7 tips for better payer contracts

The prospect of joining health insurance or managed care networks is increasingly attractive to behavioral healthcare providers. In part, that’s because the economics of being out-of-network versus in-network have been turned on their head. In an effort to better control their own costs and profits, payers have been cutting their out of network reimbursements, so that in many cases it makes more sense to go in network.

“With the past few years, insurers have reduced what they pay to out of network providers, almost to the point where it is equivalent or less to be out of network compared to in network,” says Anelia Shaheed, an attorney with the Law Offices of Julie W. Allison, who specializes in managed care and insurance reimbursement. “That has led to a dramatic increase of providers who want to go in network.”

All treatment centers need to weigh the pros and cons of their network status, but experts agree the final decision comes down to the ultimate financial impact.

“[Payers] cut down drastically their reimbursement levels for out of network providers,” says Nathaniel Weiner, an attorney with the Polsinelli law firm in San Francisco. “They also began to audit providers to see if the practices they were using were consistent with what payers view as medically necessary.”

Joining a network can translate to a reduced financial burden on patients, while providing a more reliable revenue stream to providers and potentially result in new referrals. However, for providers new to the process, contract negotiations can be challenging. If not handled correctly, they could even result in the provider reducing their own reimbursements.

Most payers are also narrowing their provider networks to focus on the most efficient providers and cut away the more costly ones. That means it can be more difficult initially for a provider to join those networks. Gaining access and then having enough leverage during the contract negotiation to ensure an acceptable reimbursement rate will require treatment centers to differentiate themselves in the market, back-up their claims with data on outcomes, and avoid common contracting pitfalls.

“You can’t be another face in the crowd,” Weiner says. “Research what their networks look like and if possible create something new that might fit the network need at that time. Some providers won’t have that flexibility if they are already licensed and staffed in a particular way. But the payer’s language now is data. Show us what your data is for outcomes, how you can improve the cost curve and provide better care.”

Once the provider obtains network access, the contract negotiation process can take anywhere from three to six months as providers and payers haggle over reimbursement rates and other contract terms. In the current environment, negotiating leverage comes almost entirely from providers offering unique and provably effective services that can help reduce overall costs.

Is it worth it?

Negotiating a contract with a payer can be time-consuming and frustrating. So why do it at all?

The primary benefit is that providers can stabilize their reimbursements, while also being listed in the payer’s online provider directory. That listing can help bring in new patients and revenue.

However, those listings need to be accurate. Insurer directories often include out of date information, including indications of whether or not the practice is accepting new patients, services provided, and in-network status. This is despite federal rules that would levy penalties and removal from marketplace portals if directories are not up-to-date.

New business from the directory also isn’t guaranteed. Some providers also think that insurance companies themselves will direct referrals to the practice, but that is not the case. Depending on state insurance law, the payers may actually be prohibited from recommending specific providers.

Another potential benefit is reducing administrative complexity. Going in-network can help streamline claims disputes. Providers may also have access to the payer’s medial director to resolve some questions.

“Unfortunately, in many cases the same patient who goes to an in network provider may get an authorization much more easily than with an out of network provider, even with the same criteria,” Shaheed says. “You can save time and money on authorizations.”

The New Haven, Conn.-based Turnbridge treatment center joined the Anthem network roughly one year ago. While CEO and founder David Vieau says that he hasn’t noticed Anthem’s approvals being measurably faster, reimbursements have been accelerated. “Once you are in network, those claims go to a different department and to a team of individuals you are working with on a regular basis,” Vieau says. “The processing is easier, even if the number of denials doesn’t really change.”

Ultimately, in-network status can also be a true help to clients.

“We have a responsibility to the consumer,” Vieau says. “If cost is a barrier to entry, then the provider has to think about that. As out of network deductibles have increased, the average American can’t afford them. Being in network stabilizes that to a certain degree. The consumer is spending less money on the front end to satisfy insurance requirements, and that makes more money available to provide help later in the process.”

Be selective

While there are benefits to being in-network, the value of those benefits will vary by payers. Providers should carefully select potential networks based on availability (can they join the network at all?) as well as their current patient and payer mix. How much business the provider already does with an insurer (or how much business they may be turning away because they are out-of-network) can guide that selection process.

Find out about the rate of physician or provider turnover for the plan. A 2017 Health Affairs report found that narrow network Medicaid managed care plans experienced three-percentage-point higher turnover rates in one year, and a 20-percentage-point-higher rate in five years compared to non-narrow network plans, for example. Those metrics could give providers an idea of how they might be treated while in-network.

Also, look at your own claims data with that particular payer over time. How much revenue have they provided across different services, and investigate how they handled denials.  Talk to your admin staff as well and find out what their experience has been like when dealing with a specific payer.

At Turnbridge, Vieau says he’s been evaluating plans based on their focus on effectiveness.

“Our approach is focused on efficacy, we believe that the longer a person is engaged in some form of treatment, that increases probability they stay sober,” Vieau says. “Our focus on efficacy has played an instrumental role in our decision to go in-network or out-of-network."

Turnbridge completed a lengthy contract negotiation process with Anthem that was heavily reliant on data from the provider and a willingness on Anthem’s part to consider that when determining a reimbursement rate.

According to Vieau, data on their success rates (97 % reach their one-year sobriety milestone, for example) helped move the needle.

