Core Elements in Your Payer Contracts

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Adequate and timely reimbursements are essential to an independent medical practice. Practices’ operational leaders should create and maintain a spreadsheet master for their top five or six major payers. At a minimum the following information should be listed for each payer:
  • Number of days payer has to reimburse provider for covered services
  • Number of days provider has to submit claims after service or visit
  • Scope and list of services covered by payer
  • Reimbursement rates for all covered services
  • Claim denial dispute procedures
  • Term of contract
  • Notice provisions
  • Notice periods for renegotiation and termination

Reviewing and understanding the complex components of each contract is crucial to avoiding claim denials and offering comprehensive (and reimbursable) services to patients.

In addition, practices should analyze the language in a contract before final negotiations. Some items to consider are:

Joint Construction of Agreement Clause

The clause notes that both the payer and practice had the opportunity to be represented by counsel and the agreement was “drafted jointly by the parties.” With most contracts, providers may successfully receive a few requested changes, but most often the payer dictates contract language. Practices should attempt to reject this language in a contract. 


Lesser Of 

Contracts typically include language stating that reimbursement is based on “lesser of” language where payers incorporate the language to ensure reimbursement rates favorable to them. Practices should verify state schedule rates against the existing contract rate to make sure there is enough reimbursement to make the service financially sustainable.

Losing Termination Rates 

Contract includes language that undercuts the practice’s right to terminate the contract with or without cause. As an example, in a merger, one practice may have to stay with their lower reimbursement rate and not “bump up” to the other practice’s reimbursement contract rate. Practices should also consider the time length of a termination clause – asking a payer for a specific limit on this provision.

Notice Provisions 

There may be provisions that allow changes to rates or requirements through “generally accepted media.” Practices need to define exactly what is the generally accepted media – for example, an email to the practice administrator instead of a physician/provider and not through an announcement in a rarely visited website or newsletter. Reviewing the “accepted media” on a regular basis will help the practice avoid being surprised by revised reimbursement rates or requirements.
The AMA has several resources to help practices in evaluating their payer contracts. Those practices or providers with membership can view the documents here.

The information in this blog was taken from an InfoDive webinar series on Contract Analysis, January 2019