Ensuring correct reimbursement in a timely manner is always at the top of a healthcare provider’s mind. But many provider organizations could be leaving money on the table with inefficient and infrequent payer contract management.
Payer contracts contain fee schedules and reimbursement requirements, as well as the conditions payers must meet for timely reimbursement.
Therefore, payer contract management is key to ensuring payers reimburse practices and hospitals the correct amount each time a claim is submitted.
Many provider organizations have failed to implement comprehensive payer contract management practices because of the complexity associated with negotiating and managing multiple contracts, explained Tracy Watrous, Vice President Member Services and Content Development at MGMA.
“Payer contracting, whether it is commercial payers or government payers, and the credentialing process is complicated, cumbersome, lengthy and time-consuming,” the former medical group director recently told RevCycleIntelligence.com.
“It’s very hard for a medical practice to keep up without getting discouraged by the process because it is lengthy and complicated.”
Provider organizations can overcome these challenges and maximize their revenue by understanding the basics of payer contracts, diving deeper into contract language, creating a central space for contracts, and preparing for negotiations.
Understanding the basics of payer contracts
While payer contracts are legal documents, providers and practice or hospital administrators do not need a legal degree to understand the terms of each contract. Payer contracts may seem complicated, but ensuring providers and administrators understand the fine print can help organizations capture all charges and prevent claim denials.
“It’s incredibly important for practice administrators and physicians to understand their contracts and know what they are getting paid,” said Watrous.
Providers usually know the payment rates for commonly billed services at their organizations. However, payer contracts contain a lot more information than just the rates for these services. The fine print can easily create revenue cycle challenges for provider organizations.
On top of the rates for commonly billed services, providers and administrators should also be aware of the following core elements of any payer contract:
- The number of days a provider has to submit a claim after a service or visit
- The number of days a payer has to reimburse the provider for covered services
- Scope and list of services covered by the payer
- Reimbursement rates for all covered services
- Claim denial dispute procedures
- Term of contract
- Notice periods for renegotiation and termination
Understanding all of these terms is key to not just receiving payments, but maximizing reimbursement. For example, knowing the codes for all covered services ensures that claims are complete and providers get paid for every covered service they perform, even if it is not a commonly billed one.
Digging into all the provisions of a payer contract also helps provider organizations prevent and fight claim denials because they understand all the requirements for reimbursement on both their side and the payer’s side.
Considering language while contracting
Once practice or hospital administrators understand the basics of payer contracts, they can start to dive deeper into contract language. Understanding common clauses and requirements included in the majority of contracts will improve payer contract management and help provider organizations protect their revenue.
Contract language pertaining to unilateral amendments can be particularly important. These clauses state that payers can change reimbursement rates, requirements, network participation, and even contract language whenever they please.
“Most payer contracts say that the payer can amend the contract at any time,” Watrous explained. “In the worst case, they say that no approval is required from the provider at all. In the best case, they’ll say, ‘We are amending this contract and you have 30 days to object to the amendment in writing or it automatically goes into effect.’”
Some states require payers to notify provider organizations of any changes to the contract, but others do not. In addition, the small window of time may not be enough for providers and administrators to digest the changes, analyze the impacts on revenue, and develop a response.
With revenue at risk under unilateral amendment language, provider organizations should not accept contracts from payers that include this clause, Watrous advised.
“Thirty days is such an unattainable period of time for a practice that is trying to keep up with all of this,” she said. “At the very least, ask for 60 to 90 days. But ideally, organizations should not allow unilateral amendment language in the contract at all.”
Payers typically have reimbursement requirements that are not explicitly detailed in individual contracts. But provider organizations must still abide by these policies or face claim denials.
While payer contracts contain language pointing to these reimbursement policies, the clauses also typically state that the payer can change these policies whenever they choose.
“That’s a big catch-all that can trap providers because it ties reimbursement to policies not specified in the contract,” Watrous said.
However, provider organizations may not be able to avoid the clause.
“In most cases, they can’t really take out language that says they will abide by reimbursement policies because these clauses often include mechanisms such as medical necessity guidelines or pre-authorization protocols,” she explained.
“They just need to be aware of the language pertaining to reimbursement policies and how broad it is,” she added.
Payer contracts also detail the networks in which provider organizations can participate, as well as the credentialing requirements providers must meet to join a network. Ensuring a provider organization is in the appropriate network is key to revenue generation because plan networks guide members to the organization.
However, contract language regarding network changes can lower revenue for provider organizations. Payers can redesign networks to include different physician positions, such as specific specialists. Practices or hospitals lacking those positions can be eliminated from the network.
“Value-based care is producing different networks for different products,” Watrous stated. “There’s always language in contracts that pertains to credentialing criteria that you have to meet in order to be added to the network. But oftentimes a contract will also have language that states that the payer can pick and choose which positions can participate in which networks.”
Ideally, a payer contract should never include language that allows payers to select a provider organization’s network, she advised. Network changes should be tied to credentialing criteria only and not arbitrary selection of physicians.
