Negotiating Payer Contracts
By John Stiles
The process of negotiating third party
commercial insurance contracts can be a
bit overwhelming, especially if you don’t
know where to start. Often, managers in
the outpatient setting tend to shy away
from the idea of negotiating their in-network commercial contracts because
they believe they can’t be effective. In essence, some of the best negotiations are
done when people are informed regarding their contracts and when they have
full authority at the negotiating table to
approve or refuse any offer. Nevertheless,
where does one start?
Knowledge is power. Having access to
the right data organized in a meaningful
and informative way is the key to taking
the next step. We are going to review a
report that every entity should have in
their arsenal of management reports for
evaluating third party payers. This report
will supply the necessary facts to provide
negotiating strength that comes from
being factually informed of underlying
performance and yields of current payer
mix. With this information in hand, you
are protected from being misled by erroneous or manipulative information and
perspectives insurance carriers may use
as they attempt to negotiate terms that
may or may not be in your best interest.
Table 1 is a sample report referred to
as “Revenue by Contracted Versus Non-Contracted Payers.” In today’s high tech
environment, you should have a billing
process and system capable of producing
accurate, informative data that enables
you to manage your business effectively.
It is imperative that you request and have
Having access to the right data organized in a meaningful
and informative way is the key to taking the next step.
available this type of informative data so
that you can effectively and efficiently
manage your business based upon pertinent and timely facts. The report is developed by taking six months of data, based
upon claims from specific dates of service that range from 12 months back to
six months back (six month look-back).
By using this range of data, a six month
gap from the current date is created. The
six month gap insures ample time has
been allowed for payments to have been
received on the largest possible percentage of claims and, therefore, provides an
accuracy that you can depend on.
Your billing system should have the
capability to build this report based on
the primary insurance on any claim.
Since any secondary insurance is under
the guidance of the primary insurance,
once the primary carrier has determined
the approval amount for the claim all
payments, whether from a secondary
insurance or from the patient, should
be rolled up to the primary insurance.
This is due to the primary coverage setting the approval rate per the agreement.
By accumulating data in this way you are
able to evaluate what insurance carriers
are paying you in comparison to existing
By utilizing the six to 12 month look-
back for dates of service to be evaluated,
a full six months of payments is allowed
to be applied to the newest claim. The
report is then segregated into two cat-
egories: contracted payers and non-con-