The Rate Exhibit and the Term Sheet
Two documents come out of a rate negotiation and only one of them is the agreement. The term sheet is short, legible and therefore the one that gets circulated and remembered; the rate exhibit is the one the payment system has to be built from. They disagree in predictable ways, because a summary leaves out the modifiers, localities, effective dates and methodology that decide what a line actually pays — and where they disagree, the exhibit is what the practice agreed to.
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Key takeaways
- A term sheet records an intention. A rate exhibit is an operative part of the contract. Only one of them pays claims.
- Summaries omit the limbs that decide the number: price-changing modifiers, locality, place of service, product line and effective dates.
- A methodology expressed as a percentage of a published schedule is not a rate until the schedule, version and locality are named.
- Load from the exhibit, never from the summary — and reconcile the two before signature rather than after the first remittance.
- Under 15 U.S.C. 7001(a), a record or contract cannot be denied legal effect solely because it is electronic, or because an electronic record was used in its formation.
- So a negotiation conducted by email is not informal by virtue of the medium; whether a term sheet binds depends on its language and the parties' intent.
- Which means the document should say what it is — binding or not, and in which parts — rather than leaving that to be argued later.
- Anything the term sheet promised that the exhibit does not contain was not agreed, however clearly everyone remembers it.
Two documents, one of which pays claims
| Term sheet | Rate exhibit | |
|---|---|---|
| What it is | A summary of proposed terms, produced to make a negotiation legible. | An operative part of the executed agreement, incorporated by the contract itself. |
| What it usually omits | Price-changing modifiers, locality, place of service, product line, effective dates, and the methodology's fine print. | Nothing that decides the number — which is why it is long and unreadable. |
| What it is safe to build from | Expectations, and the agenda for the next conversation. | The fee schedule load, and therefore every variance report that follows. |
| What happens where they conflict | It loses, unless its own language and the parties' intent made it binding. | It governs, because it is the agreement. |
The failure is rarely a disagreement about a headline number. It is that the summary answered a simpler question than the exhibit does, and the practice built on the simpler answer.
The five things a summary drops
- Price-changing modifiers. A rate stated per code is not a rate per claim line. A modifier that reduces or multiplies the allowance changes the number the summary quoted, and modifier handling is frequently the whole difference between an expected and an actual amount.
- Locality and place of service. Where the methodology references a published schedule, both are inputs. A summary that names neither has quoted an incomplete formula.
- Product line. One signature can reach several products at different economics — see the all-products clause. A single quoted rate may apply to one of them.
- Effective dates. A rate is a rate for a period. Without an effective date range, the summary cannot answer the only question a variance review ever asks: what applied on this date of service?
- What the methodology actually references. A percentage of a published fee schedule is not a rate until the schedule, its version and its locality are named. Two parties can agree that number and mean different amounts.
The reconciliation belongs before signature
Whether the term sheet binds, and why the medium is irrelevant
The opposite error is to treat everything before signature as conversation. Negotiations run over email, and email feels informal, so the documents exchanged in one are frequently handled as though they could not matter.
Electronic form decides nothing either way
- Make the document say what it is. A term sheet that states, in terms, whether it is binding — and if partly, which parts — removes the question. One that says nothing leaves it to be settled later by people with opposing interests.
- Watch the parts that usually are binding. Confidentiality and exclusivity provisions are commonly intended to bind even inside a non-binding sheet, which is a normal arrangement and worth noticing rather than discovering.
- Keep the exchange. Not because it is the contract, but because it is the record of what each side said it was agreeing — and, per the retention standard in the payer contract inventory, it has to be reproducible rather than merely somewhere in a mailbox.
- Ask counsel once, not each time. Whether a given form of words binds is a legal question that depends on the language and the governing law. It is worth answering for the practice's standard form so that every subsequent negotiation starts from a known position.
