Five reasons to say no to payer contracts

A payer contract is more than a mere fee schedule. There are several other factors to consider when deciding to keep or terminate a payer contract.

A payer contract is more than a mere fee schedule. There are several other factors to consider when deciding to keep or terminate a payer contract. Oddly enough, the fee schedule was a secondary consideration in most payer agreements I have terminated through the years. In this article, I will discuss five reasons to consider terminating or renegotiating an agreement. I also will introduce an old friend, the Payer Report Card.    

Overflowing appointment schedules 

If you have more patients than you have room for or time to see, you have leverage with any payer who makes up five percent or less of your revenues. Let the payer who pays least and the payer who is the biggest pain know that they need you more than you need them. Make your issues with them-be they lengthy credentialing, a high denial rate, and/or low fees-their issues. These are the issues that must be addressed to your satisfaction if you are to remain in their networks.    

Credentialing issues 

There are opposing incentives when it comes to credentialing new providers. The sooner a practice can get a provider credentialed, the sooner it can bill and get paid. Conversely, the longer it takes a payer to credential a provider, the more money they save since the practice may not bill for services delivered by un-credentialed providers. If your state does not have credentialing regulations that include a timeline, your practice could lose thousands of dollars due to credentialing delays. My recommendation is to make it an issue with your payers. Share your expectations in advance of bringing in a new provider and let your provider representative know their performance will be part of your next renegotiations.  

Arbitrary downcoding 

Some payers have been sneaky in automatically or arbitrarily downcoding E/M services. Level 5 services are downcoded and paid at level 4 prices, and level 4 services get the level 3 treatment. Think about it this way: Level 4 office visits (new and established) generally pay 45-55 percent more than their level 3 counterparts! I don’t see this often, but when I do, I call the payer right away. I consider such behavior egregious and would be willing to terminate an agreement over unwarranted downcoding.

Excessive denials/higher accounts receivable 

Some payers deny more claims than others. Ask your staff to show you the first pass denial rate for your payers-that is, what percent of initial claims submitted to each payer are denied. Ceteris paribus, a payer who denies more claims is cutting into your bottom line since a denied claim requires additional work by your billing department.  

While looking at denial rates, take the extra step to look at why claims are being denied.  You may find patterns-incomplete/incorrect registration, for example- that can be improved internally.


Another burden that payers distribute is the authorization process. It costs the practice more to do business with a payer who needs an authorization for seemingly everything.  Unless a payer can prove that my practice has much higher utilization of a procedure or test than our peers, I fight to make the authorization go away since the authorization process’s only result is costing us more money.

The Payer Report Card 

I close this column with a nod to the

, a tool that has served me well for years.  It has been invaluable in payer negotiations and has led to higher reimbursements, and occasionally, the termination of a bad agreement. Simply put, the Payer Report Card is a template that is used to rank each of my payers on an “A” to “F” basis; there is a comment field next to each payer’s grade where comments on what is liked/disliked about the payer can be added. I ask each employee and clinician to rank the payers from his or her perspective. The results are subjective, but irrefutable: your team is letting you know which payers make it easiest-or hardest-to provide good patient care and get paid.

Fees are top-line math, but underperformance by a payer often offsets a better fee schedule.  When making decisions regarding payer agreements, it is prudent to look at impact on both the top line and the bottom line.

Lucien W. Roberts, III, MHA, FACMPE, is administrator of Gastrointestinal Specialists, Inc., a 27-provider practice in Central Virginia. This is his 75tharticle for Physicians Practice. He may be reached at