Payor contracts are a fundamental aspect of the home health industry, serving as the foundation for reimbursement Understanding key components of these contracts, the consequences of lacking them, and strategies for effective negotiation are essential for home health agencies looking to ensure financial stability within their revenue cycle, as well as operational efficiency. In this blog post, we will explore the ins and outs of payor contracts in home health, providing valuable insights and actionable guidance to help your agency thrive in the ever-evolving healthcare landscape with predictable revenue. 

What is a Payor Contract in Home Health? 

A payor contract in home health refers to an agreement between a home health provider and an insurance company or other payer that outlines the terms and conditions for reimbursement of home health services.

The key aspects of a payor contract in home health include:

1. Reimbursement Rates: 

The contract specifies the negotiated rates the home health provider will be paid for different services and procedures. See more about negotiating payor contracts later on in this blog. 

2. Covered Services: 

The contract defines which home health services are covered and eligible for reimbursement by the payer.

3. Claims Processing: 

The contract outlines the requirements and timelines for submitting claims to the payer for reimbursement and appeal procedures available at the time of billing. 

4. Prior Authorization: 

The contract may include provisions around prior authorization, utilization review, and medical necessity, and appeal processes available prior to billing.  

5. Quality Reporting: 

The contract may require the home health provider to report on certain quality metrics or performance measures. 

6. Network Participation: 

The contract establishes the home health provider as an in-network provider for the payer’s insurance plan. According to Katie Eisel, Payer Relations Director for Ohio Community at Home Network, “This may include certain lines/products within the plan, such as Medicare, Medicaid, Commercial or DSNP products. Additionally, knowing the differences in PPO vs. HMO products are important and the PPO is likely to have higher out of pocket/patient responsibility than the HMO. This creates additional administrative burden at the time of billing and potential delay in DSO.”

Having these payor contracts in place is critical for home health providers, as it provides a reliable revenue stream, negotiated reimbursement rates, and administrative support – all of which are essential for the financial stability and operational efficiency of the home health agency.

So now that we’ve covered what payor contracts are, let’s discuss the consequences of NOT having a payor contract in place. 

Key Consequences of Not having a Payor Contract in Home Health include:

1. Unpredictable Revenue Stream: 

Without payor contracts, The provider will be subject to the payor’s out of network pay and must ensure the patient is aware of the additional cost due to being out of network. Katie also adds, “Pay is often delayed for out of network providers and/or they are subject to 100% medical record review, as they will likely perform a detailed review of clinical information to ensure the patient’s care was medically necessary. This is done as out of network providers are also not likely to be subject to prior authorization. Again, this adds administrative burden and cost of goods sold to the agency for each patient.” 

2. Difficulty Attracting Patients: 

Patients often prefer to use providers that are covered by their insurance, so being out-of-network can put a home health provider at a significant competitive disadvantage.

3. Lower Reimbursement Rates: 

Payor contracts typically include negotiated reimbursement rates, which can be higher than what a provider may be able to collect from uninsured patients. Operating without these contracts means home health agencies may be reimbursed at lower, non-negotiated rates, negatively impacting their bottom line. 

4. Operational Challenges: 

Payor contracts often include provisions around claims processing, utilization management, and quality reporting. WHen a contract is in place, the agency will be assigned a representative to assist the agency with any revenue cycle or care delivery issues. If an agency is out of network, they are not likely to be afforded the luxury of an assigned provider representative. Without these agreements in place, home health providers may face administrative challenges and lack the support systems to efficiently manage these critical operational aspects.

The lack of payor contracts in home health can lead to unpredictable revenue, difficulty attracting patients, lower reimbursement rates, and operational complexities – all of which can threaten the financial stability and ability of home health providers to deliver high-quality care.

How Often Should Payor Contracts Be Negotiated?

If you have a payor contract already in place, how often should those be negotiated? 

Home health providers should update their payor contracts on a regular basis, typically at least annually. Here are some general parameters. 

1. Home health agencies should review their major payor contracts at least annually, and evaluate them semi-annually. Contracts with smaller-volume payers should be reviewed at least every three years.
2. Don’t let payor contracts become stale, as this can lead to missed opportunities for renegotiating higher reimbursement rates and addressing performance issues. Maintaining relationships with payors is important. 
3. One of the key reasons cited for updating payor contracts is if “the parties have not evaluated the contract in more than three years.” This suggests that home health providers should not let their payor contracts go unreviewed for extended periods of time. 
4. Ohio Community at Home Network suggests that home health providers should hold MONTHLY meetings with their revenue cycle, managed care, and contracting personnel to review payor contracts and identify any needed updates. 
5. Home health providers should also have routine meetings with the provider representatives assigned to their agency, and understand what metrics the insurance plans are reviewing to measure the agency’s success.

Home health providers should make a concerted effort to review and update their payor contracts on at least an annual basis, if not more frequently, in order to ensure they are being fairly compensated and address any performance or operational issues. Letting these contracts become outdated can lead to significant financial and operational challenges.

Negotiating Payor Contracts in Home Health: 

Here are some key strategies for home health providers to effectively negotiate payor contracts:

1. Conduct a Thorough Contract Review and Analysis (Annually, as noted above!)

• Review existing payor contracts to understand the current reimbursement rates, covered services, claims processing requirements, and other key terms.
• Analyze claims data and utilization patterns to identify opportunities for higher reimbursement rates or expanded covered services.
• Benchmark the provider’s contract terms against market rates and competitors’ contracts.
• Understand and review any gaps between authorization, denials, appeals, and documentation of medical necessity from field staff. If documentation of medical necessity is a key culprit within your organization, it must be addressed to have a clear and fair analysis of the provider’s relationship with the payer. 

2. Develop a Negotiation Strategy

– Identify the provider’s key priorities and goals for the contract negotiations, such as higher reimbursement, expanded covered services, or improved administrative processes such as reduced authorization or no authorization for initial time frame agreed upon.

• Assess the provider’s negotiating leverage based on factors like market share, quality metrics, access to care issues within the plan, and patient volume. 
• Prepare a detailed proposal with data-driven justifications for the desired contract terms.
• Know what disciplines are utilized more than others so the provider can agree to a lower rate on a less commonly used code to allow for a higher rate on a more commonly used code. 

3. Engage Effectively with Payors

• Leverage strong communication skills and negotiation tactics to advocate for the provider’s position.
• Be prepared to compromise on certain terms while protecting the provider’s core priorities. Know these priorities prior to engaging. 
• Follow up promptly and persistently to keep the negotiations moving forward.

4. Leverage External Expertise

• Consider working with a payor contracting specialist or consulting firm that has deep industry knowledge and existing payer relationships. Ensure the firm or specialist you choose gets to know your organization and a contract that also reduces your administrative burden.  
• Allow the external experts to handle the administrative burden of the contract negotiations so the provider can focus on patient care.

5. Monitor and Manage Contracts Proactively

• Continuously track contract performance and identify opportunities for renegotiation or amendments.
• Ensure the provider is adhering to all contract terms and requirements to maintain good standing with payers.

By following these key strategies, home health providers can position themselves to negotiate more favorable payor contracts that support the financial stability and operational efficiency of their organizations.

At HealthRev Partners, we understand the challenges home health, hospice, and palliative care agencies face