Strategies for Payer Negotiation

April 15, 2015
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“Let us never negotiate out of fear. But let us never fear to negotiate.”

John F. Kennedy

“Let us never negotiate out of fear. But let us never fear to negotiate.”

John F. Kennedy

Getting – and Keeping — Big Payer Contracts

When it comes to procuring and maintaining your contracts with payers, there is perhaps no skillset greater to possess than that of the art of payer negotiation. In today’s healthcare market, there’s not only a need to be informed and competitive, but healthcare organizations need to have a very clear understanding of where they stand amid the competition.

payer negotiations

Know Your Organization’s Bargaining Power

Before you can begin your payer negotiation, you have to develop a clear understanding of your organization’s expectations, abilities and any areas of weakness or vulnerability that could jeopardize the contracts.

Use SWOT

One way of achieving this is through SWOT analysis. SWOT stands for “Strengths, Weaknesses, Opportunities and Threats” all of which are worth exploring within your organization as a means to demonstrate your organization’s readiness for a multitude of undertakings, including entering into new contracts.

Collect and Analyze Your Data

Through SWOT, you can also identify your principles, the overall impact of the current market state on your organization and what the cost is for delivering quality healthcare. Raw data can be collected and subsequently analyzed through utilization reports which will become invaluable as you move through the process of identifying new payors you’d like to engage with, as well as maintaining good relationships with those you already work with.

The Break-even Point

A great source of data may come from your CPT code usage. By tallying up the most used codes and analyzing what you are paid based on the amount billed for each, you can determine your break-even point. This is a financial marker that will be important when you are pursuing new contracts. If you are entering into a new contract with a payor where you will not surpass your break-even point, you may need to reevaluate forging that relationship – and pass on it unless there is another compelling reason for maintaining it.

Know Your Deal-breakers and Stick To Your Guns

When entering into new contracts it’s also vital to know what your bottom line is and what your “must-haves” will be. In any payer negotiation it’s unlikely that you’ll get everything you ask for, so you need to know what are the absolute deal-breakers for your organization; as well as what you may be able to live without.

You’ll want to review the “legalese” of the contract with a fine toothed comb and make sure that you understand everything set forth in the document. If something is unclear or doesn’t seem in line with your discussions, ask for clarification and stick to your guns. You will also want to be certain of your state laws, which will differ (perhaps subtly) from the federal laws. You will also want a clear, itemized list of what isn’t included or covered within the contract payment terms, which will perhaps be one of the most frequently asked questions by consumers.

Know Your Timeline

Another important consideration for such contracts is leaving or renewing them when the elapsed time has passed. Most contracts will have a clause that allows organizations to leave in the first 90-days after the contract is signed, but you’ll want to be certain of that timeframe before signing on. Furthermore, many engage it what is called an “evergreen clause”, which means that there will be an automatic renewal each year without discussion unless one party explicitly states otherwise.

Include the Right People

When you’re reviewing this information, you’ll want to include several key stakeholders in your organization such as your medical director, office manager, your hospital attorney and the coding and billing specialists who will have a keen understanding of those aforementioned CPT codes.

Keep an Eye on Deadlines

At the end of the day, the easiest mistake to make may be all about timing: don’t get so wrapped up in the big picture that you miss your filing deadlines. The time requirement for negotiating this contracts and making a decision may pass by if you aren’t actively aware of your timetable.