The Importance of Understanding Payer Contracts

By Jana Holt

Understanding your payer contracts can affect denial of payment as well as the amount and timeliness of reimbursement.

Insurance payers are constantly making changes to contract terms: changing to their fee schedules; how they interpret contractual language; full-scale policy changes, etc. As a result, physicians and medical practice administrators must remain vigilant to ensure that they are being reimbursed correctly and competitively by their managed care payers. 

Provisions to consider when reviewing potential new or existing payer contracts are:

• Parties, plans and products

• Covered services

• Key definitions

• Credentialing requirements

• Payment provisions

  • Late payments/non-payments

  • Method of payment (VCC, EFT, Check, etc)

  • Prior authorizations

  • Submission of claims

  • Member responsibility and COB

  • Overpayments, repayments, future offsets

  • Appeals and dispute resolution

  • Reimbursement rates

  • Down-coding and bundling

• Policies, procedures and guidelines

• Utilization review and audits

• Term and termination

• Amendments (unilateral or mutual agreement?)

The last item to consider is the most alarming. Insurance payers can implement policies and amendments to contracts without mutual consent that can have a significant impact on reimbursement. This is called a unilateral amendment. A unilateral amendment means that payers can change contract provisions without notifying the physician. Some states require notification to the provider of any contract changes or amendment. If no state requirement exists, payers are allowed to amend the contract at any time and some without the approval of the physician.

Insurance payers can also implement new policies or policy changes at will. These policies can affect a variety of things including reimbursement for services, covered services, and medical necessity requirements. Most insurance plans communicate policy changes via a newsletter subscription that can be accessed on their websites or via email list serve. Be sure to sign up for any available notifications for payers you contract with.

Before signing initial contracts or renewing existing contracts, here are some things to consider:

• Review the contract entirely before you sign it

• Consider having a knowledgeable healthcare attorney review the contract

• Keep a copy of the signed contract and keep it accessible

• Know the process for reporting unfair practices by the insurance company within your state

While PMRG does not handle contract negotiations, we understand the importance of contract language and provisions included in provider contracts that can significantly impact your reimbursement. We encourage providers to understand their contracts and seek out assistance in negotiating a contract that is favorable to the practice and the provider.