Published: Sep 27, 2023
Revenue Cycle Management

Payer Contract Negotiation: How to Prepare, Negotiate, & Track Effectively 

Suzanne Delzio
Suzanne Delzio
8 minute read
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According to a recent MGMA poll, a full 33 percent of providers fail to review their contracts yearly. Another 17 percent report NEVER reviewing them, and 16 percent review contracts every 2 to 3 years or more. 

58% do review annually--not a bad number. 

Of those 58%, however, how many renegotiate aggressively? It can take some assertiveness to win just reimbursement from payers. The contracts originate with the payers after all. And they have far more time and attorneys than providers do. 

If your practice is not regularly examining and renegotiating contracts with insurance plans, you could be abandoning revenue. You can stand toe-to-toe with payers and negotiate your best contract terms without risking payer relationships or, worse, the loss of a large swath of patients. Here, we arm you up with ways to win in payer contract negotiations. 

Take a quick, self-guided tour through a powerful contract management and underpayments recovery tool:

You have a right…to fight

Disputes between providers and payers are becoming more common. As of May 2023, six big medical centers were out of network with insurance companies, including Aetna, UnitedHealthcare and BlueCross. Four more splits were pending. 

Patients are the ultimate losers in these feuds. In early 2022, the University of Mississippi Medical Center and Blue Cross / Blue Shield entered a stalemate over reimbursement rates that lasted 9 months. During this time, 750,000 residents were left without health coverage. 

Suddenly facing the prospect that a majority of patients will not have the money to pay for your organization’s services can be daunting. Still, advocating for favorable fees and terms may be the only route to ensuring your long-term viability. 

Providers that hold their ground can win. 

In 2022, a three-judge arbitration panel in Florida ruled that UnitedHealthcare reimbursed ER clinician group TeamHealth clinicians 30 percent of fair compensation for care provided. The resulting $10.8 million award brought TeamHealth’s total recovery from UnitedHealthcare to nearly $500 million. Centene and Molina know UnitedHealthcare’s pain. TeamHealth won underpayment cases against these two insurers as well.

According to TeamHealth President & CEO Leif Murphy, "like many insurance companies across the United States...Molina refused to negotiate fair reimbursement with emergency medicine physicians, coercively underpaid physicians, and exposed its members to its underpaid balances."  

Murphy’s statement reflects the experience of many providers who struggle to win fair reimbursement from payers. 

Your interactions with payers don’t have to reach this level of acrimony, however. Simple awareness of points in your contracts where you have negotiating room is a responsible first step in winning more fair terms.   

Prepare, Negotiate & Track to Win in Payer Contract Negotiations

Insurers steer patients to providers, increasing providers’ patient volume. For this reason, providers can be hesitant to push too hard to win favorable terms in their contracts. Because payers write the contracts initially, these documents are full of terms that benefit them the most. 

Some healthcare leaders suspect and even state assertively that payers rely on providers’ overwhelm to write whatever they want into a contract. Whether that’s true or not, you do need to make sure the language in your contracts is understandable, fair, and supportive of your business. 

Prepare: Before the Contract Negotiation

Getting a grasp on and having input into the terms of your payer contracts is empowering. Once you’re aware of where payers fashion terms that keep more revenue in their pockets, you can negotiate assertively. 

Focus on the fee schedule

The fee schedule is the most critical aspect of the contract. Start at your organization by listing your top codes that drive the majority of practice revenue. It’s likely that 20 of your codes generate 80% of your revenue. Fight hardest for the best rates for that 20 percent. Don’t let payers offer good rates just for services you rarely provide. Most likely, you won’t see much revenue coming in from those services. 

Be careful if a payer proposes reimbursing you, for example, at an average of 160 percent of Medicare. It sounds good, but they are likely quoting from across your fee schedule of 500 codes or more. Avoid the averages and pay most attention to the reimbursement rates of your most common CPT codes. 

The next step is to negotiate what each payer is currently paying you for each CPT code you bill. Benchmark your payers' rates against Medicare’s rates. You can find Medicare’s reimbursement rates for all physician services here. (Medicare does not negotiate its rates.)

