Primer on payer contract issues

By Lou Terranova, Associate Director, Practice and Payment Policy, and Teresa Salaway, Senior Manager, Practice and Payment Policy, October 1, 2024

Each month, DermWorld tackles issues “in practice” for dermatologists. This month, AADA regulatory and payment policy staff highlight critical elements of payer contracts for dermatologists and their staff.

While payment rates certainly require close inspection in payer contracts, there are other terms and conditions that also require attention. These details impact payments but also the administrative requirements and operations of a practice. Understanding contract language and provisions is vital to the financial wellbeing of a dermatology practice. Understanding payer contract issues allows you to prioritize payers that offer more favorable contracts. This article will identify potential troublesome contract issues to be aware of and steps to take to prevent or mitigate their impact.

Know the payer

It is important to distinguish the type of payer and their impact in your service area. “Payer” is a broad term for any entity that pays for the services your practice provides. This includes commercial insurance plans, government programs (Medicare, Medicaid, Tricare, etc.), employers, third-party administrators (TPAs), or even the patient. The type of payer often determines the degree of flexibility the payer may have due to applicable laws and regulations. Another factor is whether the payer comprises a substantial market share in your service area which may also impact your negotiation strategy.

Conduct a comparative analysis of payers to help you identify which you choose to work with. Use the Setting up to Succeed Payer Contracting Toolkit to track how payers compare in various metrics, such as timely payment, administrative hassles, denial rates and reconsiderations, and payer mix (what percentage of the practice’s patients are covered by the health plan). Academy practice management staff have also developed a spreadsheet for tracking reimbursement rates (Excel) that may help with the contracting process.

Review all related documents

Thoroughly review the contract and all related documents before signing to identify areas of concern and discuss alternative language with the payer. While the payer may not allow changes to some contract language, you should review and understand the terms because they outline the rights and responsibilities of you and the payer. For example, the contract may state that reimbursement is based on the Medicare Physician Fee Schedule (MPFS). Before assuming that this means the current MPFS, make sure the rate exhibit of the contract specifies that reimbursement is based on a percentage of the current MPFS.

Familiarize yourself with state and federal laws, as well as the payer’s administrative manuals, coding and payment edits, and reimbursement policies. These documents can impact your reimbursement, rights, and responsibilities under the contract as well as specify the payer’s protocols and processes on areas such as prior authorization, billing, claims processing, contact information, and payer resources.

Insist the payer provide a complete copy of the fee schedule. You may need to initiate the process by providing a list of your practice’s most common CPT codes and may need to be persistent in getting the fee schedule.

Potential red flags

The Academy’s Understanding Payer Contracts resources provide an overview of key terms and considerations when reviewing a payer contract, as well as sample contract language beneficial to the physician practice. Below are a few potential red flags to be aware of when reviewing a payer contract.

Term and termination

When entering into an agreement with a payer, you will want to know the initial term, or time period, for which the contract is in effect, and whether it automatically renews. Be sure to know the process and notice periods for terminating the contract by both parties. Key process considerations are the notice periods for either party to terminate with or without cause and whether you can terminate participation in a specific product(s) without terminating the entire payer contract.

Making amendments

Be wary of provisions that allow the payer to make unilateral changes. Ideally, amendments are only adopted by mutual written consent and with adequate notice. Otherwise, the practice may receive limited notice of these changes and may not be able to effectively contest or reject the amendment. Advocate for contract language specifying that material changes, which may include changes to policies, procedures, or manuals, may not take effect without the written consent of the physician practice.

Audits, chart reviews, and documentation requests

Payers, particularly Medicare Advantage plans, are increasingly requesting medical records from physicians. Learn more. Review the payer contract and related documents for the process and purpose of audits, chart reviews, and documentation requests. Make sure the processes, including the notice and audit timeframes, are reasonable to your practice and do not create substantial administrative burden.

For additional information on audits, see the AAD resources on surviving an audit and appealing an audit.

Language permitting downcoding and bundling

Increasingly, payers utilize coding edits, algorithms, and vendors to review claims to reduce the evaluation and management (E/M) code level, or group together physician services into bundled services, resulting in reduced reimbursement. Dermatologists need to be aware of how payers will apply these edits and their rights to appeal or contest the decision, as this can impact reimbursement.

For information on appropriate use of codes and modifiers, see the AAD Coding Resource Center.

Mandated payment formats

Payers are adopting electronic payment requirements through third parties that may impose additional costs on the practice. While electronic funds transfers (EFT) and virtual credit cards (VCC) can increase payment time and decrease accounts receivable timelines, they may result in extra charges to the practice. See our resources on virtual credit cards.

Referrals and use of preferred providers/vendors

Payers may require physicians to refer to other participating physicians and other health care entities, and they may impose a penalty if patients are referred to non-participating physicians or entities. Payers may also have preferred vendors, such as for lab services, which can impact reimbursement and access. Identify contract language specifying restrictions or penalties for referrals to non-participating or non-preferred physicians, vendors, or other entities and work with the payer to remove or adjust the restrictive language.

Appeals and dispute resolution

Ensure the payer contract and related documents address physicians’ appeal rights as well as the grievance or dispute resolution process. Be knowledgeable of your state law to ensure that the dispute resolution process in the contract is permitted in your state. For assistance with appeals, use the Academy’s private payer appeal letter tool.

Overcoming concerns or hesitancy to approach payers

It is natural to be apprehensive about negotiating with payers. However, you are the best advocate for your practice. To assist members, the Academy has developed several resources to guide and embolden dermatologists in payer negotiations. The Payer Contracting Best Practices webinar covers the payer contracting process and outlines keys to success.

DermWorld articles on negotiating include the following:

• Negotiating fee schedules: When negotiating with private payers, knowing your worth can pay off

• The modern payer contract

• Payer contracts redux

Don’t hesitate to have an experienced practice manager, managed care contracting agent, or attorney review the payer contract if you have questions or are unsure about the terms of the contract.

Academy resources

The Academy works with private payers to alleviate administrative burdens for dermatologists, maintain appropriate reimbursement for furnished services, and ensure patients can access covered quality care. To report payer issues, complete our form, or send an email to privatepayer@aad.org.

Disclaimer: This article is provided for informational and educational purposes and is not intended to provide legal advice and should not be relied upon as such. Readers should consult with their personal attorneys for legal advice regarding the subject matter of this article.

Additional DermWorld Resources