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—April 2007

Coding is Key, But Don’t Overlook Getting Your Contracts in Order … Part II

This is the second of a three-article series 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. Get the steps outlined in phase I done, complete the steps in this second phase, and watch for our next issue in which the final steps will be outlined.

In the first article we talked about getting organized for this 2+ year journey into payer contract improvement after a decade or more of payer-friendly contracts have eroded your practice revenue. With your basic information on each payer and MCO contract now gathered (outlined in phase I of this article), you are ready to begin the steps involving both the reimbursement analysis and the initial payer/MCO contact phases.

So, you’ve now gathered up the contract entity names, renewal dates, termination notice requirements, brief description of reimbursement, and contact information. Now, organized them in order of contract renewal date. You will likely find that the termination notice timeframe from payer to payer or MCO ranges from 60 to 120 days. You will also likely find that most of your contracts have an “evergreen” clause that automatically renews the old contract rates unless either or both parties contact each other by the notice period prior to renewal. Create a calendar of all of your renewal dates and then figure out the date by which each contract notice must be received by the payer or MCO to be in compliance with the agreement. Now figure out the date one month prior to that required-notice date and you’ve got your latest start date for tackling the particular contract. If you use MS Outlook or other organizer, start populating it with reminders on the deadlines and notice dates that we will be discussing.

Create a calendar of all contract renewal dates and back into the required notice dates.

Now, let’s get the draft letter to the payer composed, making sure that all the key information is included. The letter should be concise, businesslike, not hostile, and very clear regarding the purpose. It should be on practice letterhead, sent via USPS certified mail or other means indicated in the agreement (keep the tracking info) and include:

• Name and address of the party indicated in the notice section of the agreement
• Date on which you will send the letter
• Your name, title and contact information [with authorization from the physician(s) if you are not already on record with the payer as an agent for the practice or physician(s)]
• Statement regarding your intention to renegotiate rates that must be effective on the renewal date.
• Request from the payer for a proposed fee schedule
• TIN, Practice Name and the physicians’ names
• Statement regarding this letter serving as notice of termination in the event that mutually acceptable terms are not met well before the renewal date, allowing adequate administrative time to make all terms effective on that renewal date.
• Deadlines by which you request the payer/MCO contact you to acknowledge receipt of this letter
• Carbon copy all partners or, if a corporation, carbon copy the physician owners

You might ask, “Why include termination notice at this point?” And, “why be so specific about the rates needing to be effective on the renewal date?” Well, you might be lucky and find yourself working with a payer or MCO provider rep that is knowledgeable, respectful, timely and diligent. Unfortunately, not all payer reps have these traits. It is fairly commonplace for practices not to know their rep’s name. It is just as common for practices not to know exactly how to contact the rep. You might get caught in the maze of voice response units and menu choices that never lead you to a live person. Payer reorganizations, attrition, and movement of reps from one payer to another are common in the industry. This all leads to a lack of continuity in communications.

And so, if the letter includes the intention to terminate In the event that acceptable contract terms are not met and effective by a given deadline, the payer has been given official notice of the consequences of letting your request to renegotiate fall between the cracks. The payer is aware that the countdown to potential termination has begun and that you are not diligently providing ample notice to get the negotiations done, only to find in the end that, if you do agree on rates, that it will take another two to three months beyond your renewal date because the payer waited until too late to bring the best rates possible to the table. And if you do not come to terms on new rates, you can walk away from the old the contract rates on the renewal date, and not have to start the termination notice clock after months of frustrating discussions.And so, if the letter includes the intention to terminate In the event that acceptable contract terms are not met and effective by a given deadline, the payer has been given official notice of the consequences of letting your request to renegotiate fall between the cracks. The payer is aware that the countdown to potential termination has begun and that you are not diligently providing ample notice to get the negotiations done, only to find in the end that, if you do agree on rates, that it will take another two to three months beyond your renewal date because the payer waited until too late to bring the best rates possible to the table. And if you do not come to terms on new rates, you can walk away from the old the contract rates on the renewal date, and not have to start the termination notice clock after months of frustrating discussions.

Once you have mailed the notice to the payer, make a note in your calendar to follow up by phone or in writing within two weeks of the letter being mailed if you have not yet heard from the payer. Keep a thorough log of ALL calls, emails, meetings and letters pertaining to your request to renegotiate.

You have asked the payer to propose new rates and so you need to gather the data to determine what will be acceptable when you hear back. You’ll want to respond promptly to the offer so get ready now. Take a look at the performance of the payers in terms of reimbursement and administrative issues. For reimbursement analysis, look at your collection rate, preferably by type of service…Surgical, Evaluation & Management (E&M) and Other. If your practice management system or vendor can summarize the average number of days to collect from the payer and the accuracy rate on the first EOB, then start pulling that information together to use in the negotiations…if the payer is slower or inaccurate more often than other payers, then provide that feedback in the negotiations and increase your demands to include better rates and performance. Your costs related to poor cash flow and resubmitting due to payer error are an important part of your negotiations. Below are a few report formats that will help you simplify your analysis:

Create a report that allows you to see a comparison of payer contract performance prior to asking the payer for a new contract rate so that you will be prepared to respond to the requested new rates.

A payer's performance in timely and accurate payments is very important in deciding whether to ask for higher or lower reimbursement rates.

The information provided in this segment of the article should keep you busy until next quarter when we will discuss how to analyze your offer rates from the payer. We'll also cover some other contract language that you will want the payer to modify before you sign the agreement.

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

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