HBN periodically posts pertinent information on a new or hot topic pertaining to contract negotiations or payor relationships.  Sign up for immediate notification when a new advisory is published. These are free tips that are intended to help healthcare providers to understand and analyze relationships with managed care organizations (MCOs), insurance companies and other parties involved in the industry.  The more educated you are, the more likely you will understand your contract terms and ability to improve your bottom line.

HBN Advisory—December 2006

Getting Your Contracts in Order

This is the first of a series of articles to assist your practice in getting your payer and MCO contracts under control. The author, Penny Noyes, spent 18 years on the payer and MCO side of the healthcare industry and now works with providers to ensure an even playing field. Complete the initial steps outlined here and watch for future issues in which the next steps will be outlined.

You are keenly aware of the importance of correct coding to maximize the revenue that your practice can collect. Even with the best coding, many practices are collecting only 30 or 40 cents on a dollar charged. So ask yourself, how much more revenue improvement could come from increasing the amount reimbursed for each procedure by private payers?

Too many practices complain about reimbursement, but have become complacent with the status of payer and managed care organization (MCO) contracts, assuming there is no room for negotiation. It takes getting organized, some firm convictions and some solid data to get your contracting on tract. Throughout this process, keep in mind that contracts are intended to benefit both parties, not just the payer. Get a little fired up about this issue and start a campaign to manage and improve your contracts. In future issues, we will address very specific anti-provider contract provisions and what changes you’ll request, as well as improvement of your chargemaster, utilization of contract monitoring tools, and how differences in insured and self-insured plans can affect your practice. Managing your contracts is a very complex issue, involving many factors. In this issue we are providing a few tips to get started on management of your payer and MCO contracts.

First, let’s clarify that we will focus on private payer and MCO contracts. Although some government programs, like Medicaid plans managed by private parties, have some room for negotiation, the most prevalent one-sided agreements and “lowest hanging fruit” are found in the contracts with private payers. These first steps will take several weeks to accomplish, but be prepared for the entire project of getting your contracts renegotiated and under control to take 2 to 3 years. Don’t be discouraged…fair reimbursement can be found. Next, let’s start pulling the key information together for every private payer and MCO contract you have. If they are not all in one file drawer together, don’t be embarrassed, you’re not alone… this is the norm for many practices. But it’s time to find every agreement and compile certain information for each. Focus on the larger payers and MCOs in your market like Anthem BCBS, Aetna, CIGNA, UHC, Humana, PHCS/MultiPlan, First Health and other local players, but don’t forget the agreements that collectively account for some significant
revenue loss. If you can’t find some of agreements, contact the payer or MCO and request a copy of your most current agreement. Don’t be surprised if it takes a while to get them, but also don’t be afraid to explain that you are aware that they are taking contractual discounts for which you do not have any documentation and it is extremely important that they immediately verify the appropriateness of the discounts by providing you with the contract they are applying to your reimbursements. If you sense a lack of cooperation by phone, ask in writing, by email, fax or certified mail so that you have a communication trail should you later need to report the matter to your insurance department or other governing agencies. Depending on the state in which you operate your practice, you will find significant variation in the statutes and support by the insurance department with regard to your rights to request information of payers. Regardless, document all attempts to request information and be persistent with the payer and MCO if they are not cooperative in providing requested information. You will find some to be quite helpful and others that will make it so difficult that you cannot even find a human being to which you make the request.

Once you have your contracts in hand, pull together the following information creating a spreadsheet for easy reference. More than likely you will need to contact the payer or MCO to verify the current contact information, as reorganizations among payers and MCOs are common and your representative has probably changed since your practice signed an agreement. Many MCOs have gone through mergers and acquisitions, such as PHCS and MultiPlan, over the past few years.

* “Evergreen” clauses are very common in payer agreements… they mean that your contract automatically renews each year or term if neither party provides termination or notice of change within the contract’s notice period.

** Most agreements will have an attachment or exhibit that will include either language that describes how the reimbursement rate is developed, often a percentage of a certain or current year Medicare RBRVS, or an actual sample schedule. If you have a sample schedule, contact your payer or MCO and request a complete schedule of every CPT and modifier that you perform in your practice.

If you complete this phase of contract management, pat yourself on the back. It is harder to do that you might initially think. If you are really ambitious, start the next step by pulling together charge and reimbursement information by payer and MCO together for a 12-months period, in aggregate and by CPT/modifier, with a period end date of at least 3 months ago to ensure it is mature in the revenue
cycle. It is harder for most practice management systems to track the MCO reimbursement because the MCO networks are rented by multiple payers, often smaller payers in your market, and the practice management data is likely sorted in a “payer,” not MCO, buckets. If your management system captures both the payer and MCO network information so that you can aggregate the MCO contract use, you are a step ahead.

This article prepared by Penny Noyes, President of Health Business Navigators.

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