers

 When the typical payer contract involves around 200 pages of dry legalese, it’s no wonder healthcare staff avoids and even loses contracts. 

As the healthcare industry and payer/provider relationships get more complex, however, its contracts do, too. Only provider groups and management services organizations (MSOs) that scrutinize payer contract terms, amendments, and renewals stand to optimize revenue.  

Today’s organizations lose 8.6 percent in contract value due to inefficient contract management, according to the 2023 World Commerce and Contracting Benchmark Report of 750 business leaders. Most in that survey lament their lack of adequate contract visibility – a consequence of inadequate contract management.  

But the playing field has been imbalanced since insurance entered into the healthcare arena in the 1950s. 

For too long, payers – with their extensive legal resources – have had the upper hand in contract creation. They have the bandwidth to know and advocate for the fees and terms that will benefit them the most. While payers’ noses are buried deep in contracts, providers are busy delivering patient care (particularly through COVID). A recent MGMA poll reveals that while 58 percent of providers do review contracts yearly, 16 percent review only every two to three years, and 17 percent never review them. 

As providers toil in exam rooms and surgical suites, payers are busy adjusting their fee schedules and contractual language, and making full-scale policy changes. They send these changes to healthcare organizations throughout the year, often with a 30-day time limit for approval or negotiation. When requests for changes end up languishing in the organization’s mail room, payers make their changes without the organization reviewing the request or evaluating its options. When this freedom enjoyed by payers is written into the contract, it is perfectly legal. 

But providers are starting to stick up for themselves. 

• Louisiana-based Allegiance Health Management has filed a lawsuit against data analytics firm MultiPlan alleging they work with payers to fix prices on 370,000 out-of-network claims daily for more than 700 payers. These actions have resulted in $22 billion in underpayments annually.  
• Physician group TeamHealth won $10.8 million dollars in their underpayments case against UnitedHealthcare.  
• Over 100 Alabama hospitals are now suing Blue Cross, claiming a $5 billion loss due to underpayments.

These organizations found the revenue locked up in underpayments and unfavorable contract fees and terms by creating proactive contract management systems. Either via new initiatives (and training) in-house, outsourced services, contract management software, or a combination of these, healthcare organizations like these were able to: 

• centralize contracts in one repository
• compare the performance of payer contracts
• flag critical clauses and fees for review
• extract essential data and insights
• conduct compliance checks
• identify root causes of revenue leakage  
• use benchmarking data to negotiate for better terms

Here, you can survey the payer contract management landscape to determine just how you will enrich your organization by cleaning up and sharpening your contracts.

What is payer contract management?

Healthcare payer contract management is the process of establishing, negotiating, implementing, and maintaining agreements between healthcare providers and insurance payers. It aims to ensure fair reimbursement rates, compliance with regulations, and efficient handling of claims. Effective contract management requires either an in-house team dedicated to manual contract management (spreadsheets),  an in-house team supported by contract management software, or a third-party entity that provides the software and experts to handle all tasks involved in payer contracts. The tasks involved in payer contract management are: 

• initial contract negotiation
• payer proposed change management (which can occur throughout the year)
• contract renewal negotiation (once during the year or three or more years) 
• underpayment detection and recovery
• contract performance analysis (comparing terms and fees across the payer mix for a stronger negotiation stance)

Take a quick, self-guided tour through a powerful contract management and underpayment recovery tool:

Legislation impacting payer contract management

The landscape of payer contract management is ever-evolving, driven by continuous legislative changes aimed at expanding value-based care and alternative payment models. Only by staying informed about legislative changes and their implications, can providers negotiate more favorable contract terms, ensure compliance, and optimize their revenue cycle management processes. These mounting mandates necessitate assertive contract management. 

The following legislative developments are shaping the future of payer contract management.

 1. No Surprises Act

The No Surprises Act, effective January 2022 mandates that patients are not billed at out-of-network rates for emergency services and certain non-emergency services provided by out-of-network providers at in-network facilities. 

For healthcare providers, this means revisiting payer contracts to ensure compliance with new billing and notice requirements.  

 2. Transparency in Coverage Rule

Implemented by the Centers for Medicare & Medicaid Services (CMS), the Transparency in Coverage Rule requires insurers and group health plans to disclose pricing information publicly. This includes providing cost-sharing information to consumers and publicly disclosing negotiated rates with in-network providers and allowed amounts for out-of-network services. 

