Payer Rates: How Providers Elevate Them Meaningfully

 When it comes to financial forecasts for the coming year, 58% of the 100 U.S. healthcare finance professionals surveyed in Strata Decision Technology’s CFO Outlook for Healthcare expect operating margins to stay the same or drop. 

Respondents in the study pinpoint high labor costs and insufficient payer rates as the most intense constraints on net revenue. 

Automation is stepping in to help keep labor costs under control, but what can healthcare organizations do about topline, namely, payer rates? 

Historically, payers have dictated what they’ll pay for procedures, with providers simply having to agree, particularly if the payer dominates the geographic area. 

 A recent Boston Consulting Group study has a cautionary tale, however. It warns that,

“Hospitals that have traditionally just taken whatever rates payers will give them can no longer afford inaction. The typical health system needs a rate increase of 5% to 8% each year across all payers to break even by 2027.”

Now that healthcare organization margins are so thin and more hospitals are closing across the United States, revenue cycle managers and CFOs must find strategies to increase rates by the 5% to 8% BSG advises above. 

Payer rates are one of the levers revenue cycle managers and CFOs can use to improve healthcare organization margins. Here, you’ll discover just how to use recent legislation, data, and technology to efficiently tackle insufficient payer rates. 

What are payer rates? 

Payer rates are the amounts healthcare insurance companies (payers) agree to pay providers for specific medical services or procedures. These rates are established through contracts and negotiations and are distinct from the provider's initial listed "charge" for a service, which often serves only as a starting point for price negotiation. The actual reimbursement amount is determined by these agreed-upon rates or fee schedules, which can vary significantly between different private insurers and public programs like Medicare and Medicaid. 

Adequate reimbursement rates are essential for providers to maintain financial stability, cover the costs of delivering care, and invest in necessary resources and services.

Understanding specific payer rates allows providers to verify that they:

• Receive the correct payment according to their contracts 
• Identify underpayments
• Capture their full, legitimate revenue  

Payer rates: A provider problem

Payer rates are listed in the contract’s fee schedule, but many healthcare organizations do not manage their contracts closely. After surveying 522 contract managers in healthcare organizations, Black Book managing partner Doug Brown finds,

 "The majority of US health systems are struggling with manual contract tasks and fragmented contract processes." 

Manual contract management systems are often disjointed and inefficient, leading to overlooked or lost updates in rate and term changes. As a result, payers get away with failing to include annual escalators, paying less than agreed-upon rates, and making unilateral changes to reimbursement policies that go unnoticed—leading to lost revenue and increased financial risk for providers. Brown concludes that the lack of dependable contract systems costs the healthcare industry $157 billion annually. 

A recent MGMA Stat poll echoes this contract neglect. MGMA surveyed medical group leaders on the frequency of their payer contract reviews. The results showed that 58% of respondents review their payer contracts annually, while 16% indicated “other”—which suggests they review their contracts every two years or even less frequently.

Notably, 17% reported that they never review their contracts.

These findings align with our experience: many of our clients admit they have not revisited their contracts in five years or more. Additionally, we encounter clients who struggle to obtain copies of their contracts from payers at all. (If you’re one of these, we discuss how to demand recent contracts from payers and more in Best Practices for Contract Management.) 

Behind the failure to manage contracts are several issues occurring throughout the industry:  a widespread staffing shortage, providers’ focus on patients over profits (and legal issues), but most of all, healthcare organizations’ lag in modernizing and digitizing.  Of course, the sensitivity of patient healthcare information (PHI) has been a significant hurdle that other industries didn’t face. Now, however, healthcare’s digital revolution has begun. With the help of the last few years’ legislation and the innovation in AI-driven technologies, providers are gaining in contract negotiation firepower. 

The way into higher payer rates: Transparency legislation & software 

With real-time rate benchmarking and automated contract tools, more providers are negotiating from strength, ensuring reimbursement aligns with market standards and care costs.  

First, new federal rules aim to dismantle payers’ opaque pricing practices. Effective in July 2022,  The Transparency in Coverage rule specifically mandates that all payers publicly publish their negotiated rates with providers, as well as historical out-of-network allowed amounts, in machine-readable files (MRFs) posted online.  