Create a spreadsheet like this one to compare your payers’ payments by CPT code.

CPT code Medicare Volume Medicare Rate Medicare Total Revenue Payer 1 Volume Payer 1 Rate Payer 1 Total Revenue Payer 2 Volume Payer 2 Rate Payer 2 Total Revenue

Of course rates will vary, and payers will have justifications about why their rates are lower than their competitors. Present your findings respectfully but firmly, and prepare to compromise on some of your terms. 

Other items to document include:

  • Whether any rates from any payers are below Medicare rates. This figure should be zero as, on average, private payers pay 224% above Medicare rates, according to a Rand Corporation study. 
  • What portion of your revenue each payer contributes. Negotiate most aggressively with your biggest payers. 
  • Rate escalations for each payer over the last 3 years. Aim for a 3 to 5 percent increase every three years. 
  • The most frequent, most lucrative services you provide. These you want to assertively negotiate to get good rates. 
  • The least frequent, least lucrative services you provide with this payer. Winning lower reimbursement for these will be more palatable. 

While these steps require significant time investment upfront, the benefits roll in for years to come. Further, once your system is in place, the time it takes to update it each year diminishes significantly. 

Determine Your Revenue Per Visit to Negotiate Fee Schedules

The next step in preparing effectively for payer contract negotiations is to get a firm idea of the figures you refuse to go below for each CPT code. When setting your lowest acceptable rates, consider the profits you need for organization viability. Then determine the prices for each service.  

To get a ballpark idea of the lowest rates you’ll accept, add up your revenue for the past 12 months. Divide that number by the number of patients your organization negotiated. If your practice remained profitable and your 12 physicians brought in 2.4 million dollars, each office visit brought in $200. A contract management software system can provide the data to help you with these calculations. 

Spreadsheets v. contract management software

When quarterly revenue underperforms, providers go on a hunt for revenue leakage points in the contract. By then, it’s often too late. It’s better to track how every contract is performing in real-time. This way, you can jump on any leakage points before they get out of control.  

Manually compiling spreadsheets to track payer fees and terms typically occurs after revenue cycle specialists have noticed revenue leakage.  

Payer contract management software can alert you to payer underperformance. It reads, ingests, and learns contracts. It automatically alerts you to:

  • where you’re being underpaid (the amount you received vs. the amount the contract stipulates you’re entitled to receive). 
  • which payers offer you the highest fees and terms.
  • how you can improve future contracts.
  • which contracts are returning the most revenue.
  • how contract changes will impact cash flow. 
  • contract renewal dates, notifying you when you should start reviewing which contract. 

With this automation, you can reduce staff time spent on contract administration and data entry. You can go into your negotiations with all fees and terms laid out in front of you in clear terms. 

Compare terms by payer

Fees are not the only aspect of your contracts you should track. Terms favoring payers also diminish revenue. 

Creating a spreadsheet where you can track the terms of every contract also helps you know what aspects need to be renegotiated. Below, you’ll see the start of such a spreadsheet. You will have many more entries on both the X and Y axes as you add your payers.  

  Blue Cross/ Blue Shield (exp date: 10/01/23) Aetna
(exp date: 11/15/23)
“Lesser of” language    
Reduction of charges    
Stop losses    
Contract modifications    
Dispute resolution    

Mark the payer that has the most favorable language for each term and work to get all payers closer to that. Below, we list many contract terms and the improvements you can make to the language to preserve more of your net revenue.

Prepare for tricky terms

Contracts are notoriously dry and hard to understand. Don’t let payers hide behind legalese to establish fees and terms that favor them most. The following terms are most likely to take the biggest bites from your net revenue, so examine them closely. When you manage to improve them all with the “how to negotiate” suggestions below, they can add up to significant additional net revenue. 

Another way to gauge what you’re entitled to is to talk with other physicians in your local area to get a sense of the terms they’ll tolerate and which they won’t. Contacting your state’s medical association can help, too. 

“Lesser of” language

Contracts can include "lesser of” clauses that state that the payer will pay the lesser of the charged amount or the contracted rate. For example, if a service costs $100 and the contracted rate is $150, the payer only reimburses you $100.