Providers must adapt their contract management strategies to align with the increased transparency, ensuring that their negotiated rates remain competitive and reflective of the quality of care provided.

 3. Interoperability and Patient Access Final Rule

As part of the 21st Century Cures Act, the Interoperability and Patient Access Final Rule aims to enhance patient access to health information and promote interoperability across the healthcare ecosystem. Effective from July 2021, this rule requires payers to make patient data available through standardized APIs. Healthcare providers need to ensure that their contract management systems are capable of integrating with these APIs, facilitating seamless data exchange and compliance with the new standards.

 4. Medicare and Medicaid Programs; Contract Year 2023 Policy and Technical Changes

This set of changes, affecting the Medicare Advantage (MA) and Part D programs, includes updates to payment methodologies, risk adjustment models, and star ratings.

 Providers participating in these programs must renegotiate contracts to reflect new payment models and ensure they meet performance benchmarks to maximize reimbursement rates. This legislation underscores the importance of staying abreast of policy changes and their implications on contract terms and revenue cycles.

 5. State-Level Legislation

Several states have enacted laws affecting payer contracts, focusing on issues such as balance billing, network adequacy, and provider directory accuracy. For instance, California’s AB 72 protects patients from surprise billing by setting payment rates for out-of-network services provided at in-network facilities.

 Providers must navigate these state-specific regulations, ensuring their contracts are compliant and that reimbursement rates are fair and sustainable.

Understand payer contract elements

Healthcare payer contracts are complex documents that outline the terms and conditions between healthcare providers and insurance payers. Key components include:

1. Reimbursement terms

• Fee schedules: Detailed lists of procedures and services with corresponding reimbursement rates.
• Payment models: Defines the payment structure, such as fee-for-service, capitation, bundled payments, or value-based payments.
• Claim submission: Procedures and deadlines for submitting claims to the payer.

2. Covered services

• Scope of services: Lists all the medical services and treatments covered under the contract.
• Exclusions and limitations: Specifies services not covered or limitations on coverage.

3. Prior authorization requirements

• Authorization procedures: Steps required to obtain approval for certain services before they are provided.
• Urgent vs. standard requests: Different processes and timeframes for urgent and non-urgent authorization requests.

4. Performance standards

• Quality metrics: Standards for measuring the quality of care provided, including patient outcomes and satisfaction.
• Compliance requirements: Adherence to regulatory standards and payer policies.

5. Contract duration and termination

• Effective dates: Start and end dates of the contract.
• Renewal terms: Conditions under which the contract can be renewed.
• Termination clauses: Grounds and procedures for terminating the contract by either party.

6. Dispute resolution

• Grievance procedures: Processes for resolving disputes between the provider and payer.
• Arbitration and mediation: Methods for resolving conflicts outside of court.

7. Payment terms

• Timelines: Deadlines for the payer to reimburse the provider.
• Interest on late payments: Penalties for delayed payments by the payer.

8. Administrative requirements

• Documentation standards: Required documentation for services rendered.
• Data sharing and reporting: Protocols for sharing patient and payment data between the provider and payer.

9. Audit and compliance

• Audit rights: The payer’s right to audit the provider’s records and practices.
• Compliance audits: Regular checks to ensure adherence to contract terms and regulatory requirements.

10. Patient obligations

• Cost sharing: Details on patient copayments, deductibles, and other out-of-pocket costs.
• Eligibility verification: Requirements for verifying patient eligibility for coverage under the contract.

These components ensure clarity and mutual understanding between healthcare providers and payers, facilitating smooth operations and minimizing disputes.

Differences between fee-for-service and value-based payer contracts

Your payer contract management approach will depend on whether your provider group or the organizations in your portfolio are using fee- or value-based payer contracts. CMS is aiming for 100% of Medicare payments to be on a value model by 2030. Commercial payers will most likely follow Medicare’s lead. 

Healthcare organizations know that value-based pricing is the future. According to new research conducted by HFMA and FORVIS for the Value-Based Healthcare Innovation Council, 59 percent of healthcare organizations plan to participate in VBC models within the next 18 months. However, only 50 percent report having the necessary protocols in place to confidently assess these new opportunities. 

