Did you know…60-80% of transactions within the healthcare industry are governed by contracts? Even so, the key players aren’t always on a level playing field.
When it comes to payer-provider contracts, it often feels inequitable, with each side doing what’s in their own best interest. For example, some payers have a tendency to carve 3-5% out of a contract every time one is negotiated. Meanwhile, many providers sign payer contracts without negotiating, leaving valuable dollars on the table. In order to maximize revenue in the midst of an endlessly changing environment, it is imperative for health systems to master the contract negotiation process.
It may seem basic but it is essential to:
(1) always read your contracts and (2) avoid signing anywhere until you understand the impact of what you’re signing. But how do providers further ensure they take a proactive approach to payer contracts? Implement, or live by, the steps below to make contract negotiation a priority at your organization.
1. Avoid Legalese
Request your payers to remove unnecessary legal jargon from your contract. Though it’s not always possible, any strides you can make toward a clearer contract will make it easier for you to understand the rules within – and to ensure each party abides by them.
2. Eliminate Gray Language
If payment terms are vague, each side will assume the best case scenario for themselves, at the expense of the other party. Concrete terms for payment make understanding payments easier, while ambiguity leads to variance in payment and frustration in the appeals process. If a contract includes algorithms, ensure the payer includes a clear example of how that item will be calculated.
3. Ensure Continuity
Ensure continuity between your contract and your facility. This includes being aware of how your contract service types are identified by the payer within the contract. Identifying a specific service or procedure as one revenue code, while the payer identifies it as another, could lead to denials. Don’t allow the payer to determine what is (and is not) included on the surgical fee schedule. Also, it doesn’t hurt to do a little “comparison shopping” before signing on the dotted line. Look at the surgical fee schedule for a few of your top payers to see what the rates are for the most common surgeries your organization performs.
4. Prevent DRG Downgrading
Request payers to go through a requirements checklist before they change the billed claim’s DRG code to a lesser DRG code…and get this in writing within the contract. If this is something you foresee a specific payer doing, or you’ve witnessed the payer doing it before, add it as a prevention clause in the contract or, at the very least, make a mutual agreement that they will notify your facility prior to payment.
5. Steer Clear of Overly Complex Calculations
If you can’t measure it, you can’t manage it. When at all possible, steer clear of complex mathematical formulas for projecting payment reimbursement for a particular service. High math is hard to follow, making it a painful portion of a contract. Don’t be afraid to go back to a payer if your adjudication engine can’t handle what they are asking for and use that as leverage for them to develop alternative payment methodologies. If you’re going to agree to specific contract terms, make sure your adjudication engine can handle them.
Join us for our upcoming webinar to learn more about the importance of contract negotiation and how data can be used to achieve better outcomes for all parties.
August 22, 2019 | 1:00 p.m. EST
Balancing the Scales: Leveraging Analytics to Create Contracts that Win for Health Plans and Providers
Presented by Will Israel, VP of Product Management, SSI and Stacie Adcock, Rev Cycle Admin Services Manager at Nebraska Medicine