The Devil Is in the Details
By Selena Chavis
For The Record
Vol. 31 No. 7 P. 22
Experts explain why optimal revenue cycles demand that staff understand payer contracts.
The fact that revenue cycle management (RCM) has become increasingly complex is not lost on today’s providers. As health care organizations try to navigate the intricacies of capitated agreements, fee for service, and everything in between, it is critical that the staff responsible for submitting clean claims and ensuring timely payments are keenly aware of details within an organization’s payer contracts.
Doug Palmer, CCS-P, CPC, CRC, chief operating officer of Compliant Coding Systems, notes that while this foundational knowledge has always been an important element of RCM, it was largely overlooked until recent years. “I think the No. 1 reason [providers] go to the contract is to make sure they got paid correctly. And if they didn’t, they are going to use that contract to go back and make sure they get appropriate payment,” he says.
Yet, to thrive in a shifting health care landscape, providers must view payer contracts as more than a reference tool. According to Palmer, they must equip RCM staff with a thorough understanding of provider responsibility. “Providers like to say that it’s the payer’s responsibility to pay this amount for services rendered, but there are a lot of other responsibilities on the part of providers as far as documentation and coding of services,” he says, noting that if providers are not aware of these responsibilities, they will set themselves up for downstream reimbursement challenges.
Rose Dunn, MBA, RHIA, CPA, CHPS, FACHE, FHFMA, an ICD-10-CM/PCS AHIMA-approved trainer and chief operating officer of First Class Solutions, points out that without a thorough understanding of payer contracts, “RCM staff may not know how to address coding-related edits or know the amount of contractual deduction to take.”
For example, some payer agreements require claims to be submitted with an alternative diagnosis-related group (DRG) rather than the typical Medicare severity DRG. In these instances, a provider runs the risk of a denied or rejected claim.
Offering another example, Dunn suggests that if negotiated discounts in a payer contract are not understood, RCM staff may “overcontractualize” and write off too much of the amount that was not paid by the payer. “When this happens, the reimbursement the entity may have been entitled to from the patient or another payer will not be captured,” she says.
Palmer explains that payer contracts also dictate documentation responsibilities that can have a significant impact on risk adjustment scores—a reimbursement methodology now used by all three major payer categories: Medicare, Medicaid, and commercial. “It’s a two-way street,” he says. “Providers want to get paid appropriate reimbursement, but payers rely on providers meeting their responsibilities for their operating revenue under risk adjustment.”
Simply put, R. Kendall Smith, Jr, MD, SFHM, chief physician advisor for Intersect Healthcare, says that it comes down to optimal contract management. Otherwise, providers run the risk of claims underpayment, failing to respond to claim denials on time, missing out on appropriate dispute resolution, payers overreaching, and mishandling even the basics of mailing addresses and contract information.
“Understanding common clauses and requirements included in the majority of contracts will improve payer contract management and help provider organizations protect their revenue, respond to denials, and identify payers not playing by agreed-upon rules,” Smith says.
Payer Contract Basics
Education and information are key to better payer contract management, says Palmer, who points out that providers must get everyone who has a role in RCM on the same page. This includes those involved with preauthorization, the front desk, billing and claims, and back-end RCM processes.
“It’s often an interdependent relationship—making sure each role in the RCM process has the information they need to execute properly,” Palmer says.
While most RCM staff have general knowledge of payment rates for commonly billed services, payer contracts contain a lot more information that defines the responsibilities of both parties. The fine details can easily create revenue cycle challenges for health care organizations.
Awareness begins with an understanding of the core elements of any payer contract, Smith says, pointing to the following:
• number of days the payer has to reimburse provider for covered services;
• number of days the provider has to submit claims after service or visit;
• scope and list of services covered by the payer;
• reimbursement rates for all covered services;
• claim denial dispute procedures;
• term of contract;
• notice provisions; and
• notice periods for renegotiation and termination.
Dunn adds other important elements to the list, including contract definitions, compliance with policies, information and records, confidentiality, and term and termination.
To properly equip RCM staff, Smith suggests that health care organizations provide education and tools to support basic contract interpretation and then create a centralized and automated repository for the storage and tracking of all contracts and contract-related documents. While RCM staff will not be able to commit to memory all details of various payer contracts, he notes that helping them gain an understanding of common clauses and requirements included in the majority of contracts will notably improve the outlook.
Palmer agrees, emphasizing that health care organizations must find a way to give RCM staff access to payer contract information. “There are so many different contracts today,” he says. “It’s not enough to say Blue Cross Blue Shield. A provider may have 10 different contracts with the same entity, all with different stipulations.”
Dunn encourages RCM departments to make staff assignments by payer, which will enable staff to learn the ins and outs of a few payers. As a result, they can develop relationships with the provider relations staff at those insurers and become proficient in the full processing of their claims.