Fee-for-service (FFS) contracts operate on a model where healthcare providers are reimbursed for each individual service they perform. In other words, the more services a provider delivers, the more they are compensated. Each service has a specific fee, making it clear and predictable for providers to understand their reimbursement. 

Fee-based detractors claim that this model incentivizes providers to increase the number of services and procedures, which can sometimes lead to unnecessary treatments. Under FFS, the financial risk primarily falls on the payer, as they must cover the costs of all services rendered, regardless of their outcomes. For example, if a patient visit involves a consultation, blood test, and X-ray, each would be billed separately under the FFS model.

In contrast, value-based contracts aim to reimburse providers based on the quality of care and patient outcomes rather than the quantity of services provided. This model is designed to improve overall health outcomes, reduce costs, and enhance patient experiences. Value-based care emphasizes preventative care, care coordination among a patient’s primary doctors and specialists, and cost containment. 

Payments in value-based contracts are often tied to specific health outcomes and patient satisfaction metrics. Providers may receive bundled payments, where a single payment covers all services related to a treatment or condition over a specified period or for a full episode of care. This payment structure incentivizes providers to avoid unnecessary treatments and make all medical choices according to the best patient outcomes.

Strategies for Effective Payer Contract Management

 Negotiation tactics start with clear data

In our post about the most effective steps to payer contracting, we cover how you must:

1. use contract performance analytics to assess your payers’ competitive performance so you can determine your best and worst payers. Prepare to give your best payers the most attention and fight hard with your worst payers to win better terms. 
2. define your group’s value and differentiate yourself from your competitors to win a stronger negotiation stance.
3. determine your priorities for each payer contract - do you want to delete an unfavorable, revenue-diminishing term? Raise fees for certain treatments? 
4. alert your payers (60 to 90 days prior to renewal) that you plan to renegotiate your contract fees and terms

First, contract data helps providers understand the financial implications of their agreements. By analyzing data related to payment timelines, claim denials, and reimbursement rates, providers can identify patterns and trends that impact their revenue cycle. This insight enables them to negotiate terms that align better with their financial goals, ultimately improving their financial performance. 

Then, using contract data allows providers to present objective, evidence-based arguments during negotiations with payers. By analyzing historical data on service costs, reimbursement rates, and patient outcomes, providers can demonstrate the financial and operational impact of current contract terms and justify the need for better rates. This data-driven approach adds credibility to their requests and can lead to more favorable outcomes.

 Data-driven decision making

Finally, using data in negotiations fosters transparency and collaboration between providers and payers. When both parties have access to the same data, it facilitates open discussions and mutual understanding of the issues at hand. The healthcare sector generates 30 percent of the world’s data volume, and hospitals alone produce 50 petabytes of data per year, according to the World Economic Forum. All parties respect data-driven decisions. A collaborative approach based onshared data can lead to more innovative and mutually beneficial contract terms.  

Modern contract management options

That many hospitals still rely on paper contracts highlights the slow adoption of automated technology in healthcare. On average, hospitals manage 52 payer contracts, and, despite their resources, struggle to keep these contracts up-to-date. Large provider groups can manage 10 or more. Given the pressure from payers and from legislation, healthcare organizations must establish a contract management system. You have several routes for accomplishing this. 

Handling contracts in-house

 Appoint a contract specialist

To improve contract management, appointing a dedicated contract specialist is essential. This individual can be an internal team member or an external hire, preferably with training in healthcare regulations and compliance. A trained contract specialist will negotiate better rates, rectify underpayments, and challenge denials, thereby enhancing net revenue. If your practice has fewer contracts than the average organization, a part-time specialist may be all that’s necessary. Part-time specialists can also recommend effective contract management software.

Use contract management software

For practices overwhelmed by contracts, contract management software can centralize and make sense of the chaos. This software reveals data regarding your underpayments, unfavorable payer terms, and the financial impact of contract modifications. It also tracks upcoming renewals and generates essential notifications. By handling the initial contract uploads, the software provider minimizes the workload for your team. These services typically demonstrate a positive return on investment through clear financial recovery opportunities.