And the exhibit is not frozen either
One more assumption is worth removing: that the exhibit, once signed, is the last word. It is the operative document, and it can still move without a new signature where the agreement lets it — by amendment notice, or through a document the contract incorporates.
- An amendment can change it without a signature. The payer contract amendment notice covers how, and what notice is owed before a change takes effect.
- An incorporated document can qualify it. A payment rule in the provider manual may be a contract term, which means the operative rate is the exhibit as the manual conditions it.
- So keep the versions. Superseded exhibits with their date ranges are what make a later variance argument possible at all, since the comparison is always against the rate that applied then.
Common questions
Can we load our fee schedule from the term sheet?
No, and doing so is one of the more common ways a practice ends up with a variance report it cannot trust. A term sheet summarizes; the exhibit is the agreement. The summary will usually be silent on price-changing modifiers, locality, place of service, product line and effective dates, and where the methodology references a published schedule it may not name the schedule's version. Loading from it produces expected amounts that are confidently wrong, and the errors surface as variances that are really the wrong row being compared. Load from the exhibit, and reconcile it against the summary before signature so that any difference is a question rather than a dispute.
Is a term sheet sent by email binding?
The medium is not what decides it. Under 15 U.S.C. 7001(a), a signature, contract or other record relating to a transaction in or affecting interstate or foreign commerce may not be denied legal effect, validity or enforceability solely because it is in electronic form, and a contract may not be denied them solely because an electronic record or signature was used in its formation. So whether a particular term sheet binds turns on its language and the parties' intent, and it is answered by counsel for the practice's standard form rather than assumed from the fact that it arrived as an attachment. The practical response is to make the document state what it is.
The exhibit does not include something we were promised. Now what?
Then it was not agreed, however clearly everyone remembers the conversation, unless the term sheet was binding as to that point. That is why the reconciliation belongs before signature: it is the last moment at which the difference is a question that can simply be asked. After signature the same finding is an argument about intent conducted against a document that has already answered it, and the routes available are the ones the agreement provides — an amendment, or the dispute process — rather than a correction.
What should a rate exhibit contain to be usable?
Enough to compute an expected amount without anybody's recollection: the code, the price-changing modifiers, the locality and place of service where the methodology uses them, the product line the row applies to, an effective date range rather than a current value, and — where the rate is a percentage of a published schedule — that schedule named with its version. A row missing any of those is a rate that has to be interpreted, and an interpreted rate becomes an argument about somebody's data entry at the moment it needs to be an argument about the contract.
Does the exhibit stay fixed once signed?
Not necessarily. It is the operative document, and it can still change without a new signature where the agreement permits — through an amendment notice, or through a document the contract incorporates by reference, such as a provider manual carrying a payment rule that conditions how a row applies. That is the reason to keep superseded exhibits with their date ranges rather than only the current one: a variance argument is always about the rate that applied on the date of service, and it cannot be made from a file holding only what applies today.
Key terms in this article
Defined once, on their own pages.
Continue learning
What happens to the exhibit next, and where the summary belongs.
Fee Schedule Load and Validation
Turning the exhibit into an expected amount you can compare a payment against.
Payer Contract Renegotiation
The event that produces both documents, and what decides it before it starts.
The Payer Contract Inventory
Where the exhibit, its versions and the exchange behind it are recorded and kept reproducible.
The Provider Manual as Contract
How a document you did not sign can condition the rate the exhibit sets.
Contractual Variance Calculator
Compare expected against paid, once the expected amount comes from the right document.
Authoritative sources
- 15 U.S.C. § 7001(a) — General rule of validity (Electronic Signatures in Global and National Commerce Act) (opens in a new tab)
Provides that, notwithstanding any statute, regulation, or other rule of law, with respect to any transaction in or affecting interstate or foreign commerce, a signature, contract, or other record relating to such transaction may not be denied legal effect, validity, or enforceability solely because it is in electronic form, and a contract relating to such transaction may not be denied legal effect, validity, or enforceability solely because an electronic signature or electronic record was used in its formation.