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Payor Contracting Strategy

Updated: Sep 29, 2023

I was talking to my dad the other day, as he was trying to determine what insurance to select for the coming calendar year. It is November so many people are in open enrollment. He was picking my brain about which plan he should choose and what considerations he should make when selecting from two good plans.

I come from the other view point in this discussion, not of the consumer, but as the biller. I am looking at the strategy and uniqueness of each client profile within a specific market. So, if an individual consumer is selecting an insurance based on cost and benefits, then how are healthcare facilities and provider groups deciding how to pursue payor contracts? And how can that impact the consumer like my dad from year to year? As I walked my dad through my list, I realized this was my consolidated strategy for how any healthcare entity might pursue in-network contracting with payors.

Considerations for Contracting

The one thing that seems to always hold true when it comes to looking at a market is that each one is so different. There are trends within a market or geographic area, but the specifics will vary for facilities, provider groups, specialties and even service lines.

  • What is your market? What are the largest payors in your area, your state, your or your client's payor mix.

  • What is your or your client's payor mix? Even if the market or area has one profile of payors there may be a completely different mix in your specific care setting or health system.

  • Are there specific payors that are causing abnormal issues? Is a payor remitting their insurance portion of payments to the patient, or are they denying accounts unreasonably. It may be time to give that payor some focus and work towards in-network contracting to find ways to reduce rework costs.

The Strategy

Once you have done your baseline research on the market, now it is time to target payors.

  1. Start with government payors. Of course! Traditional Medicare should be on the enrollment list and processing 60 days before the clients first date of patient services. State Medicaid should be prepped and ready to go as soon as Medicare approves.

  2. Target the Commercial BUCAHs (BCBS, UHC, Cigna, Aetna, Humana). In every state there are 2-3 of these main commercial payors that rule the market. Know which ones you want to start on day one for your client, because it may take years to get to an agreed upon contracted rate and terms.

  3. Target the Managed Care payors. Now true that the BUCAHs do have commercial and government plans, but we see them mainly as big payors in the space and they have already been addressed. So next we look at payors that fit in between government and commercial. These are ones that immediately come to my mind, Superior/Ambetter, Amerigroup/Centene, Molina, and many other state and location specific plans.

  4. Work with specialty payors. Somewhere between #1 and #3 you will be in a lull as larger contracts take time. This is when you bring in discussions of payors that are specific to the client, facility, or region. There may be other alternate options depending on your service line, like other independent physician associations.

  5. Mirror the facility. If you are a provider group, separate from the facility or health system you render services at, try to pursue the same contracted facility payors. This goes a long way with customer service, reducing the patient burden of determining what care is in-network verses out-of-network.

No matter the client or the state, this is likely the roadmap for any billing entity's pursuit of payor contracting at a really high level. So as RCM is working toward contracting with payors, the individual is busy selecting their insurance plan for the next year. They will also need to make some considerations besides cost and general benefits. Do they know the payor mix of their state/area? Do they know the network status of local hospitals or their PCP? I really feel if more people had a general understanding of the hidden side of healthcare, decisions would not be so difficult for the consumer. At the very least, there would be more awareness of the many variables of our healthcare system, and how they may change year to year.

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