Establish a payer relations department

Should you have the capacity, it’s your payer relations department that should spearhead healthcare payer contract management. Key professionals in payer relations should have expertise in the following: 

 1. Negotiations

Payer relations professionals bring specialized skills in negotiation, ensuring that contracts are fair, competitive, and beneficial for the healthcare organization. They analyze market trends, reimbursement rates, and payer policies to secure the best possible terms.

 2. Regulatory compliance

Staying updated with federal and state regulations, such as the No Surprises Act and Transparency in Coverage Rule, is crucial. The payer relations team ensures that all contracts comply with current laws, preventing legal issues and potential penalties.

 3. Data analysis and reporting

Utilizing data analytics, the department assesses the performance of existing contracts. This involves monitoring metrics like claim denial rates, payment timelines, and reimbursement levels. By identifying areas for improvement, they can renegotiate terms or adjust strategies to enhance financial outcomes.

 4. Relationship management

Building strong relationships with payers is essential for resolving disputes and facilitating smooth operations. The payer relations team acts as a liaison, addressing concerns and ensuring that both parties are aligned in their goals.

 5. Strategic planning

By aligning contract management strategies with the organization’s financial goals, the payer relations department ensures that payer agreements support overall business objectives. This includes exploring alternative payment models and value-based care arrangements.

 6. Education and training

The department provides education and training for other staff members on payer policies and contract specifics, ensuring that all stakeholders are informed and aligned.

By effectively managing payer contracts, this department helps secure favorable terms that support sustainable growth and high-quality patient care.

Outsource contract management to third parties

Contract management services for healthcare organizations leverage both software and contract specialists, attorneys, and financial analysts, all who understand the intricacies of healthcare contracts. These experts work to ensure that the agreements are fair, legally sound, and aligned with organizational goals. Their compliance officers ensure that contracts adhere to healthcare laws and regulations. Should any compliance-related issues arise, compliance officers manage them. Their IT specialists manage the contract management software, ensuring it is properly configured, secure, and integrated with other systems used by the organization. Project managers coordinate the contract management process, ensuring that all team members are aligned and that contracts are handled efficiently from initiation to renewal or termination.

Integrating these professionals with advanced contract management software enhances efficiency by automating processes that reduce manual workloads and improve accuracy. As you can imagine, involving this many experts can be cost-prohibitive for many small organizations, physician groups, and MSOs. 

Future Trends in Payer Contract Management

Impact of AI on Contract Management

Artificial Intelligence (AI) is already revolutionizing payer contract management in several ways.

AI is the driver behind predictive analytics, the technology that forecasts future trends and outcomes based on historical data. It allows healthcare organizations to optimize contract terms,  anticipate payer behavior, and manage risks. Predictive analytics can also identify potential contract fee and term issues before they become significant problems, enabling proactive, less costly interventions.  

By applying advanced data analytics, AI can render deeper insights into contract performance. It uncovers patterns and correlations missed by human analysis. These insights support better decision-making, helping providers negotiate more favorable terms and manage contracts more effectively.

In addition, AI tools establish better compliance with regulatory requirements by continuously monitoring contract terms and flagging potential issues. This oversight helps organizations avoid penalties and reduce financial risks. Additionally, AI helps bring attention to real-time updates on regulatory changes, ensuring that contracts remain compliant.

The future of payer contract management is increasingly driven by value-based care models, advanced data analytics, collaboration, and the transformative impact of AI. 

Empowering contract negotiations with data and insights

Effective payer contract management lays the foundation for financial stability and operational efficiency in any healthcare organization. As laws continue to evolve and payers fight harder, healthcare provider groups and MSOs must remain agile, informed, and equipped with the right tools to navigate the complexities of payer contracts. When you fight for the reimbursements you deserve, you enhance revenue streams and ultimately provide better care to patients.

MD Clarity's RevFind automates contract management, enabling healthcare entities to identify their best and worst payers, detect payment trends, uncover underpayments, and marshal evidence for negotiation. This system also ensures each payment is scrutinized against contract terms, alerting staff to discrepancies for prompt resolution. By identifying systemic issues, RevFind helps prevent future underpayments. It centralizes agreements, automates alerts for critical dates, and provides detailed reports comparing reimbursements by CPT code and provider location. By including Medicare benchmarks, RevFind offers a comprehensive comparison of payer contract performance and reimbursements.

Schedule a demo to see how RevFind can enhance your contract negotiations and boost net revenue.

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