How to negotiate

Scan your contracts for “lesser of” language. If they exist, review your most charged codes. Are your fees higher than the contracted rates in all cases? If not, update these fees immediately. 

Another option is to review just which payers include “lesser of” clauses. If some of your payers do not include them, let the payer that does include them know. Propose that they, too, remove all “lesser of” terms. 

Percentage reduction of charges

Some contracts allow payers to reduce charges by a certain percentage for specific services. For example, a contract may call for the organization to be paid on a DRG basis but stipulate that for all claims in excess of $75,000, the payer will pay the claim at 80% of charges. 

How to negotiate

Make sure your billing amounts on your fee schedule are higher than the insurer's reimbursement rate. 

Stop losses

A stop loss sets the maximum amount that the insurer will pay. If a patient’s treatment costs $75,000, but the stop loss clause stipulates $50,000 for that treatment, you (and/or the patient) will be on the hook for the remaining $25,000.

How to negotiate

Review the stop loss amounts surrounding your most common CPT codes. Compare these limits to what the procedures have cost you and other payers in the past. If this payers' stop loss amount falls far short of that, use documented fees and charges to negotiate higher stop loss levels. 

Implants and Supplies Definitions

Non-alignment on the definitions of the terms "implants" and “supplies” can get providers underpaid. A healthcare provider may classify a medical device as an implant and charge accordingly. However, if the payer's policy has a different definition for the item and denies coverage for it as an implant, they may refuse to pay the full amount. For instance, UHC does not consider certain materials, such as hemostats, sealants, bone morphogenetic protein, catheters, staples, and clips, to be implants. 

Similarly, providers and payers may have different ideas of what constitutes “supplies.” Specifically, while a healthcare provider may consider certain specialty bandages as supplies, the payer may not recognize them as such and could refuse full reimbursement.

How to negotiate

Review contracts for language surrounding supplies and implants. If your definitions don’t match with the payer’s, use competing payer contracts to impress upon them that your reimbursements should be based on your more reasonable definition.   

Contract Modifications

One term that troubles revenue cycle managers is the payer's ability to modify the contract without provider approval. Payers often give providers a short 30-day notice to object to amendments, but many providers cannot get the tasks completed in time. Payers may write into the contract that if providers miss this deadline, they will implement their amendments automatically. 

Furthermore, payers may add stipulations that eliminate the need for provider approval altogether. It’s tough for staff and revenue cycle managers to understand these stipulations during a staffing shortage. When amendments are received, many provider groups simply accept them without negotiating, assuming the effort will be futile. 

How to negotiate

Below, we include the AMA’s guidance on contract modification language. You’ll see that the language favorable to providers does not include a time limit. The language that benefits the payer most has the clause, “the proposed amendment will take effect unless Physician notifies the Payer of its termination of the Agreement.” In other words, should the payer write in a modification and the provider miss it, that modification rolls out automatically.  

Claim filing time frames

Watch your contracts for 30-day filing limitations. With high staff turnover, filing claims within 30 days of the service can be a challenge, and missing a deadline can result in withheld payment. 

How to negotiate

If you can’t win longer 45- or 60-day deadlines, ask for a clause that excuses late filings during exceptional periods like staff turnover or organization overload (e.g. during a COVID variant surge.)

Hold Harmless 

“Hold harmless” clauses appear frequently in payer contracts. These clauses state that one or both parties agree not to hold the other party responsible for financial or legal liability.

While the clause sounds equitable, payers often use hold harmless clauses to escape financial liabilities. In a courtroom, this clause can increase your level of liability and trigger financial penalties. 

How to negotiate

Negotiate for a mutual clause that shares liability between you and the payer. Emphasize the unfairness of a one-sided agreement and stand firm that a reciprocal clause better represents the interests of both parties.


When disputes arise, payers most often prefer to use arbitrators rather than taking the case to court. Arbitration clauses that appear in your contracts too often benefit the payer. 

