Negotiating Payer Contracts


Lancaster, PA
Best answers
Not sure if this is the right place to put it, but I'll ask.
What type of formula or what are you using to base your fee schedules on when negotiating the payer contracts. Some payers allow you to negotiate for a higher rate (not Highmark!) so we are trying to figure out some kind of base to work from; ie. what is the lowest you will go for allowable rate. Someone suggested using the PI/WC ratio to Medicare. Just trying to get some other input.
I believe most practices compare fees with Medicare rates. Some practices will agree on 100% of medicare, some will take no less than 115%-125% of medicare. If you have a lot of good paying commercial payers, then you may want to compare with your highest payer. It all depends...

Example: If your commercial payers pay $160 - $200 for procedure X, and Medicare rate is $110, then the lowest you can accept is $110 (if you don't accept anything less than Medicare), and your goal is to negotiate a fee in $160-$200 range.
Marketing and demand. If you are in a market with lots of similar specialties, then the above advice on using CMS fee schedules works well. If you are a specialists' specialist or in an area without lots of competition, then you should be able to negotiate higher fees for your bread and butter procedure codes. Usually 80%-85% of your revenue comes from the same 20-25 CPT codes so those are the ones you want to concentrate on. The CMS Medicare fee schedules should be your absolute bottom. Use their fee schedule program for your locale to get some numbers on your common CPT codes if you don't already know these and work up from those.
How do you go about negotiating with the payer to not have it in your contract that you will pay the affiliates any discounted rate that was negotiated between the affiliates and the payer?

There are more and more of the TPA's that receive an additional discount that we do not want to accept. We would like to see this written out of our contracts and I am needing to know the proper way of presenting this to the payer. Would this be done with a letter of agreement or some other means?

Thanks for any help.
I am beginning the process of renegotiating my contracts with all of our payers. This is all new to me, so any advise on how to go about this would be greatly appreciated.