Recent executive orders and regulatory guidance have reinforced and expanded these requirements, directing federal agencies to ensure that the disclosed prices are the actual prices paid, not just estimates, and that the data is standardized and easily comparable across health plans. The intent is to make payer rates more transparent and accessible not only to providers but also to patients, researchers, and third-party app developers. Access to reimbursement rates helps providers determine which payers they would prefer to do business with. It also gives providers more data with which to negotiate payer rates. 

With pricing transparency, healthcare organizations finally have the freedom to negotiate from evidence-based positions, challenge non-compliant payers, and identify underpayments. It’s about time providers got firmer footing in contract negotiations!

Enter contract management software

Because aggregating, comparing, and analyzing these rates can get complicated, many providers seek help via technology. Contract management software has gained significant traction over the last decade as regulatory complexity, the need for operational efficiency, and digital transformation accelerated in healthcare. 

These features make it enticing: 

• Automated compliance: The platforms detect healthcare underpayments, payment variances, and denials by comparing received amounts to contracted rates.
• Benchmarking and negotiation functions: Platforms parse transparency data to show how a provider’s rates compare within the provider’s payer mix, as well as regionally or nationally, identifying gaps.
• Workflow efficiency: Solutions streamline contract lifecycle management, creating renewal alerts, RCM reports and more, thereby reducing errors and ensuring timely renewals.

Providers can leverage price transparency and contract performance platforms to analyze competitor rates for identical services (CPT/DRG level), exposing disparities. 

This shift has enabled providers to:

• Identify underpayments as low as 30–40% below market rates.
  
• Challenge payer claims of "fair market value" with granular, service-line comparisons.
  
• Uncover regional payment inconsistencies (e.g., a payer paying 1.8x Medicare in one state vs. 1.2x in another).

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

6 steps to winning higher payer rates 

Step 1: Examine data and benchmark 

During the days that payers were keeping their rates hidden, providers were forced to accept "market rate" claims at face value, leaning on anecdotal evidence, or reusing expired contract terms. 

These tactics left providers vulnerable to systemic underpayment, as payers often cited proprietary data to justify low rates while providers lacked comparable benchmarks. This practice allowed payers to quietly reduce reimbursements or remove annual escalators without pushback. 

Now that you can access payment data, use it! 

With clear data, providers transition from guesswork to precision. As our RCM Data post details here, you can collect and track contract terms, rates, performance metrics, compliance requirements, and renewal dates.

Contract management platforms not only surface important data, but they also report benchmark payer rates for procedures to standard rate sets such as Medicare. It also stacks your payer reimbursement rates against each other. For example, Blue Cross might pay you 180% of the Medicare rate for a shoulder surgery, whereas United Healthcare might pay 210% for the same combination of CPT codes. You can bring this discrepancy into your negotiations to showcase a payer’s value or lack thereof. Data-driven comparisons provide the concrete data that justify reimbursement rate improvement opportunities.

‍
Armed with benchmarks, you can counter payer resistance with evidence like:

• Medicare anchors: Demonstrating rates as a percentage of Medicare (e.g., demanding 150% instead of 120% for high-value services).
  
• Peer comparisons: Showing a payer’s rates for colonoscopies are $900 locally vs. $1,300 in adjacent markets calls them out on their manipulations.
  
• Cost-of-care data: Proving that proposed rates don’t cover staffing (+18% since 2022) or supply costs (+12% YoY). 

Replace subjective debates with irrefutable data, so you can enter negotiations prepared to demand—not request—fair reimbursements. 

Step 2: Assemble payer performance metrics

To effectively negotiate payer rates, providers must first assemble a comprehensive picture of their own performance and costs. This involves tracking key payer-specific metrics like reimbursement trends, volume, and denial patterns to pinpoint areas for improvement. Additionally, understanding the true cost of delivering care is essential for demonstrating value and justifying rate requests.

Payer performance metrics include: 

• Reimbursement trends: Track how reimbursement rates for key services have changed over time with each payer. You can conduct this analysis either manually or by using a contract management platform. Your insights will target payers who consistently underpay or lag behind market trends.
  
• Volume per payer: Understanding the volume of claims or revenue associated with each payer helps prioritize negotiation efforts and reveals where rate changes will have the greatest impact.
  
• Denial patterns per payer: Analyzing denial reasons and rates by payer can uncover systemic issues—such as frequent documentation requests or policy changes—that may be addressed in contract discussions.
  

