Payer Contracting - Part of Revenue Cycle Integrity

by Elizabeth Lamkin. This article first appeared on the ACPA website. Thanks to Ms Lamkin for allowing us to replicate for our care mgmt readers.
Published on Nov 12, 2015

The importance of payer contract language cannot be underestimated. Unless the language is modified to create a win-win situation for the provider and payer, the hospital is generally placed in a defensive position subject to the demands of the payer. At the next contract renewal, make sure you have data and the opportunity to recommend changes based on the hospital's experience with the payer.

There was a recent thread on the RAC Relief Google group about Medicare Advantage managed care plans and the problems providers are encountering with the various plans. As I read this thread, it occurred to me that this is really part of a larger discussion on payer contracting in general.

Effective contracting is a team sport that requires input from the whole revenue cycle team (see figure below). Once a payer contract is in effect, there is very little recourse when care management (CM), physician advisors, billers and other members of the team discover issues with that contract. Time spent in getting input, studying, clarifying and negotiating contract terms prior to signing will pay off big on the back-end with fewer denials and more clean claims.

Typically, providers face two areas of concern: unfavorable contract terms such as a limited appeal process and misinterpretation of regulatory guidance by Medicare Advantage (MA) plans. Effective hospitals tackle these real problems with a systems approach and develop a permanent multi-disciplinary team for ongoing contract review and input. The team should include not just finance and contracting, but CM, the physician advisor and clinical staff. During the year, these contracts are treated like other vendors with data collected on key performance indicators (KPIs) for tracking and trending for the team to review, in order to monitor performance and suggest changes. There are numerous resources such as the Healthcare Finance Managers Association (HFMA) that publish KPIs for contracting, but as the regulatory landscape changes, teams may wish to add specific indicators for their facility, including the time required by the physician advisor to manage each payer.

Within the contracting team, the experts on regulatory and utilization issues can educate the contract staff on contract terms needed and update them on how the plan is adhering to the terms. The accounts receivable staff can provide feedback to the utilization management team on how their management of patients translates into favorable or unfavorable reimbursement. Is it a matter of internal improvements that are needed, or has the payer strayed from the contract terms?

In the day-to-day management of contracts, case management and physician advisors should have real-time online access to a summary of terms for each contract in order to optimize management of current patients. Even small facilities can manage this process with existing resources, and most likely the finance department will have the summary of each contract for billing purposes already on-hand. Without knowledge of the terms of payer contracts, it is like driving blindfolded and then wondering why you have a three-car pile-up. If the facility is concerned about contracted rates becoming public, the team can sign confidentiality agreements or finance can provide reimbursement methodology without financial details, but keep in mind that transparency is the only route to effective contract management.

Finally, forget departments as separate functions as these are just names for siloes. As stated earlier, contract management, like most effective hospital systems, takes a team effort and is a continuum of linked activities. A hospital must use each resource to maximum value for the organization. The quality department knows how to create KPIs, the education department knows how to educate staff, the compliance department knows the regulatory environment, and so on. By bringing all the players and resources together in one initiative, hospitals will gain spill over improvements in other systems because of the shared knowledge.