Insights Into 5 Areas of Home Health Payer Contracts
Develop mutually rewarding relationships
by Steve Selbst

Payer contracting for home health companies can be overwhelming. The purpose of this article is to help the provider with five key payer contract items. Note that I am a payer contracting business expert, not legal counsel, and it is important that you have contracts reviewed by a legal counsel since, beyond the business and operational aspects of payer contracts, there are many items that can impact you from a legal perspective. It is mandatory to have both kinds of skill sets reviewing your payer contracts; the business and operational skills and legal skills are separate. We will examine home health fee schedule amendments, lesser of billed charges vs. contracted rates, term and termination without cause, claims payments, retrospective reviews and a bonus, “favored nation.”

1. Fee Schedule Amendments

About 80 percent or more of a commercial payer contract is usually uniform. The variability is usually in the fee schedule amendment due to differing provider types and, therefore, fee schedules. It is important to know what to look for in a home health fee schedule amendment.

Home health commercial payer fee schedule amendments are usually paid on a fee-for-service basis using a variety of G and S HCPCS codes. Below is a sample of codes that could be in a home health fee schedule:

Each of these codes will have a per-visit rate associated with it, and many are time constrained, for example, a 15-minute duration. It is important to make sure that all of your key codes and services performed are in a payer’s fee schedule. Otherwise, you run the risk of services that you are providing being excluded and, therefore, not paid. You may not realize this problem until you file a claim and the claim is rejected.

If you need to provide services that are unlisted, there should either be reimbursement rates for unlisted codes or a provision that allows you to bill a patient directly for unlisted services. If you enter into HMO agreements via IPAs and ACOs, you may be asked to accept a capitated rate which is a per member per month (PMPM) fee. Also, you should make sure to check your fee schedules for any restrictions on how many minutes or times a code may be billed per unit of time, such as number of visits per day, etc. to be sure that these limitations fit your business model.

2. “Lesser of” vs. “Contracted Rates”

Almost universally found in payer agreements is the “lesser of billed charges vs. contracted rates language” clause. This is very important to understand and dissect, and it means that you will get paid your billed charge instead of the contracted rate if your billed charge is less than the payer’s contracted rate.

For example, if code G0154, a 15-minute skilled nurse in a home health setting, has a contracted rate of $100 and your billed charges for this code is $80, you will get paid $80 not $100. The effect of this discrepancy is that you have negated the higher contracted rate by setting your charge master too low.

Audit your charge master to be sure that all of your billed charge rates are well above the highest rate paid for any code/service that you are or will be negotiating.

The other potential problem is that if the wording of this clause is, instead, the “lesser of UCR rates vs. Contracted Rates.” Be careful. UCR is universally commercially usual and customary rates, which can be highly variable based on a geographic location. Further, while you control your billed charges via your charge master, you have no control over what usual and customary rates may be. However, it may be reasonable for a payer to place a high limit on reimbursement that is based on a percentage of your billed charges such as limiting it to 500 percent of Medicare to avoid unusually high rates.

3. Term and Termination

There are many variants of the term and termination without cause clause. The more common ones are 90 days without cause, 90 days prior to the anniversary date and similar clauses for 120 days. Your goal is to maximize flexibility to either renegotiate rates periodically or to have the option to terminate an agreement.

When the condition for termination without cause is 90 days notice (without specifying an anniversary date or a minimum duration) then you may give 90 days notice at any time during the contract period, and then the contract will terminate if you give notice 90 days prior to the termination date. For example, if you give notice to terminate on 10/1, then your termination would be effective on 12/30, which is 90 days later.

Many contracts have a related stipulation that the initial contract term must happen first, before you may issue the termination request. You may be on a minimum three-year agreement from the date of signature. The three-year term may have to take place first, and the contract may specify that the soonest you may terminate is on the third anniversary of the agreement. In this situation, you could give notice roughly two years and nine months from the effective date of the agreement.

Other agreements are evergreen. They renew as of a certain date, usually annually, unless either party issues a termination request. The best time to issue notice to the payer that you want to negotiate a rate increase is about three to four months prior to the termination notification date. This gives you and the payer time to adjust the terms of the agreement before the notification to terminate would otherwise be due.

4. Claims Payments

Claims payments deal with how long you have to file and how long the payer has to pay claims from the date that they receive the claims. Ninety days to file after the date of service is desirable. If necessary, you may request up to 180 days.

In my experience, a payer will not usually agree to accept claims after 180 days. Make sure claims filing requirements meet your business and operational practice for filing claims. If you routinely file within 10 to 20 days of performing a service, you will be well ahead of the 90-day requirement.

Check the provider manual for claims filing requirements. Often, if you are filing with secondary insurance, the requirement is that you process the primary claim filing first. This may be applicable, for example, to a Medicare Supplement Plan.

5. Retrospective Review

A retrospective review means that a payer may audit payments at a later date and, if they determine that overpayments have been made, the payer may request refunds. The key, here, is to ensure time limits. A review period should not exceed 90 days from payment. Also, it is best, where possible, to specify that any overpayments will be paid separately by the provider and not withheld from future claims payments. This will be better both operationally and less complex from an accounting perspective.


“Favored nation,” in payer contracts, means that once you agree to contracted rates with a payer, if you put in place lower rates from another commercial payer, then you will agree to accept the same lower rates from the payer you just contracted higher rates with. Simple solution: Do not accept it. Today, it is rare to see this language in major commercial payer agreements. However, because of the severe implications to your reimbursement, I wanted to cover it.


Review the provider manual and consult with your health care legal counsel to be sure state and national laws affecting payer contracts are taken into consideration.