In any negotiation, both parties come to the table with their own list of terms they’d like to see in the final agreement. In this second blog in a 3-part series on demystifying the process ambulatory surgery centers (ASCS) go though in negotiating contracts with health plans, Regent Vice President of Managed Care Andrea Woodell shares language “red flags” to help ASCs leaders avoid common pitfalls in payer contracts.

“In our work with ASCs across the country, we see hundreds of contracts – that’s one of the benefits Regent brings to the table as a management partner,” says Woodell. “A local ASC leadership team doesn’t always have that perspective, but the health plans they’re negotiating with do. So it’s really helpful to know some of the language to watch out for, and to be armed with the ammunition you’ll need to come to agreement on payer contracts that allow you to stay profitable.”

Woodell outlines five areas where ASC leaders should be on the lookout for sub-optimal contract language:

Term of the contract: If the contract extends more than one year, have you successfully negotiated a cost-of-living increase for each subsequent year?

“Lesser of” language: You’ll see this with TPAs or national PPOs. They’ll negotiate 65% of bill charge for example, and the ASC may say ‘great, I’ll take that all day.’ But then the language goes on to read ‘or the lesser of’ xyz. Any time you see the language ‘or the lesser of,’ buyer beware. I’ve seen commercial business get repriced to 100% of Medicare or 100% of Medicaid. This happens regardless of what you’ve negotiated, because they have ‘the lessor of’ language allowing default to a lower state or federal mandated fee schedule.

Escape clause: What’s your ability to get out of the contract? Most contracts will read that you’re unable to cancel within the initial term of the contract, typically 3 years. It’s important to be certain that you can get out of a contract when you need to — a 90- or a 120-day out clause is ideal.

Indemnification: If they want to be indemnified, we get to be indemnified. It’s reciprocal, or not at all.

Timely payment: Strong contracts stipulate payment of a clean claim within 30 days. One metric driving margin is how quickly you collect your money. But often, you’ll see 45 or 60 days in a draft contract. Be on the lookout for that.

For more help with negotiating you next contract, contact Woodell here. And, watch for the final installment in this series, focused on specialty-specific contract tips.