In medical billing, there are two scenarios once the claim has been processed, receiving payment or negotiation. If the provider and payer have a valid contract on the date the service was rendered, the payment that the payer issues should be correct. If the payer and provider don’t have a contract, the payer may send the claim to be priced by a third party in a process known as negotiation.

Some payers use third-party pricing companies to negotiate pricing for out-of-network claims. These companies serve as intermediaries in the negotiations between payer and provider. The intermediary contacts the provider and offers a negotiated settlement amount that is specific to an individual claim. Normally, this settlement offer also includes a prompt payment clause. After the provider signs the settlement, the payer sends the agreed upon payment.

In a negotiation, the intermediary may do the following:

  • Arbitrarily price a claim and state that the pricing is “usual and customary” based on the geographical area where the services were provided: These claims are often underpriced, so be prepared to challenge the pricing.

  • Submit a settlement request to the provider: These settlement agreements normally obligate a discounted payment to be sent within a specified time, usually 10 days or less.

These negotiation attempts are just that — attempts. The provider isn’t obligated to accept the offer. In fact, providers should counter any initial offer they receive from a payer in these circumstances:

  • When a contract exists between provider and payer: If the claim doesn’t pay as specified by the contract, you should immediately notify the payer of the issue. Often, you can simply send the claim back with a notation explaining how the claim should have processed.

  • When no contract exists between payer and provider: In this situation, the payer isn’t entitled to a discount, even though the payer looks for a discount in most cases.

    If the provider hasn’t accepted a pre-payment price reduction but the payer takes one, immediately notify the payer in writing that the payment is not acceptable. This written notice, sent upon receipt of an under-paid claim settlement, is known as a claim appeal. The important part of the appeal is to know the payment rules and stand firm on them.