Having made the case as to why a careful review and negotiation of healthcare insurance contracts is so essential for healthcare providers (in Part 1 of this 3-part series), we will now focus on examining the contract provisions that often have the most significant impact on reveue, operational efficiency, and patient care. A strategic approach to the negotiation process begins with understanding key contract terms to help identify potential risks and anticipate outcomes, and working with counsel to draft specifc language to help mitigate such risks.
Below are some of the most critical clauses in payer contracts and how providers can negotiate them more effectively:
- Termination and Renewal Provisions
Provisions that allow insurers to terminate without cause or renew contracts automatically can have financial and operational consequences for providers and hospitals. Steps to mitigation this risk include:- Adding clear notice periods.
- Verifying how the insurer plans to communicate changes to key contract terms prior to its renewal.
- Prior Authorization Requirements
When payer contracts fail to clarify the payer's prior authorization procedures, operational efficiency and patient care both suffer. To mitigate this risk, providers can consider:- Requesting well-defined criteria for authorization, processing timelines and communication protocols.
- Establishing limits on the insurer's ability to retroactively deny claims, including requiring timely notification of potential denials.
- Including language that prohibits payers from denying claims once they have already issued the necessary prior authorization.
- Reimbursement Rates and Payment
Schedules
Unfortunately, there are no set standards for payer reimbursement rates, particularly when it comes to reimbursement for out-of-network services and emergencies. Risk mitigation steps include:- Negotiating a rate schedule for both in- and out-of-network services.
- Addressing administrative processes such as claim submission timelines and dispute resolution procedures, including those for out-of-network claims.
- Defining limitations on "balance billing" to protect patients from excessive out-of-pocket expenses.
- Appeals and Dispute Resolution
Even though payer contracts may include a previously negotiated rate schedule, earning the full amount for services rendered is not a guarantee. You could approach this by:- Including afair and independent appeals process in the contract for any claims denied, with clearly defined response timelines.
- Including the right to request an independent review so that dispute resolutions are less likely to be weighed against patients.
- Payer Policy Updates
Payers may update their reimbursement policies (including service codes) without prior discussion or notification, resulting in processing delays, increased administrative costs and implications to the bottom line. To stay informed and aligned, consider:- Requesting prior written notification by payer of impending policy changes.
- Specifying the method of communication.
Negotiating payer contracts, whether first-time or renewals, is a complex, and often daunting, process for physicians and health systems. Many contract provisions carry significant financial and operational risks that can have a detrimental impact when disregarded or poorly negotiated. Unfavorable reimbursement rates and excessive prior authorizations can harm revenue streams, while complex claims processes, delays in payment and disputes over coverage can increase administrative costs and cause irreparable to damage the patient-provider relationship.
Although certain aspects of the health insurance system are far beyond provider control, providers can mitigate risk and level the playing field by negotiating key contract terms with insurers with the support of experienced healthcare counsel.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
