Consider these strategies to negotiate favorable payer contracts.
Before her practice joined an accountable care organization (ACO), payer contract negotiations seemed impossible, according to Karen Smith, M.D. Her family medicine practice in Raeford, North Carolina, couldn’t compete with large multispecialty clinics and hospital corporations.
“We accepted what we were given,” Smith says. “Contract negotiations were definitely one-sided.”
Since her practice joined the ACO, however, payment rates have gone up. There’s also the potential for shared savings — additional money that ACO members receive for providing cost-effective, high-quality care.
“Now we get paid in a manner that supports our practice, including our overhead,” she says. “That makes life a little easier and it allows me to invest back into my practice.”
The struggle is real
Many physicians struggle with fee-for-service payer contract negotiations because asking for higher payments can feel like a futile effort, says Andrew Harding, co-founder and vice president of customer success at Rivet, a healthcare billing and payment company that works with practices. “Payers invest millions of dollars into modeling software,” he says. “They hold the data and they basically hold all of the cards. They have a lot of power.”
Still, negotiating a successful payer contract is possible for those willing to craft a thoughtful, data-driven argument for why they deserve more money, Rivet says.
“I think this is an often-overlooked revenue generator,” he says. “Physicians think it will be really stressful or not yield any results, but if it’s been more than a few years, chances are your payers haven’t kept up with industry changes and inflation.”
What’s a reasonable payment increase?
Harding says he often helps physicians successfully negotiate a 3% to 5% increase every few years.
Words of caution
When you do negotiate an increased payment rate, doublecheck that it will benefit your practice. “A payer might provide a 5% increase, but when a physician looks at the services they provide most often, they might see those are actually getting a 2% cut,” Harding says.