Get exactly what you want from your next contract

Don't miss the mark in contract negotiations

Before heading into your next negotiation, review our guide to the dos and don’ts of negotiations to ensure you walk away with the best contracts possible.

The responsibility of health system finance leaders to maximize contract value is more complex than ever.  As a result, best practice organizations are getting the most out of their health care contracting yield and improving contract management by:

  • Increasing internal communication and coordination and,
  • Opening regular communication channels with payers.

Come together as an internal team to know what you want out of a contract and then do the prep work to get what you want when you speak to payers.

Organize a Committee of Stakeholders

Payers know exactly what they want when they sit down for their next negotiation.  Do you?

Good internal communication across the organization means organizing a committee that includes key stakeholders such as financial leadership, patient accounting experts, and clinical representation. This committee is in charge of reviewing your health care contracting and constantly monitoring, improving, and setting your strategy going forward. 

Stakeholders should meet monthly or quarterly to understand payer performance.  Best practice organizations hardwire this habit into their schedules throughout the year—not just before a negotiation is due. At these meetings you should calculate your contract yield, compare expected to actual yield, review service line figures, and understand overall financial numbers.

Use Data to Formalize the Negotiation Process

When a negotiation is approaching, it is crucial to review data of past contract performance, identify contract vulnerabilities, and solidify your negotiation strategy upfront so that your team is prepared. 

First, review past performance to see how expectations matched actual outcomes.  If something did not turn out profitably, then you can work to correct it during the next round of negotiation. 

Second, every contract has vulnerabilities, so you should know the vulnerabilities and market conditions that impact each contract.  Payers tend to follow one another, so if you see one payer making a particular move then other payers will likely follow that same reimbursement methodology or contract provision. 

Finally, your internal team must align your negotiating strategy with organizational objectives to ensure that contracts support your organizational objectives.  Having an understanding of what the payer is likely to ask for and your organizational goals will help you determine where you need to hold strong and where you can compromise a bit. 

A Clear Plan Is the Best Plan

Best practice organizations plan for contract negotiations three to six months out and follow three rules to elevate their success.

  1. Define the baseline population.  One of the first things many organizations do is set the baseline patient population for proposal iterations with specific date range, payers, and services.
  2. Establish clear objectives of what you want to achieve out of negotiation.  Do you want specific net yield increases or an increase in a specific service line?  Is greater accountability your main goal or stronger contract language for late or inaccurate payment?  Make your objectives known to the payer up front.
  3. Anticipate as many changes as you can and plan for them.  For instance, brainstorm methodology changes that might come from the payer or anticipate language changes that you want to make for charge master increases or payment discrepancies.  If you are looking at a longer-term contract, think about a price adjustment or index you and the payer can agree on.