The dreaded favored nations clause

While you are in the process of renegotiating your contract with a managed care carrier, they want you to sign an agreement that states that the rate being offered will remain as favorable as those granted to other carriers (i.e. their competition).


Should you ever grant any other carrier a more “favorable” rate (i.e. a higher rate), you will need to notify the carrier within 30 days and the contract will then be amended to the more favorable rate, and all overpayments shall be refunded.


To make matters worse, the carrier tries to insert a clause that says it shall have the right to audit your books upon 90 days notice, to determine if the rate is favorable.


As experienced healthcare people know, this is the dreaded “favored nations clause” that many payers try to put in to their provider agreements. NEVER sign an agreement with this type of clause in it – seeing how it can shackle a practice should be painfully obvious.

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