Interpreting complex contract terms then adjusting your patient accounting system to accurately bill and administer claims can be daunting. With a careful look inside managed care payer contracts, Signature Performance partners with health systems to find opportunities to negotiate contract terms and conditions for improved accuracy and streamlined administration that will ultimately benefit your bottom line. Check out our list of best practices to improve your collections and reduce administrative costs.
Pended for Audit, Review, or Terms Clarification
Challenge: Payers will frequently pend a claim or a class of claims for audit, review, or to clarify terms of service or payment. In these situations, payment can be delayed for months and consumes significant resources to resolve, causing a direct impact on cash flow. Most issues are ultimately resolved in favor of the provider; however, they do not recoup the time value of the money associated with late reimbursement.
Signature’s Best Practice: The preferred solution is to insert contract language that compels the payer to pay a percentage of the negotiated rate for pended claims while they are being analyzed and resolved. A rule of thumb should be 85%-90% of the negotiated reimbursement outlined in the contract. Another tactic is to charge interest on the claims for the period they are in the pended state. The rate should have some sting in it for the payer and should be no less than 1.5% a month. Either of these measures will incentive payers not to pend claims unless they believe it is a serious issue that will ultimately be resolved in their favor.
Challenge: Some contracts have appeal periods stipulated in the contract, less than one year. Some as low as 90 days.
Signature’s Best Practice: The appeal period for disputing underpayments should be a minimum of one year from the date of final payment. This allows the accounts adequate time to run a full cycle through the whole collection process. It also allows for recoveries in situations where an error is identified, and a retrospective review of older accounts leads to bulk recoveries for the same error.
Case Rate Pricing
Challenge: Some case rates do not have pass through provisions for high-cost procedures such as CT and MRI scans.
Signature’s Best Practice: All case rates should be priced to cover high priced procedures (CT, MRI, etc.), drugs, and implants. If not there needs to be a pass-through provision for those specific items.
There also should be a provision for pass through of high-cost procedures for inpatient per diem arrangements, especially for ICU rates.
Late Payment Penalties
Challenge: Most contracts do not have specific language that outlines terms and interest penalties for late payments.
Signature’s Best Practice: Negotiate late payment penalties or at the very least include language that re-affirms any state laws regulating interest penalty on late payments. Any underpayments identified and collected are technically late payments and are subject to interest penalties. Many facilities have reaped considerable additional interest income from payers who consistently underpay or pay late.
Stop Loss Provisions
Challenge: Most payer contracts do not include language and terms for stop loss on behalf of the provider.
Signature’s Best Practice: Every contract should have a stop loss provision to protect you when the inevitable catastrophic cases occur. Our recommendation is that diagnosis-related group (DRG)-based methodology have a minimum of a one-day outlier provision and that all other inpatient reimbursement include stop loss thresholds and additional reimbursement calculations. We recommend a cost-based stop loss threshold. Most contracts have language that states reimbursement cannot exceed charges, protecting the payer. In turn every contract should have language that reimbursement cannot be less than your allocated cost.
Most Favored Payer
Challenge: Many plan contracts contain a “most favored payer” clause with a procedure for the payer to audit rates.
Signature’s Best Practice: These clauses are a throwback to the 1980s and serve no practical purpose in today’s environment. This language frequently creates costs involved in analysis to ensure compliance and accommodating the independent audit; we recommend this language be removed.
Payer Service Team
Challenge: Not all high-volume contracts have a designated service team within the payer organization, to address contract issues such as: underpayments, denials, billing issues, etc.
Signature’s Best Practice: High volume payers should have a designated service team assigned to your account. This will greatly facilitate the resolution of billing and underpayment issues. This should be negotiated into the actual contract language to make it an enforceable provision. This will have a measurable effect on the effectiveness of an underpayment recovery program.
Payer Billing Manual
Challenge: Many contracts have language that requires strict adherence to procedures in the payer billing manual. In some cases, this requirement can adversely alter negotiated reimbursement. It can also increase the effort and overhead for the billing office.
Signature’s Best Practice: Modify the contract language to state that you will make a reasonable effort to comply with requirements in the payers’ billing manual, but in no case will such compliance alter the negotiated reimbursement in the contract.
Grouper Version and Coding Schemes
Challenge: There are multiple DRG grouper versions and coding schemes utilized across payer contracts. This constitutes a coding and billing nightmare for medical records and patient accounting personnel.
Signature’s Best Practice: Make the best effort to negotiate the most current version of the DRG grouper required by CMS regulations be utilized by all payers in pricing claims. If their system does not accommodate it, put the responsibility to convert your coding on the payer. Always specify the most current version of CPT-4.
Challenge: Contracts frequently don’t contain language for replacement DRGs, when a DRG remains substantially the same from a clinical delivery perspective but is replaced by or combined into a new DRG number. For example: DRG “AAA” and “BBB” now become DRG “XXX” and payers refuse to pay for “XXX” because it isn’t listed in the contract, even though the services delivered are identical to the ones contracted for under the old DRG numbers.
Signature’s Best Practice: Insert language into all contracts that include DRG groupers, stipulating that the payer will pay the designated DRG or its subsequent replacement DRG at the contracted rate.
Invoices for Pass Through Reimbursement
Challenge: Frequently, contracts contain provision for the payers to reimburse invoice cost for implants, high-cost drugs, etc. The billing process for this can be extremely laborious and problematic. Patient Accounting must first identify accounts where invoices are required, secure the invoice from purchasing, and do a separate billing to the payer then track payment manually. Many times, purchasing does not have a one-to-one invoice for each patient; the item may be only one of many on a comprehensive purchase order or possibly been purchased through a third-party supplier. On the payer side, they must match up the invoices to the patient and date of service and pay them separately. Frequently, much of this reimbursement is lost and even when implant billing is processed - it is not uncommon for this portion of the claim to be paid until the original claim is older than 90 days.
Signature’s Best Practice: Push for at least a 10% markup to be applied to the invoice cost to cover inventory costs, handling, and administrative costs of extra billing effort to get reimbursed. Eliminate the requirement to send the payer a copy of the invoice. The items can be billed on the UB-04 at cost with a specific revenue code identifying them as a pass-through item and the payer can reimburse. The language can contain a clause allowing the payer to audit any invoice (at their expense) they feel is overpriced. Another option is to price procedures that have implant items at case rates that include the high end of the average cost of implants plus a markup factor of no less than 10%.
Per Diem Differentials
Challenge: It’s common for contracts with per diem reimbursement methodology for inpatient services not to have a differential between medical and surgical cases. Frequently the surgical per diem is higher than the medical per diem. This is based upon a general acceptance that surgical cases usually consume more resources and require more intense care than the average medical case.
Signature’s Best Practice: We recommend separate per diems for medical versus surgical cases, with the surgical per diem being at least 10% to 20% higher. Medical and surgical services can easily be defined and separated by the CMS DRG designations for medical and surgical DRGs.
Signature’s Managed Care Contract Management team has worked with hundreds of providers and thousands of contracts- we are experts at abstracting, analyzing, and providing guidance. We also have deep expertise in setting up your patient accounting systems for accurate billing, work-listing, denials identification, and more.
Signature Performance is on a mission to reduce administrative burden in healthcare and help organizations, including critical access facilities, reshape the landscape of healthcare. 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 towards increasing your organization’s financial stability, contact us today for more information about our solutions.