A critical lever in your negotiations will be demonstrating your cost to deliver care—especially as value-based payment models become more prevalent. Make sure you’re also gathering your own cost data: 

• Service line costing: Calculate the direct and indirect costs associated with providing specific services or procedures. This data is crucial for demonstrating when current payer rates do not cover your costs. It justifies the need for higher reimbursement.
  
• Benchmarking against industry standards: Compare your costs and reimbursement rates to regional or national benchmarks to identify outliers and support your negotiation position. Forestall payers’ claims that your costs are higher than their other providers when you bring your own data.

By systematically collecting and analyzing these internal data points, healthcare organizations can move beyond anecdotal negotiation tactics. Instead, they present a data-driven, evidence-based case that is far more persuasive to payers, ultimately leading to improved payer rates and greater financial stability.

Step 3:  Key benchmarks

Internal Payer Comparison

Overview: Identify rate variations for the same services across your current payers. For example:

• A payer reimburses $1,200 for an MRI at your facility but only $850 for the same service at a competing provider.
  
• Another payer pays 1.8x Medicare for knee replacements at your hospital but 2.1x Medicare for the same procedure at a peer facility.

Action Steps:

• Use contract management tools to map payer-specific rates for your top 20 CPT/DRG codes.
  
• Flag payers reimbursing 15–30% below your average rate for high-volume services.
  

Example:
A Midwest health system discovered one payer reimbursed $2,100 for laparoscopic cholecystectomies, while another paid $3,400 for the same procedure—a 38% discrepancy. 

Medicare benchmarking

Overview: Calculate reimbursement as a percentage of Medicare rates for key codes. Medicare serves as a universal benchmark, with private payers typically paying 1.5–2.5x Medicare rates for the same service.

Action:

• Convert contracted rates to “percentage of Medicare” (e.g., $1,800 for a colonoscopy vs. Medicare’s $1,200 = 150%).
  
• Target services where your rates fall below regional Medicare multiples.
  

Example: 

While you charge $120 for a Level 4 office visit, Medicare only reimburses at $92. Given that private payers must pay 150% to 250% higher than Medicare, you may want to set a target benchmark at 170% of the Medicare rate or $156. 

Market/Competitor Benchmarking

Overview:  Leverage transparency data to compare your rates against competitors’ negotiated amounts.

Action:

• Access Machine-Readable Files (MRFs): Use CMS’s Hospital Price Transparency data or third-party tools like Milliman to extract competitor rates for identical services.
• Identify market gaps: For example, if Competitor A receives $1,500 for an MRI from Payer X, but your contract with Payer X only allows $1,200, target a 25% increase.
  

Case Study:
A Texas hospital system used Milliman Transparent to analyze 12 regional competitors’ rates for 30 high-volume codes. They found their rates were 18% below the market median for cardiology services, which became a focal point in renegotiations.

Data reliability check

Overview:  Transparency data can be inconsistent or incomplete. Triangulate findings with:

• CMS Public Files: Validate competitor rates against Medicare’s posted data.
  
• Third-Party Benchmarks: Use aggregated datasets from partners like Vizient or Strata Decision Technology.
  
• Internal Claims Data: Compare historical payments to identify outliers.
  

Common Issues to Flag:

• Missing DRG-specific rates in payer MRFs.
  
• Outdated rates (e.g., contracts not updated since 2018).
  
• Discrepancies between posted rates and actual payments.
  

Example:
If a payer’s transparency data shows $1,500 for a service but your claims average $1,300, investigate underpayments and demand retroactive adjustments.

By systematically comparing rates internally, against Medicare, and across the market, you can focus on payers and services with the largest reimbursement gaps. You can also use competitor data to justify rate increases and thereby demand parity. Most importantly, you can retreat with feeble explanations like  “it kinda seems like we’re underpaid.” Instead, hit them with: “Hey! Here’s how much we’re underpaid.”

From data points to deal points: 5 steps to improve payer rates at negotiation time

To translate benchmarking insights into tangible rate improvements, providers must craft a targeted negotiation strategy. Here’s how to prioritize efforts and present an irrefutable case:

1. Identify high-impact opportunities

Focus on service lines or payers where data reveals the greatest discrepancies or revenue potential.

Service Line Prioritization:

‍ Target services with high volumes, high costs, or significant reimbursement gaps. 

