Reimbursements are a significant source of revenue for health systems. Yet, many organizations don’t receive the full reimbursement for a service rendered, even when the payer and provider have agreed on a rate. Unfortunately, keeping up with payer policy changes is difficult and most healthcare organizations don’t have a payer expert who regularly analyzes payer contracts. To protect themselves from surprise policy changes that lead to lost revenue, organizations should include three key phrases in their current and existing payer contracts: 1. “We’re not bound by payer policies unless agreed to in writing by both parties.” 2. “Once authorization is approved for a service, it cannot be subsequently denied.” 3. “Any code not in this contract will be reimbursed at a percent of charge.”

1. Don’t Negotiate Your Next Payer Contract
Without These Three Phrases
Chris Arthur
Tech Optimization Services, Director

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Maximizing Payer Contracts
As providers work to maximize all sources of
the healthcare revenue stream, they should
closely examine their contracts with payers.
Earning the full amount from payers for
services rendered isn’t guaranteed.
After a medical procedure, health systems
submit a claim to the payer (e.g., commercial
health insurance plans and government
programs like Medicare) and wait for the
payer to process the claim, then the payer
either pays or denies the claim.

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Maximizing Payer Contracts
While health systems can’t control
payers or the cumbersome payment
process, they can control the contracts
they negotiate with payers.
Contracts between health systems and
payers include guidelines both parties
agree to regarding payment, timing,
and policy changes, to name a few.

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Maximizing Payer Contracts
Organizations can take a strategic approach
to these contract negotiations by including
specific language in the payer contracts that
protect health systems from unforeseen
policy changes, prevent denied claims, and
reduce lost reimbursement from payers.

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Three Critical Phrases to Include in
Payer Contracts
Health systems are constantly negotiating
first-time contracts or renewing contracts
with payers.
These complex processes can sometimes
catch health systems unaware if they
don’t have a specialized expert
scrupulously reviewing contracts on a
regular basis for modifications, including
updates to the payment process and
changes to the list of covered procedures.

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Three Critical Phrases to Include in
Payer Contracts
To effectively negotiate the most beneficial payer contracts and avoid
negative financial consequences, including denied claims with downstream
healthcare revenue implications, organizations should include three key
phrases in their next payer contracts:
#1: “We’re not bound by payer policies unless
agreed to in writing by both parties.”
#2: “Once authorization is approved for a service,
it cannot be subsequently denied.”
#3: “Any code not in this contract will be
reimbursed at a percent of charge.”

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Three Critical Phrases to Include in
Payer Contracts
#1: “We’re not bound by payer policies
unless agreed to in writing by both parties.”
Payers may change their policies
without discussing the modifications
with the health system or notifying the
health system about the change.
As a result, when it’s time to submit a
claim for reimbursement, the health
system can run into surprise policy
changes that can have significant—and
often negative—revenue repercussions.

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Three Critical Phrases to Include in
Payer Contracts
#1: “We’re not bound by payer policies
unless agreed to in writing by both parties.”
To avoid these hidden policy changes,
health systems should include specific
language in their contracts that require
the payer to notify and discuss the
alteration with the health system before
the contract is updated.
For example, organizations may state,
“We’re not bound by payer policies unless
agreed to in writing by both parties.”

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Three Critical Phrases to Include in
Payer Contracts
#1: “We’re not bound by payer policies
unless agreed to in writing by both parties.”
In a worst-case scenario, payers will not
agree to a contract that includes the
phrase above.
In such cases, organizations should
negotiate that the payer must notify the
health system about policy updates and
the method of communication.
Even a basic notification, such as an
email, allows the organization to stay
informed and make changes that align
with new policies.

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Three Critical Phrases to Include in
Payer Contracts
#2: “Once authorization is approved for a
service, it cannot be subsequently denied.”
To ensure payment and avoid a denied
claim, a health system will reach out to a
payer before a procedure to verify that the
payer will cover and authorize the
procedure.
However, payers will sometimes still deny
a claim even after they have authorized
the procedure.

