Payor Contracting – A Broad Walkthrough

cpt code update

Let me take you to a walkthrough on Payor Contracting. Are you aware of this term payor contract? In simple it is a contract between the insurance companies and payors that are provided for the patients. When looking into it as a healthcare provider it looks quite complex.

For most healthcare providers, the key problem with managing a wide range of payor contracts lies in the complexity of the process. I’ll outline a few methods for this to resolve it.


Payor contracting is the practice of examining current insurance company contracts to ensure that healthcare providers are receiving appropriate compensation. Contracts pose a significant challenge for all providers, regardless of size, with relation to varied reimbursements, network access concerns, and handling hidden provisions.

A credentialed provider gets an increased number of patients through referrals from payers. Further, credentialing assures the patient that they are getting treated by a credible provider. It also helps physicians expand their business. Physicians/providers must credential themselves, i.e., enroll and attest with the payer’s network and get authorized to provide services to patients who are members of the payer’s plans.

Since many providers are working with different payors all at once this may lead to complications such as

  • Different payor rates for the same or comparable services
  • Understanding the variety of provider contracts
  • Variation in reimbursement schedules
  • Contract language that is confusing and unique to each payor


Here are some of the advantages of a payor contracting for healthcare providers

Enhanced cash flow: By offering a reliable source of income, a strong payor contract helps the organization’s cash flow and guarantees that healthcare professionals have the resources necessary to serve patients with high-quality care.

You can negotiate: Negotiation can be done with fair reimbursement rates so that healthcare providers can receive compensation for their service, reducing financial risk.

Improved patient satisfaction: Due to this contract, patients are more satisfied and use these services to save money. This helps their relationship thereby resulting in referral-friendly. Even if you are paid less for your service, the increased number of patients who use your service can lead you to a good amount of revenue.


This checklist provides you with an overview of the key terms and considerations when reviewing a payor contracting.

Plans, parties and products: Clearly check on the contract whether it allows parties to contract and whether it has mentioned any plans and reimbursement methodologies under the contract.

Physician service: Check on the contract whether it clearly describes the physician’s service is said with any expectations or limitations along with the medical necessity and coverage rules.

Clean claim: Payor agreements specify what a payor needs to guarantee prompt claim reimbursement. This relates to what a provider needs to have for his claims to be valid. The provider should be aware of his clean claim rate to evaluate his revenue cycle. Higher clean claim rates are proof that all process is running smoothly and the revenues are collected.

Terms and conditions: All contracts that are enforceable by law are supported by a set of terms and conditions. Without these, no current or future business contract would likely occur. The main components of a legally binding contract, defined by contract law, are the source of terms and conditions.

Allowed amount: According to AHS, the allowed amount for the payor contract mentioned is the maximum amount that can be retained for the covered healthcare service. Patients may be required to pay the difference between the authorized amount and provider charges if the rate is insufficient to cover their service rates.

Termination of contract: The contract should clearly explain under what situations the provider and payor can terminate if required. Knowing the details of each contract termination helps an organization prevent providers from wasting money on agreements that don’t benefit them.


As the popularity and complexity of value-based payor contracting continue to arise, healthcare providers are finding it more challenging to achieve great financial achievement. It is more important to build a successful relationship in order to improve your financial performance.

A single provider tends to manage any number of value-based contracts with risk and complexity. It is easy to lose track of what is important and where to focus on limited resources. The following prioritization helps to a successful contracting evaluation process.

Transparency: Value-based contracts are to be riskier than FFS contracts since it has more financial risks. The minimum requirement that a provider should be able to produce is the base medical cost and historical trends that match the key metrics as specified in the contract.

In the event that the payor is unable to supply the essential information to complete, the provider’s capacity to manage risk is difficult.

Stability: By taking into account the right number of lives, excluding some high-cost claims, and including verifiable risk adjustments, successful contracts reduce the random variation in payouts. Continues changes in the provider’s physician network, a lack of referral management procedures, faculty coding linked to risk ratings, a lack of prescribing tools, and careless use of provided data are further facts that could undermine a contract.

Each element is examined through the prism of stability, highlighting areas where providers can concentrate their efforts profitably or, if needed, remove unnecessary complications that could destabilize the conclusion of the contract.

Control: Providers often get into this without realizing the complexity of the contract. A value-based contract may still have some aspects that are out of the provider’s control. For instance, the provider has little control over changes to the payor’s membership base, payor contracts with hospitals and doctors outside the provider’s network, or regularity changes. Contracts should be structured in a way that some unpredictable factors should not have an impact on the provider’s financial performance.

These three pillars will put healthcare providers in a position to work effectively with payors in a value-based world.


Here we are up to the final words, as mentioned payor contracting is a complex process, but when observing and understanding all the key elements and benefits, healthcare providers can make it clear and smooth. This blog can give you an outline of the payor contracting, its advantages and the key elements to consider.

By clearly understanding the concepts above healthcare providers can lower their risk, increase their financial stability, and concentrate on giving their patients high-quality care.

Previous Post
Newer Post