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  • Clean up your Contracts: A Step-by-Step Guide for Negotiating Higher Reimbursement Rates

Clean up your Contracts: A Step-by-Step Guide for Negotiating Higher Reimbursement Rates

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Truly understand the intricacies of insurance contracts and navigate the negotiation process

By Bryanne Johnson and Matthew Johnson, JD

Everyone is feeling the impact of rising costs in today’s business environment. Goods, materials, and labor have become more expensive, negatively effecting the bottom line. Unfortunately, there is no corresponding increase in the reimbursement rates for therapy services. These rates are based on the percentages included in the payer contracts with our patients’ insurance companies. Now more than ever, insurance contract negotiation is a critical aspect of driving revenue into our practices.

The process of critically reading and negotiating insurance contracts may seem daunting, especially to owners of large, multi-centered practices who contract with countless insurance companies. There are questions to ask about each contract: What are the reimbursement rates for various treatments? How do those rates compare to your other contracts or practices in your area? Are there any red flags to investigate? It is critical that we are proactive in advocating for our practices, the profession, and payment — and, in turn, for our patients. Follow this step-by-step guide to truly understand the intricacies of insurance contracts and navigate the negotiation process to ensure that you are receiving the highest reimbursement possible from the insurers with whom you contract.


First, you need to review your current payer contracts and identify your existing rates. While this may seem straightforward, most practice owners stall in this initial stage. If you cannot find your original contracts, you will need to call the applicable insurance company and ask for a copy of the agreement or fee schedule.

When analyzing your rates, be sure to determine how much you are being reimbursed for your most frequently billed codes. Then, compare those rates to the Medicare fee schedule and rates for other payers to see how each payer compares. Perform the same analysis for those insurance companies that pay a “One Rate/Per Diem” and “Case Rate.” Be prepared to present your actual reimbursement rates in an accurate and organized manner when speaking with the insurance company.

Read the fine print to be certain that you are aware of the nitty-gritty of the payment policies detailed in your contracts. For example, some contracts require a modality to be billed as part of a three-unit minimum encounter in order to receive full contractual payment. If a modality is not billed, the payment can be decreased by up to 20%, which could result in a payment that is less than the cost of treatment. Create a strategy to change this arbitrary payment policy, and in the meantime, educate your clinical staff regarding its existence.


Next, you should determine where to start. Which payers have the lowest reimbursement rates? Which payers account for the largest portions of your payer mix? Which contracts contain arbitrary payment policies? Answering these questions will help you prioritize the contracts that have the most effect on your revenue and, therefore, your bottom line.


Now it is time to collect the information you need to make a compelling case to the insurance company that your rates should be increased. What is it about your practice that makes you stand out or brings unique benefits to their patients? It is important to understand your role in each payer’s provider network so you can prove your value to that network.

Consider your clinicians’ advanced competencies and certifications; cutting-edge technology, modalities, and equipment utilized in the delivery of care; and innovative practice models and specialty programs and services offered in your practice.

Strong outcome data positions you to negotiate from a position of strength. Patient satisfaction scores are another metric that demonstrates your value. In sharing this data, you realize a return on all the time you invested in collecting patient outcome data! You may also use your location to your advantage; if you operate in a rural area, perhaps you are the only provider to provide a particular service in a certain mile radius.

Another key metric you will want to bring to the table is your cost to deliver care. What does it cost your clinic to deliver services to one of their beneficiaries? Unfortunately, with most commercial or managed care payers, there is little difference between the cost to deliver care and the reimbursement for that care. Sharing that information with the payer can further prove the need for a raise in rates.

A letter to the insurance company from a patient with a relevant plan of care is powerful evidence and will bolster your case. It proves to the payers that beneficiaries see true value in your practice — so much so that they are willing to write letters on your behalf.


Once you have gathered all the information you need, you will present it in the form of a letter of intent. An effective letter of intent should include the following:

  • The date your original contract was executed
  • Your current fee schedule
  • Your proposed reimbursement rate
  • Your cost to deliver care
  • The volume of patients you serve that are beneficiaries of the particular insurance
  • Outcomes that demonstrate exceptional delivery of care and patient satisfaction
  • Any patient letters

Now that you have finalized your letter of intent and have gathered all the appropriate and applicable information, call the provider customer service line and ask to speak to the contracting department to determine the best way to get them the information (whether mail, certified mail, fax, or email). Be sure to always keep a copy of everything that you send, as you likely are going to have to send the information more than once.


Congratulations on submitting your letter! Hopefully, your payers recognize the incredible work you and your providers do with increased reimbursement rates. If your request is declined, do not be afraid to go back to the insurance company in 30 days to repeat the process with any additional or updated information.

Using basic negotiation tactics will help get you over the finish line. While you should not make unreasonable or arbitrary demands, starting with a higher number will “bracket” a range where you and the insurance company can find middle ground. Be sure to play to your strengths; if you have a two-week waiting list of patients, let the insurer know that your practice is in high demand. Be kind and courteous in your interactions. Asking to speak to a supervisor can be an effective strategy, but copying a boss on a thank-you email is a nice touch, too! Remember that an effective negotiation is one where both parties come away feeling like they won.


Add a review date to your ticker system for each insurance contract, ensuring that you systematically examine every contract in a timely manner. It is critical to communicate with insurance companies on a regular basis to advocate for our profession and practices, promote the positive impact your care has on the lives of their beneficiaries, demonstrate how you save the payer money, and justify your request to be paid fairly for the skilled care you deliver.

As a practice owner, there is no need to be an expert at everything it takes to run a successful practice. The money you spend engaging a consultant or lawyer to review current contracts, as well as new ones you are considering, will come back to you in dividends when your reimbursement rates are increased. Don’t fly solo when a copilot can boost the probability of arrival in the land of higher reimbursement.

Finally, make sure you are working smarter, not harder. Disengage from contracts and insurers that simply don’t make sense for your business. You will never win by increasing volume to offset a reimbursement rate that is less than your costs. This can be a hard decision, because those beneficiaries do deserve access to therapy services. But remember, your ability to provide services to patients in your community is dependent upon a positive bottom line.

Operating a health care company means constantly dealing with changes in regulations, staffing, and delivery of care, just to name a few, and reimbursement rates will not magically increase on their own to help us meet these challenges. If we do not ask, we will not receive — so always ask for what you need to ensure your practice is healthy and thriving. 

Bryanne Johnson and Matthew Johnson, JD

Bryanne Johnson is CEO of Lincoln Reimbursement Solutions. She can be reached at bjohnson@LincolnRS.com.

Matthew Johnson, JD, is in-house legal counsel for Blue Sky Therapy. He can be reached at mjohnson@blueskytherapy.net.

Copyright © 2018, Private Practice Section of the American Physical Therapy Association. All Rights Reserved.

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