How to negotiate

Examine your arbitration clause for:

  • Payer control over choosing an arbitrator. You bet they’re going to find one more amenable to their position. Negotiate to add language about using a neutral professional arbitration organization like the American Arbitration Association
  • Any inconvenient location that would require you to travel while resolving a dispute. 
  • Any limitations of your legal options. 

Parties’ Responsibilities

Review your contracts closely for just what the payer deems is their responsibility versus yours. Watch closely for language that puts the burden of many tasks on you. You are both working together for the ultimate well-being of your patients / their subscribers. You should share the load. 

This sample payer contract language was taken from the American Medical Association’s Payer Contracting 101 toolkit: 


Favorable to Physician Favorable to Payer
Payor shall be responsible for identifying and verifying eligibility of Members. Payor shall provide each Member with an identification card. It is the Payor’s responsibility to update and maintain eligibility files and systems to ensure that eligibility verification is timely and accurate. Physician may rely on eligibility verifications obtained from a Payor or its designee and Payor shall reimburse Physician in accordance with this Agreement even if a Member is later determined to be ineligible on the date of service. Physician will verify a Member’s eligibility before providing a Covered Service unless the situation involves the provision of an Emergency Service in which case Physician will confirm eligibility in a manner that is consistent with Law on redeterminations of eligibility. Physician will not be reimbursed for any services furnished to a patient who was not an eligible Member on the date of service.

Overpayments & Recoupments

Favorable to Physician Favorable to Payer
Notwithstanding any other provision of this Agreement, Payor shall issue requests for overpayments to Physician within three hundred sixty-five (365) days from the date of the initial Claim payment or it shall be waived by Payor except in instances of fraud or misrepresentation by Physician. In no event shall Payor offset overpayments against amounts due to Physician without Physician’s written consent. In the event of an overpayment, Payor will issue an overpayment letter requesting repayment of the funds. If the Physician does not timely dispute or repay the overpayment within sixty (60) days, Payor may collect the amount by offsetting or recouping from any amounts due to the Physician. Physician will promptly notify Payor and applicable governmental agencies of any overpayments identified by Physician. Notwithstanding any other provision of this Agreement, the offset and recoupment rights for an overpayment may be exercised to the time period permitted by Law

Contract Modifications

Favorable to Physician Favorable to Payer
Any amendment to this Agreement shall require the mutual written agreement of both Parties. Payor may amend this Agreement upon thirty (30) days prior written notice to Physician. The proposed amendment shall take effect unless Physician notifies Payor of its termination of the Agreement within forty-five (45) days of receipt of the notice of amendment.

Payer Policy Changes

Favorable to Physician Favorable to Payer
Physician shall comply with the Physician Manual and all applicable policies of Payor in effect as of the Effective Date of the Agreement and as provided to Physician. Payor shall notify Physician at least ninety (90) days in advance of implementing any new policies or making material changes to the Physician Manual. A “material change” shall include, but not be limited to, (i) any changes to or negative impact to reimbursement to Physician; and (ii) any increased operational or administrative burden to Physician. In the event Physician objects to a material change, the change will not take effect as to Physician without the mutual written agreement of the Parties. Physician shall comply with the Physician Manual and all applicable policies of Payor, any of which may be amended by Payor from time to time at the Payor’s sole discretion.


Now that you have a grasp on the potential pitfalls in payer contracts, you are ready to negotiate to win more equitable terms. 

As you begin to take inventory of your contracts, consider starting with just one payer, possibly the one you suspect offers you the best terms. Compare other contract terms to those in this contract. Comb through every line of your contract and envision what each term could mean for your organization. Don’t be put off by a payer saying something like, “Oh that’s just standard legalese” or “this is the standard boilerplate stuff.” Contracts have the ultimate power where it counts: in the courtroom. 

