Contract Negotiation

The process of negotiating the terms of a provider participation agreement with a payer, including fee schedule rates, payment terms, and contract provisions.

Contract negotiation happens after you are credentialed and the payer wants to bring you into their network. The credentialing decision says you are qualified. The contract negotiation determines the business terms under which you will participate. The fee schedule is the most important thing you negotiate. Many payers send a standard contract with a take-it-or-leave-it fee schedule, especially for solo practitioners and small groups. Larger groups have more negotiating power because the payer needs their provider capacity for network adequacy. But even small practices can negotiate, especially in specialties or areas where the payer has network gaps. Before you negotiate, know your numbers. Calculate your cost per patient visit, including overhead, staff, rent, malpractice, and your own compensation. Compare the payer's offered rates to Medicare rates and to what other payers in your area are paying. If the payer is offering 80% of Medicare and your other contracts are at 110-120% of Medicare, you have data to support a higher rate. Beyond the fee schedule, read the full contract carefully. Pay attention to: timely filing requirements (some are shorter than you expect), prior authorization requirements, termination clauses (how much notice is required on either side), dispute resolution procedures, the payer's right to amend the fee schedule and how much notice they must give, and any quality metrics or value-based payment provisions. Do not sign a contract you have not read completely. Many providers sign whatever the payer sends without reviewing the terms, and then are surprised when they discover unfavorable provisions months later. If you are not comfortable reviewing contracts yourself, have a healthcare attorney review it. The cost of legal review is negligible compared to the revenue impact of a bad contract over its multi-year term. Contracts are not forever. Most participation agreements have a term (typically one to three years) with automatic renewal. If your rates are too low, you can negotiate for better rates at renewal or give notice to terminate and renegotiate.