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Three Critical Phrases to Include in
Payer Contracts
#2: “Once authorization is approved for a
service, it cannot be subsequently denied.”
For example, a patient has chest pain,
and the cardiologist recommends a
bypass.
Before the bypass, the health system
reaches out to the payer and receives
authorization.
After the bypass procedure, the health
system submits the claim, but the payer
denies the claim even though it
authorized the procedure.

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Three Critical Phrases to Include in
Payer Contracts
#2: “Once authorization is approved for a
service, it cannot be subsequently denied.”
The health system inevitably feels exasperated
because there was nothing it could have done
to avoid the denied claim.
To circumvent these frustrating scenarios that
result in lost revenue, organizations should
include language in the payer contract stating
that payers and their agents cannot initially or
subsequently deny authorized services, such
as “Once authorization is approved for a
service, it cannot be subsequently denied.”

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Three Critical Phrases to Include in
Payer Contracts
#2: “Once authorization is approved for a
service, it cannot be subsequently denied.”
Contracts that include this language allow
payers to change their reimbursement policies
as needed, but it doesn’t let them renege on
procedures they have already authorized.
Once the health system has received prior
authorization, it can rest assured it will receive
full payment.

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Three Critical Phrases to Include in
Payer Contracts
#3: “Any code not in this contract will be
reimbursed at a percent of charge.”
Adding new codes, expanding service lines, or
looking to form joint ventures with new partners
are very common activities for health systems.
As organizations do their due diligence before
engaging in any of these initiatives, they
should determine how payers will reimburse
them for the new changes to accurately
calculate any ROI.
For example, if a health system is looking to
form a partnership with a cancer center but
does not have any way to recoup the high cost
of the chemotherapy drugs in its contract, it
would only receive minimal reimbursement

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Three Critical Phrases to Include in
Payer Contracts
#3: “Any code not in this contract will be
reimbursed at a percent of charge.”
For example, if a health system is looking to
form a partnership with a cancer center but
does not have any way to recoup the high
cost of the chemotherapy drugs in its
contract, it would only receive minimal
reimbursement likely related to the
laboratory codes for appropriate
blood draws.
This could be especially true in situations
that have hierarchical case rates with
“Default Rate/Other Rate” in the contract
as a catch-all bucket.

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Three Critical Phrases to Include in
Payer Contracts
#3: “Any code not in this contract will be
reimbursed at a percent of charge.”
Including language around new codes,
such as, “Any code not listed in this
contract will be reimbursed at a percent
of charge or the case rate of similar
services,” protects health systems from
performing new services without
receiving appropriate reimbursement.
This protection also helps organizations
confidently expand their service lines
without fearing denied claims.

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Effectively Negotiate Payer Contracts with
Specific Phrasing
As organizations continue looking after their
healthcare revenue streams, they should
consider re-examining their current and new
contracts with payers.
Payer contracts have significant implications
for health systems’ financial standing, as
they guide a major source of income for
health systems: reimbursements for
services rendered.

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Effectively Negotiate Payer Contracts with
Specific Phrasing
Healthcare organizations can approach the
payer negotiating table with confidence by
applying the three key phrases listed above.
Adding specific language to payer contracts
about policy changes, prior authorization,
and coding updates allows health systems
to deliver care with the peace of mind that
they will receive full payment.

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For more information:
“This book is a fantastic piece of work”
– Robert Lindeman MD, FAAP, Chief Physician Quality Officer

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Health Catalyst Editors

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Chris Arthur joined Health Catalyst in 2020 as the Director of Technology Optimization
Services within the Financial Transformation Business Unit. His team blends revenue cycle
expertise and technology to allow for massive, measurable, and data-informed financial
transformation. Chris's background is in leading operations for revenue cycle and payment
integrity engagements for both payer and provider initiatives. His expertise is in payment
variances with a keen ability to identify, quantify, and remediate the root cause of denials,
underpayments, and credit balances.
Other Clinical Quality Improvement Resources
Click to read additional information at www.healthcatalyst.com
Chris Arthur

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Other Clinical Quality Improvement Resources
Click to read additional information at www.healthcatalyst.com
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