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Five Ways to Demystify Managed Care Negotiations
Savvy tips on how to stand your ground at the bargaining table.
Vickie Axsom-Brown
Publish Date: June 9, 2008   |  Tags:   Financial Management
After working for health insurers for 18 years, I can give you a pretty good idea of how things look from "the other side." The people who negotiate managed care contracts do it full-time, and they often encounter facility managers who are:
  • inexperienced with managed care negotiations;
  • intimidated by managed care contracts and legal jargon; and
  • geared more toward "getting it over with" than winning.

    As a result, the managed care payer gets what it wants when it wants it ? and the facilities are stuck with contracts that can undermine their best efforts to make a profit. This is really a shame, because facilities have more clout than they realize. It's possible to reshape contracts so they're more to your advantage; in fact, almost every aspect of a contract is open to negotiation. I've developed five simple steps that can help any facility manager negotiate more advantageously.

    1. Investigate the payer and employer market.
    You need to know as much about the payer and the employer market as the payer knows about the facility. This requires you to do some homework, but it will be well worth it. Begin with the information you have in your records:
    1. What case volume and overall reimbursement does this payer represent for the facility?
    2. How long does it take the payer to pay claims?
    3. How many claim denials does the payer issue?
    4. How difficult is it to get timely payments?
    5. What value is your facility to the payer? Who are other competitors within your market? What type of relationship do they have with the payer?
    6. What key employers does the payer insure, and what's your experience with them?


    The first time you assemble this information, it will be challenging. After that, you can do it on a rolling basis. We keep claims management information current, and it pays. Sometimes a quick review tells me there are problems or that it's time to renegotiate the contract.

    2. Read the Contract.
    This often is the most difficult part of the whole process, but it's essential. You must sit down and read the contract-more than once. Contracts are not designed for easy reading. In fact, they're designed to shift as much care and services management to the facility at a reimbursement rate that's most favorable to the managed care payer.

    First, make several copies of the contract, and put your original away for future use. I usually read the contract at least three times:
    1. The first time through, I highlight everything I don't understand. I check for key term definitions, process explanations, responsibilities, and contract termination requirements.
    2. The second time, I highlight (in a different color) everything that is addressed repetitively in separate sections. Watch to see if these are consistent, if responsibilities or commitments are changed in later sections, or if there's conflicting language.
    3. Lastly, I check to see if all reference materials or exhibits are included. Are there caveats in the exhibits that negate other parts of the contract?


    Each section of the contract is important, but I've found that they get more important as you proceed through the document. If you get bored, take a break, or stop and then pick it up later. Legal language can make your eyes glaze over, but it's not acceptable to skip parts or even skim over it. If you do, those parts will come back to get you, most likely in the wallet.

    3. Prioritize Your Needs.
    Here's where you begin to put your action plan together.

    (A) Using the highlighted areas of the contract, generate a needed information sheet that identifies the specific information needed from the payer to complete your contract review.

    (B) Next, create a contract issues list. By contract section and page, list the changes you would like to see incorporated into the agreement. Once you have completed this step, go back through your list and place each in one of these three priority classifications:
    • Things that must be in the contract (issues that directly affect the facility's successful participation in the network). This includes ensuring timely claims payment, having a defined contract amendment process and making sure the contract is governed by the law of your state;
    • Things needed in the contract (issues that help ensure the facility's success with the payer's network participation). An example of this might be, for example, that "Hold Harmless" language must be in accord with state law and apply only to HMO services.
    • Things desired in the contract (additions that provide further advantages ? but are not required). This may include establishing a payer penalty when claims payment timelines not met and establishing equal payer responsibilities and penalties when contract terms are not fulfilled accordingly.


    Once you have prioritized the issues generate a spreadsheet that lists contract issues in these three categories.

    (C) Once the priorities are set, identify the language changes you want. Develop two language change options ? the first is the best language for the facility, the second meets the facility's needs but does not offer the fullest contract advantage as the first option.

    Here's an example of this as it relates to the terms for prompt payment.

    Payer Language: "The Payer, or its Affiliates shall use its best efforts to pay the ASC within thirty (30) days of receipt of a properly submitted claim. Payment will be based on the Fee Schedule."

    Option 1 revision: "If the Payer, or its Affiliates fails to pay in accord with the defined timeframes stated in Section referenced, the Payer, or its Affiliates shall pay the greater of the established fee schedule (Exhibit X) or the actual billed charge."

    Option 2 revision: "If Payer or Affiliate fails to make claims payment in accordance with the defined timeframes stated in Section referenced, Payer or its Affiliate shall be obligated to pay the agreed upon rate (or billed rate) plus interest accruing at the annualized rate on the first day of the month on which such amounts were due plus three percent (3%). All payments to the facility will be considered final unless adjustments are requested by Provider within ninety (90) days after receipt of payment explanation from Payer."

    If you've never done this before, a good resource is Managed Care Contracting
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