- Every dollar counts in the healthcare revenue cycle, especially with declining Medicare reimbursement rates and new value-based care models. But organizations should understand how to successfully negotiate claims reimbursement contracts with payers to truly optimize revenue cycle management, according to a new report from the Advisory Board.
The report stated that the key factors to successfully negotiating payer contracts is to open communication with stakeholders, compare expected and actual revenue yields, evaluate service lines, and understand the organization’s financial position.
To lay the groundwork for successful negotiating, healthcare organizations should start by improving communication with important stakeholders, such as financial leaders, patient accounting experts, and physicians, researchers highlighted.
“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,” wrote the Advisory Board.
When engaging stakeholders, healthcare organizations should also focus on developing actionable strategic direction, the report added. During contract meetings, stakeholders should develop net revenue targets, address corrective measure for any internal or payer contract issues, and anticipate potential payer responses and changes during negotiations.
The Advisory Board recommended that organizations establish a committee of key stakeholders that meets monthly or quarterly to discuss actionable strategic directions and regularly review contract portfolios.
At the committee meetings, the healthcare organizations should compare expected and actual claims reimbursement revenue yields, the report continued.
“It is critical to compare the expected yield from a contract to what you are actually being paid,” wrote the Advisory Board. “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.”
The committee should also evaluate whether the actual yield for each contract aligns with the organization’s contractual allowance budget and compare actual yield across different payer contracts. The goal is to “minimize the variance in actual yield across top-tier contracts,” stated the report.
In addition, the healthcare organization should review service lines to understand how different clinical services impact a contract’s claim reimbursement structure. The industry group noted, however, that contract performance and service lines should only be compared if they manage similar patient populations.
“If a service line is not performing well, speak with the clinical manager of that service line to understand where the differences originate,” stated the report. “Together you can better understand the patient population and how your organization should think about contracts for that particular service area.”
Understanding the organization’s financial position is also essential to successfully negotiating payer contracts that add value to the organization, the report added.
“Your team should review financial numbers every month with a team from finance and managed care (and your service lines as appropriate),” wrote the Advisory Board. “Understanding overall performance will allow you to challenge the numbers when appropriate and ask questions about what is going on with various contracts.”
Healthcare organizations should regularly communicate financial goals and performance with stakeholders to ensure that the negotiation team knows what the organization needs with a payer contract.
Additionally, the Advisory Board identified three rules for negotiating contracts with payers, including defining the baseline population, developing objectives, and preparing for changes. Healthcare organizations should address these rules three to six months before negotiations start.
The industry group advised healthcare organizations to start by identifying the baseline patient population. Organizations can negotiate for better claim reimbursement rates by knowing what patient groups their providers treat and the services they consume.
Healthcare organizations should also develop clear objectives of what it expects to achieve during negotiation and expect to share these with payers, stated the report. For example, negotiation teams should know if the organization wants to increase net yields, boost a specific service line, improve accountability, or develop stronger contract language for late or inaccurate reimbursements.
“Make your objectives known to the payer up front,” wrote the Advisory Board. “There is value in letting the payer know that you have expectations about what you want to achieve during the process.”
When negotiating a payer contract, healthcare organizations should be prepared for as many changes the payer may suggest. By being prepared, negotiation teams can create the best approach for countering these changes.
“For instance, brainstorm methodology changes that might come from the payer or anticipate language changes that you want to make for charge master increases or payment discrepancies,” stated the report. “If you are looking at a longer-term contract, think about a price adjustment or index you and the payer can agree on.”