Examples:

• Cardiology procedures reimbursed 25% below market rates
  
• Orthopedic surgeries with denial rates 3x the industry average

Payer Prioritization:

Rank payers by:

• Contribution to overall revenue
  
• Underpayment severity (e.g., rates >15% below competitors)
  
• Administrative burden (e.g., denial rates, delayed payments)

Example:
A behavioral health clinic analyzed payer data and discovered that 42% of its revenue came from a single payer reimbursing 30% below Medicare rates. This payer became the top negotiation priority.

2. Build Your Value Proposition

Quantify your organization’s value using performance metrics that matter to payers:

• Quality:
  
  • Highlight 30-day readmission rates 12% below regional averages
    
  • Showcase 95% patient satisfaction scores (vs. 82% market average)
    
• Efficiency:
  
  • Demonstrate 20% lower cost per episode for joint replacements
    
  • Emphasize same-day discharge rates for outpatient surgeries exceeding 90%
    
• Specialization:
  
  • Promote unique capabilities (e.g., Level I trauma center, oncology subspecialty access)

Example:
You can emphasize that you used analytics to prove your diabetic care program reduced ER visits by 18%, securing a 7% rate increase from a major payer.

3. Develop specific asks

Use benchmark data to justify requests:

• Rate Adjustments:
  
  • Increase reimbursement for CPT 29826 (knee arthroscopy) from $1,200 to $1,650 to align with the regional median of $1,625.
    
• Contract Term Revisions:
  
  • Reduce claims adjudication timeline from 90 to 45 days for clean claims.
    
  • Cap retroactive claim denials at 6 months post-payment. (Read our payer management post to understand how more payers use AI to conduct post-payment re-evaluations of approved and paid claims.)

Example:
Stress that the market benchmark for a knee replacement is $32,000, and the payer’s reimbursement rate is $28,000. Request a $4,000 adjustment. 

4. Address Contract Terms

Our payer contract negotiation post emphasizes how you must first focus on the fee schedule, where payer rates live.  It also urges you to prepare for tricky terms like “lesser of” clauses, “stop losses,” and “percentage reduction of charges.” That post also gives you tips for making your case for more favorable language in those terms. Historically, they have favored payers. 

Consider these adjustments as well: 

Denial Management:
Demand 90-day appeal windows (vs. standard 30 days) if data shows 40% of denials are overturned on appeal.  Request automated remittance advice codes to reduce manual rework.

Payment Timelines: Tie reimbursement rates to accelerated payment terms (e.g., 2% bonus for payments within 15 days).

‍
Example:
After analyzing 12 months of data, a health system proved that one payer took 62 days to pay clean claims (vs. contracted 30 days). They negotiated a 1.5% rate increase to offset the cash flow impact.

5. Scenario Modeling (Advanced)

Use robust contract modeling tools to predict the impact to revenue of proposed payer rate changes:

• Consider modeling the overall financial impact of:
  
  • A 5% rate increase on top 10 DRGs
    
  • Shifting 15% of volume from low-performing to high-performing payers
    
• Present visualizations showing what it will take to generate an annual revenue lift from targeted adjustments

Example: 

A cardiology practice with net revenue of $10 million per year, increasing rates by 5% could up their margins by 2% and earn an additional $500,000. 

You can model exactly how proposed payer changes will impact your revenue. Experiment with your own changes via unlimited scenarios. Take a quick tour of efficient contract modeling in action here: 

Payer rates improvement: MD Clarity’s mission

By focusing on high-impact opportunities, backing up requests with concrete data, and making precise asks, providers systematically improve payer rates. Payers may not like it, but transparency legislation makes payer rate disclosure inescapable. That’s a good thing for providers and their patients. 

MD Clarity’s contract management solution RevFind consolidates your contracts into one place and digitizes all terms and fees for easy accessibility. It alerts you when a payment has not reached its contracted rate, listing all underpayments by payer, CPT code, location, physician, and any combination of those parameters in convenient reports. It models proposed payer rate changes before acceptance and lets you spin up unlimited rate changes and revenue scenarios of your own. It even benchmarks your reimbursements against national standards like Medicare. Its analysis function renders an overall contract performance metric for each payer. Comparing performance frees you to limit or dismiss payers that underperform. 

By providing the contract insights you need to negotiate proactively and in real-time, RevFind supports your payer negotiations. Get a demo to discover how it can surface the critical data that justifies your payer rate requests. 

‍