“When the staff are organized by alpha and have to deal with all payers, it’s very difficult for them to develop relationships with any one payer, and learning all the contracts is a challenge,” Dunn explains. “When staff have a few payers, time can be carved out to go through the contracts line by line and, when the contract is revised, reviewing the changes will take less time.”
Recognizing the Trickier Elements of Payer Contracts
Understanding the basics of payer contracts is one step but navigating potential landmines is another.
In terms of pitfalls, Smith points to contract language pertaining to unilateral amendments as an area of importance. “These clauses state that payers can change reimbursement rates, requirements, network participation, and even contract language whenever they please,” he says.
Notably, some states require payers to notify provider organizations when contract changes are made, while others allow for arbitrary changes without notification. Smith emphasizes that providers need to be astutely aware of these conditions.
Dunn adds that other areas that can make or break a revenue cycle include claim submission requirements (such as timely billing and complete claim documentation), payment exceptions (such as coordination of benefits, cost sharing for dual eligible members, and special rates for certain procedures), and the appeals timetable.
Fee schedules make for especially complex processes, Palmer says, pointing out the commercial health insurance market and “metal levels” that indicate how costs are split as examples. Under the Affordable Care Act, health insurance plans are assigned a metallic level—bronze, silver, gold, and platinum—that refers to a plan’s actuarial value level. Palmer explains that while he and his neighbor may both have an Aetna plan, their copays may be quite different.
“Managing fee schedules can be very tricky,” he notes. “A provider may have hundreds of different fee schedules. It’s a matter of keeping these things up to date and then maintaining them. It can be an enormous chore.”
Providers often choose to contract with as many payers as possible to attract and accommodate as many patients as possible. It’s an understandable strategy, Palmer says, but it exacerbates the contract management challenge. For example, there are thousands of procedures codes, with each one having a dollar figure attached to it in the various payer contracts a provider manages.
Providers must effectively keep these fee schedules current to avoid negative impacts to revenue cycle and the bottom line. Consider the potential impact of one error.
If a provider is seeing 1,000 patients under one specific procedure code and the code is incorrect on the fee schedule, those claims will have to be rebilled, a process that comes with a hefty cost. “Any error can exponentially create loads of work,” Palmer cautions. “The biggest thing is maintenance of the information and making sure it is created accurately from the start and then well maintained.”
The industry’s continued shift to a quality-based system also introduces challenges to understanding payer contracts. “We are at the crossroads where quality is being woven into the fabric of health care delivery and manifested in these contracts,” Palmer says. “Providers must understand their responsibilities of demonstrating quality in health care. This process often begins at the moment a patient makes initial contact.”
Managing Multiple Payers and Contract Changes
In recent decades, technology has formed the basis of many performance improvement initiatives across the health care industry. Payer contract management is no exception.
For example, managing multiple payers is a reality for today’s providers. Dunn is not aware of any organization that works with only a single payer. “This is why organizations use contract management software,” she says, cautioning that trying to manage and maintain information across spreadsheets is inefficient and error prone in today’s health care climate.
Applications exist on the market that allow providers to input all elements of payer contracts into a database. Solutions can then calculate the contracted payment and discount (contractual) amount. RCM staff see the projected payment and contractual amount, and if the payment is less than or greater than the projected payment, the solution alerts them to reassess whether the data in the contract management software need to be adjusted.
Smith points out that contract management software can also help health care organizations effectively monitor contracts by notifying staff of changes and looming renewal dates of specific contracts.
In addition to implementing a centralized and automated repository for the storage and tracking of all contracts and contract-related documents, Smith suggests that providers attempt to negotiate standard contract language, payment, appeals processes, and renewal dates across all payers to simplify efforts.
In terms of contract changes, Dunn suggests that RCM develop a close relationship with the managed care contracting team. “Monthly meetings should be held to review contract changes and any issues that revenue cycle staff are having with payers, such as untimely payments, noncompliance with the payment requirements, excessive denials, etc,” she notes. “At the same time, revenue cycle staff should provide input to the contracting team with suggested contract changes, such as defining the criteria the payer will be using for paying for certain conditions—sepsis, for example.”
The contracting team should also provide access to the portfolio of the contracts and the factors that impact the revenue cycle team, Dunn adds. Finally, because it works closely with the contract and its payment clauses, the contracting team should be responsible for loading these elements into the contract management software.
RCM remains a critical strategy for maintaining a competitive edge amid tighter profit margins and greater expectations for health care value. In that regard, industry experts agree that equipping RCM staff with knowledge of payer contracts is essential to sustainable success.
— Selena Chavis is a Florida-based freelance journalist whose writing appears regularly in various trade and consumer publications, covering everything from corporate and managerial topics to health care and travel.