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Conquering Contractual Adjustments in Healthcare

What are Contractual Adjustments?

Every healthcare organization has contractual agreements with the payers who help pay for the charges incurred for patient care. These contracts contain specific billing agreements and fee schedules that outline what portion of the charges the payer will and will not cover.

Contractual adjustments can have significant impacts on what providers ultimately get paid for providing services. For example, in efforts to manage costs, some hospitals charge for certain supplies and nursing care such as catheter kits and obtaining arterial blood gas measurements. The case providers make here is that these products and services may seem routine, but they are not administered to every patient and therefore can be charged separately from the room rate. However, this creates issues when payers contractually consider these expenses as part of the room rate and refuse payment for these items separately.

On the surface, charges for these minor items may seem like drops in the bucket. But, when considering how often these services are administered per patient, the money being left on the table adds up quickly. Reducing these adjustments helps organizations receive a higher percentage of billed charges, thus contributing to financial stability and revenue optimization. Many providers understand the importance of reducing contractual write-offs but need help navigating how to do so. 

Reducing Your Organization’s Adjustments

As a company dedicated to reducing the rising costs of healthcare, Signature Performance understands that contractual adjustments are burdensome on providers. Managing contractual adjustments is a crucial way to prevent any roadblocks between providers and payment received for the important care services they provide. Here are a few ways to reduce the impact of contractual write-offs and improve financial performance.

Build the Right Team

As the toll of contractual adjustments on providers increases, having the right people in place has become essential for revenue cycle success in healthcare. It is important to have a contracting/compliance team that is knowledgeable about billing structures and has strong negotiating skills to advocate for adequate fee schedules. Having a dedicated denials management team is also growing more common. These teams review denied claims, identify contractual issues, and work to resolve them with the payer in a timely fashion.

Understand Contractual Obligations

Contracting/compliance teams should maintain open communication lines with billing and denials management staff to ensure firm understanding of contractual terms. Understanding what is billable and staying abreast of contractual changes will help billing and denials teams develop a better eye for errors and address them more efficiently. In turn, they can provide useful trend data for the contracting/compliance team to bring to the table when it comes time to renegotiate payer contracts.

Optimize Revenue Cycle Management (RCM) System

When operating at peak performance, an optimized RCM system can help track the status of contractually adjusted claims and appeals. Many contracts contain timely filing standards for claims, so being able to track timeliness at a glance is critical. These systems also help revenue cycle managers monitor the organization’s CAR and other key performance indicators to help determine financial performance.

Ensure Medical Coding Accuracy

Inaccurate medical coding can impact how much the provider gets reimbursed for services. If a service is improperly coded to a contractually unallowable code, the payer may deny payment entirely. Providers can avoid these costly errors by conducting regular coding audits and provide continuing education opportunities for coders to stay current on quality standards.

Take the Next Step Today

Don’t let the chaos of contractual adjustments impact your financial performance. Signature Performance is on a mission to reduce administrative burden in healthcare and help organizations reshape the healthcare landscape. Our team of subject-matter experts will help you leverage the latest technology to optimize your revenue cycle processes. If you are ready to take the next step toward increasing your organization’s financial stability, contact us today for more information about our solutions.


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