What is Letter of Intent (LOI)

Letter Of Intent (LOI) Definition

The LOI is a "Strategic Placeholder" in the network development process. For Health System Executives, an LOI signals a willingness to negotiate terms without being legally bound to a specific fee schedule yet. For Payers, LOIs are critical for "New Market Entry." When a plan applies to CMS or a state to expand into a new county, they may not have 100% of their contracts signed. Regulators often allow plans to submit LOIs as "Evidence of Network Build" to prove that they are on track to meet adequacy standards by the time the plan goes live. Operationally, the transition from an LOI to a "Fully Executed Contract" (FEC) is a high-pressure workflow. If the conversion rate is low, the plan will face a "Network Gap" on day one, triggering immediate regulatory scrutiny and "Single Case Agreement" costs.

FAQs

Can an LOI be used in an HSD table submission?

For initial applications to enter a new market, CMS often allows LOIs to be counted as part of the "Pending Network," provided they are replaced by signed contracts before the final approval.

What is the difference between an LOI and a "Memorandum of Understanding" (MOU)?

An LOI is usually more preliminary and focused on intent to contract, while an MOU may outline specific high-level terms and principles of the future partnership.

Why would a provider refuse to sign a formal contract after signing an LOI?

This usually occurs if the final negotiated reimbursement rates or "Value-Based" quality requirements are not acceptable to the provider, representing a major risk to the payer’s network strategy.