Duke Health Referring Physicians

Practice Management

Tips for Negotiating With Payers

Learn how to maximize your bargaining power


When it comes to contract negotiations, commercial payers tend to have the upper hand. Indeed, it usually hurts a payer far less to walk away from a provider than vice versa. However, a weak hand is not always a losing one, and there are several ways for physicians to improve their position at the bargaining table.

First, it is important to understand your practice’s strengths and weaknesses and to maintain supporting data. What are the most frequently performed services? How many other practices near yours offer the same services? If quality outcomes are your strength, then demonstrating long-term savings is the goal. The metric most persuasive to payers is reduced hospital readmissions.

Additionally, be aware of subtle negotiating tactics. For example, payers may present average rates rather than specific ones. Averages can be skewed by inflating prices for less frequently performed procedures. Another pitfall to watch for is notification of changes. Make sure the contract calls for in-person notification. Lack of adequate notification can lead to surprise rate reductions.

Most physicians are fairly savvy about rates, according to Barry S. Herrin, founder of the Atlanta-based law firm Herrin Health Law. However, many often need help with nonrate details, which can equally impact a provider’s bottom line.

A recent trend to watch for is high-deductible plans encouraged by the Patient Protection and Affordable Care Act, Herrin says. Network agreements now insist these high deductibles cannot be waived, requiring practices to collect large sums of money that many patients may not have.

The other side of the coin involves payers subcontracting with entities like auto and workers’ compensation insurers without providers’ knowledge. These payers usually offer higher rates than commercial health insurers, so a practice may actually be leaving money on the table by being in-network.

“In other words, you have to police not only the rate but also the people to whom the rate is available,” concludes Herrin. “The agreement may say, ‘From time to time we may lease this network to so and so if they agree to pay the rates stated herein.’ Well, that sounds innocuous, but anyone who has been in this business for any length of time knows what it means.”

Herrin explains that providers can avoid this by insisting on prior approval over any expansion of payers covered by the agreement.