Implementing a payer contract management system
Adding to the complexity of payer contract management is the fact that provider organizations work with multiple payers at once. Ensuring that all contracts are centralized can help organizations manage a larger volume of relationships.
“You need to reach out if you don’t have those contracts in your office,” Watrous said. “You should reach out to the payers for your most recent contract for all of their different product lines. They either send you a copy of the contract or they send you a copy of the fee schedule.”
Once providers have all their contracts available, they should implement an automated system that stores and tracks the documents. Merely maintaining a spreadsheet of contracts will not result in comprehensive, streamlined contract management, explained Regina Flint, OB Hospitalist Group’s (OBHG) Contract Manager and Paralegal, in a recent interview.
“What I found when I started at OBHG was a list of contracts that was maintained on an Excel spreadsheet and housed on one of our internal servers, which most employees could access from their system,” she said.
“However, there was not a consolidated location where someone could review specifics about the contract, such as its terms and conditions. And obviously, maintaining on an Excel spreadsheet did not have an electronic notification feature when something occurred with that contract.”
Lack of an automated system resulted in different workflows for each contract.
Flint helped to implement an automated contract management system at OBHG to serve as a central repository of the organization’s many contracts, including agreements with payers, vendors, and asset managers. The automated system also notified staff of important provisions and deadlines listed in each contract.
“It is very important for the contract owner to receive notifications about what's happening with their contract – just in case it fell off their radar,” she said.
“Such as if there’s a termination for convenience provision, or if the agreement automatically renews unless someone does something. Or, the company’s needs may have changed and we no longer need this vendor or this service.”
The ability to view all contracts can also help provider organizations standardize contracts and pull out common clauses that their staff should be aware of. Based on all contracts at the organization, administrators can create a standard version of a payer contract and use that contract when negotiating with payers.
Preparing for payer contract negotiations
With the ability to understand payer contracts comes the ability to renegotiate terms that favor the provider organization. Payers do not hold all cards when it comes to determining reimbursement rates. Provider organizations can use contract and performance data to convince payers to give the hospital or practice a more favorable rate.
To start this process, provider organizations should start to analyze fee schedules and payment processes to determine the performance of each payer. Providers should focus on the rates for the organization’s most commonly billed services, Watrous advised.
“You build out that table so that you can look and say, for code 99213, here’s what I get paid by United Healthcare. Here’s what I get paid by Blue Cross Blue Shield. Here’s what I get paid by Humana,” she said.
“Then, you look at your entire book of business, payer mix, and all of those different codes to make a determination about where you’re paid the least and what representation of the entire patient population is under that payer.”
In addition to seeking renegotiations with payers who offer lower reimbursements, providers should look to see which payers have the highest impact on total revenue based on the covered patient population, she recommended.
Prior to entering a negotiation, providers and administrators should communicate with stakeholders in the organization, such as financial leaders, patient accounting experts, and other physicians, the Advisory Board suggested.
“Getting input and agreement from key stakeholders at your organization ensures you ask the right questions during negotiation, are flexible where you can afford to be, and are more stringent on the terms that yield the best outcome for your organization,” the group wrote in a 2016 report.
Gathering key stakeholders through a committee that meets monthly or quarterly is ideal. The committee’s primary responsibilities should be to discuss actionable strategic directions, review contract portfolios, and compare expected and actual claim reimbursement revenue yields by contract.
The latter responsibility is critical, the Advisory Board emphasized. “The key question to ask before a negotiation is whether the variance between actual and expected yield is in an acceptable range. Many contracts do not reach their expected yield; the higher the variance, the more you need to dig into that contract.”
Provider organizations also should go to the negotiation table understanding the baseline patient population impacted by the contract, the Advisory Board added. Organizations can argue for more favorable reimbursement rates by clearly understanding the population and exactly what services they consume.
Additionally, provider organizations should develop clear objectives of what the organization expects to gain from negotiations, whether the main goal is to increase net yields, boost a specific service line, enhance payment accountability, or create stronger contract language for late or inaccurate payments.
Providers and administrators should also share these objectives with payers to ensure a smooth negotiation process.
Finally, the Advisory Board cautioned provider organizations to prepare for anything. Prior to negotiating with the payer, administrators and providers should brainstorm what payers may expect from the negotiation and how payers may react to provider requests.
Developing data-driven, evidence-based responses to these potential questions or pushbacks will put providers in an ideal place to negotiate.
Providers and practice or hospital administrators may feel overwhelmed when it comes to managing the nuances of payer contracts, but breaking down the issue can help to clarify these important relationships.
Providers and administrators should take a proactive stance when improving the organization’s payer contract management strategy, Watrous advised.
“You are dealing with large payers that have lots of people and lots of different providers that they are negotiating with,” she said. “It’s a long and complicated process, but the success is in undertaking it in the first place. Most of the payers count on the fact that the majority of their providers don’t have the time to go through this process. So, don’t give up.”
“Any work that you do in this area is good work,” she concluded. “If you just start with the basics and create that foundation, any progress you make from there is good progress.”