The path to the negotiation table

  1. Gather all your contracts. If you can’t find a contract for any payer, contact them and ask them to get it to you quickly. You are entitled to your contracts so don’t let them intimidate or stonewall you. 
  2. Complete the tables you’ve created or use your contract management software to analyze the fees and terms in each. Document the effective dates of your contracts. Once you have assembled all of your data, you can compare payers.
  3. Let your payer know you want to negotiate approximately 30–60 days in advance of the contract renewal date. 
  4. Once you’ve received any new contracts, review and document exactly what fee or term you want changed. Consider categorizing your changes into “must-haves,” “like-to-haves” and “ideal.” If an item is on the “must-have” list, prepare to negotiate assertively for it. If the payer won’t accede to a “must-have,” determine whether you’re ready to walk away.  
  5. Draft your proposal letter with adjusted terms and rates.  
  6. Reassure yourself that most negotiations start with a “no.” Payers may even refuse to open up talks. Press on, and don’t give up. Simply restate your determination to amend contract terms. Stick with the facts, avoid emotion, and bring up other payers’ terms and rates. Remember, you’re renegotiating these contracts so that you have the capital to provide excellent care to their subscribers. The insurer has an obligation to serve these people. 

If your date for negotiation is approaching and you’re feeling overwhelmed, ask for help from someone who isn’t as emotionally invested as you are. Consider contacting an attorney or negotiation coach for tips. 

Justifying your changes

Payer negotiators will put up roadblocks to any proposed changes that limit their flexibility or trim their share of net revenue. Providers have many ways to substantiate their requests. 

Time passed since last rate increase

The first rationale to bring up is the time period that has passed since your reimbursement rates went up. Again, reimbursement rates should rise by three to five percent every three years. Have the increase in rates your best payers are paying you at your fingertips to justify increases. Contract management software helps you marshal these figures quickly. 

Provider viability

As mentioned above, payers and providers both owe their ultimate duty to patients. Providers can only stay in business if they can afford to. It’s payers’ job to make sure they can. 

You can pressure payers by emphasizing the financial challenges you’re up against. It’s no secret that labor, operating, and supplies costs have soared. Medical supply expenses increased 20.6 percent from early 2019 to the end of 2021, and labor expenses increased 19.1 percent during the same period. Asking for a one to two percent increase falls far short of greed. While payers are well aware of these facts, there’s no harm in repeating them, particularly when you can compare these financial pressures to the payer’s previous year’s revenue (easily found in a ZoomInfo or Google search.) 

Your Value

Payers have goals of their own when including you in their network. When you establish your unique value with a payer, they are more likely to meet your terms.

Take an inventory of what you provide that your nearby peers may not. Are you the only local practice with weekend and evening hours? Does your practice have one of the few oncologists available in a 10-mile radius? If you’re an ACO, research via ZocDoc whether there are more ACOs nearby. If not, your payer may consider you valuable. 

You can also make headway with payers by bringing up the influence you have in your community. Do any of your physicians appear on local news outlets or write columns? Have you won any awards recently? Explain how your success can reflect upon them. 

Consider going to your payer’s website to research the types of providers they consider are the best fit for their subscribers. Talk your important alliance up during your negotiation. 

Track payer performance after the contract is signed

Your spiffy new contracts should start bringing in additional net revenue right away. Still, you must monitor and assess the effects of contract changes and updates on your revenue cycle by tracking results. Utilize key performance indicators (KPIs) like net revenue, accounts receivable, cash flow, denials, and compliance to analyze performance. Compare outcomes with budget and forecasts to identify areas for improvement. Share your findings with the revenue cycle team and stakeholders, and take appropriate action as needed.

Get control of your contracts with MD Clarity

The payer / provider relationship has been acrimonious for decades. Providers’ anger stems from the fact that they don’t have the time to adequately advocate for their best interests. Payers know this and take advantage. Once providers fully understand where and how they can advocate for themselves in their contracts they will regain their power. 

A contract management solution like RevFind brings transparency to your contracts, improving your net revenue and even the patient experience. RevFind’s payer contract management capabilities consolidate your contracts into one place and digitize all terms and fees for easy accessibility. It alerts you when a payment has not reached its contracted rate and even benchmarks your reimbursements against national standards like Medicare. Its analysis function renders an overall contract performance metric for each payer. 

By providing the contract insights you need to negotiate proactively, RevFind supports you through the recovery process. Get a demo to see it in action.

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