Negotiating favorable terms in third-party health care contracts is critical to your organization’s success. In today’s practice setting, there are multiple payment options available for providers and practices, including traditional fee-for-service, capitation, and risk sharing pools.
Each method has a different impact on risk allocation and how the practice generates profit. Some payment methods are better for certain specialties, but all have pros and cons. Therefore, new practices should take the time to weigh the risk and benefits associated with each option before contracting. Similarly, existing practices should regularly evaluate their profitability under current contracts and consider renegotiating their payor contracts.
Providers often focus on the fee schedule and scope of services when contracting. While the fee schedule has a significant impact on profitability, other contract provisions can equally affect it.
For example, reimbursement denials and partial payments for “not within scope of services” or “not medically necessary,” can hamper income — especially if the contract does not provide for fair dispute resolution. Additionally, contracts that require increased administrative resources can increase expenses. In the event a dispute or early termination arises, unfavorable terms can lead to costly litigation.
All these issues will have a significant impact on the practice’s profits, which is why practitioners must ensure their payor contracts provide fair terms to allow the practice to profit.
Many providers fail to negotiate the terms of their payor contracts because they do not feel they have bargaining power. While this feeling is understandable, it is not true; hospital systems and super groups certainly have bargaining power and more resources and experience in contracting. However, small practices also have bargaining power and should not feel as though payor contracts are “take it or leave it.”
Our attorneys have experience negotiating payor contracts and can help small practices understand proposed terms, identify potential issues, and negotiate more favorable terms.