“We talked to them, showed them our results, and said the standardized rate wouldn’t be fair,” Vieau says. “We struck a deal. Other insurance companies have varying degrees of enthusiasm around efficacy. They aren’t going to shift from their reimbursement model unless you give them a reason to do so.”

Contract terms

Negotiating a contact with an insurance company should be a team effort. “The biggest mistake I see in contracting is not having the billing department and medical director or the clinical team included in the discussion,” Shaheed says. “The billing staff can tell you if you forgot codes or if a doctor is not credentialed.”

Providers may feel they don’t have much leverage with payers, but Shaheed says there are ways to negotiate from a position of strength. If the provider is receiving a significant amount of out of network compensation from the insurer, they may be more willing to compromise, provided there’s an opportunity to save money. Data on success rates and unique advantages the provider can bring to the network are also key negotiating points.

“If you have no history or you’re a new facility, it can be more difficult to get a contract,” Shaheed says.

There are several other key contract components to watch for, including:

1. Providers need to know their costs to effectively compare them with reimbursements and determine whether the relationship is financially viable. “If the provider doesn’t know their break-even costs, they need to,” Shaheed says. “Going in network is going to financially ruin you if you don’t know your costs.”

2. Always negotiate a rate increase in the contract, otherwise the provider may be stuck with the same rate for several years. “Look at the terms,” Shaheed says. “Make sure you know ancillary services and the codes. Look at the percentage paid of the Medicare allowable rate as well. If Medicare changes the rate from one year to the next, and you are contracted at the Medicare rate, then you are going to get the same percentage of a lower reimbursement.”

3. Weiner says that language around medical necessity can be a “big trap” for providers. “Definitions vary, and there are some things they can put in the contract that allow them to take another bite of the apple,” Weiner says. “If they’re asking for the lowest-cost treatment, that can lead to a lot of denials.” He also says that during negotiations the medical necessity language should be subject to objective criteria, and that there is a reciprocal sunset on the finality of a claim. “For example, the provider would want to say they can bill for up to six months or a year after delivery of care, and the payer has six months or a year to come back and question that claim,” Weiner says. “There has to be an agreement that at some point, care has been provided and payment received, and there won’t be any further review.”

4. Payers should negotiate rates before they go through the credentialing process with the insurer. “When you get to the credentialing stage, it’s important to make sure the licensing is correct, that you know all of the codes and services that will be billed, and that you know what you need to ask for or carve out,” Shaheed says. Waiting until the end to complete those processes could lead to the provider not having the right credentials in place, or forgetting to include specific services in the contract.

5. Also pay attention to language around take-backs (when insurers can reclaim money already paid), and the length of term of the contract. If the provider is dissatisfied with the contract over time, what are the rules governing cancellation of the contract? Are there fines associated with early termination?

6. Providers should also determine how the contract will apply to new lines of business or insurance products that are introduced after the contract is established. This can be particularly important for companies that offer ACA marketplace plans. “Get them to agree to automatically include you in those new lines of business, otherwise there may be patients purchasing ACA plans and thinking the provider is in network, but it hasn’t been added to their contract yet,” Shaheed says.

7. For payers that offer Medicaid or Medicare managed care offerings, providers need to make sure they can meet the state and federal audit requirements. “Enforcement tools are more stringent, and revenues can be automatically reversed if it turns out the provider has team members on the exclusion list or federal debarment list,” Weiner says. “Very few behavioral healthcare providers are equipped to monitor and police the higher compliance burden, and they can find themselves contracting to do all sorts of things that they are not set up to do.”

The strategic plan the provider has for the organization is also an important component of contract negotiations. If the goal is to build up the business and sell it, there may be some limitations in the contract that could affect their ability to terminate. “There are also ‘least favored nation’ rates,” Weiner says. “That means if you are sold to another provider or you buy another provider, and one of you has a lesser rate with that payer, the lower rate automatically applies to both businesses.”

Focusing on outcomes

With the increased focus on data and outcomes, there has been some interest in establishing value-based reimbursement programs.

The Centers for Medicare and Medicaid Services are already experimenting with value-based or outcome-based reimbursements, and private payers are beginning to follow their lead. Originally the federal government had hoped to shift half of all payments to alternative models by this year, but the Trump administration has backed off of that target.

Shaheed says she has recently worked on several value-based payment contracts, but they are the first of their kind that she has dealt with. “The clients are just now evaluating along with the payer to see if this type of contract works for them,” Shaheed says. “We don’t really know if it was cost effective from the payer side.”

She has also worked on all-inclusive contracts, in which the provider receives a flat fee for a certain package of services. In both case, the providers came up with a rate that they would require in order to reach the best outcome for the patient.

While outcomes-based reimbursement contracts are still rare, having outcomes data is still an important negotiating tool. “If you have 97% of individuals remaining sober, we’re making assumptions about what that does for overall health in terms of fewer emergency room visits or treatment of chronic diseases,” Vieau says. “Those assumptions become fodder for conversation about reimbursement.”

Weiner expects more treatment centers to join payer networks, since very few can remain viable without the steady stream of managed care patients and revenue. For providers, the key to successfully negotiating those payer contracts will be reliable data and the ability to make themselves stand out to insurers who are shrinking their networks.

“You need a differentiated success rate model if you want a differentiated reimbursement model,” Vieau says.

Brian Albright is a freelance writer based in Ohio.