What payer negotiations really require: Preparation, strategy and nerve

Payer contract negotiations have grown more contentious in recent years, and the gap between what practices settle for and what they could secure has never been wider. For many physician practices, the problem starts long before anyone sits down at the table.

Doral Jacobsen, CEO of Prosper Beyond VBC, a consulting firm specializing in payer contracting and value-based care, said the anxiety most practices feel going into negotiations is rooted in past defeats, poor groundwork and a misunderstanding of their own leverage.

“Most practices that we work with haven’t identified or articulated, or really understand what it is that they want in the short term and the long term,” Jacobsen said. “That leads to a lack of confidence; they’re not really sure what they’re asking for and how to do it, and that can lead to fear of rejection.”

A foundational step is a thorough audit of existing agreements. Many practices have no clear picture of how their contracts are performing or how contract language is eroding revenue. Jacobsen described a Florida client who believed a specific Medicare Advantage agreement was their worst performer, only to find after a full assessment that it ranked in the middle of their eight Medicare Advantage contracts. An MGMA survey found that nearly 20% of practice leaders never review their payer contracts, leaving them exposed to rate erosion and missed renegotiation windows.

Using price transparency data the right way

The expansion of price transparency requirements has given practices access to more market data than ever, but Jacobsen cautioned that payers are already using it as a hammer in negotiations. Her approach is to calculate reimbursement as a percentage of Medicare across a practice’s top procedure codes, then compare that against competitors and across all payers. But the data has significant blind spots.

“It doesn’t tell the whole story, not by a long shot,” she said. “It gives you a snapshot of a rate in time. It doesn’t give you good information about edits, how they’re eroding revenue. It doesn’t give you any information about administrative burden.”

Down-coding is one example: A payer may list an evaluation and management code at 00, but a practice receiving 5 after down-coding would not see that gap in the transparency data. The more meaningful benchmark, Jacobsen argued, is not what other independent practices are being paid but what it would cost a payer if the practice were acquired by a health system.

Contract terms that get overlooked

Headline rates draw most of the attention in negotiations, but several other contract provisions can have an equal impact on financial health. Escalator clauses in multiyear agreements are among the most underutilized tools available, allowing practices to secure automatic rate adjustments tied to inflation or a fixed percentage without renegotiating from scratch each cycle.

Jacobsen also flagged two clauses she views as nonnegotiable. Termination rights — specifically, the ability to exit an agreement within 90 days without cause — give a practice the ability to walk away if a contract deteriorates. And unilateral amendment provisions, which allow payers to change rates or add products without provider consent, should be removed or strictly limited. Medical Economics has noted that such clauses leave physicians with little recourse beyond termination if a payer decides to cut rates mid-term.

Building a case before entering the room

Jacobsen said the practices that fare best are those that have done the most work before any meeting is scheduled. That means a one-page value proposition written for a payer audience, covering the practice’s size, services and locations alongside outcome data, patient satisfaction ratings and specific areas where the practice addresses gaps in the payer’s Healthcare Effectiveness Data and Information Set measures.

Asking the right questions early also matters. Jacobsen recommends prompting the payer to consider what would happen to the total cost of care if the practice were acquired by a health system, and whether a network adequacy issue would arise if the practice were to go out of network. Both questions shift the conversation toward the practice’s value before rates are ever discussed.

“When a practice understands its worth, they find their power,” she said. “They find out who they are and they get brave, which is what you really need in a negotiation.”

Negotiate on a regular cadence

The best-performing practices are always in some stage of a payer negotiation, Jacobsen said, because staff costs and operational expenses increase continuously and reimbursement needs to keep pace. Some negotiations take upward of 14 months to close, so practices need to plan well in advance of contract renewal dates.

“The place you don’t want to be is you get a love letter from a payer and then all of a sudden you’re just trying to claw your way back to equal to current rates,” she said.