Tips to Maximize Reimbursement with Contract Management

Tips to Maximize

Reimbursement with

Contract Management

by Kristen Wood

EXCLUSIVEWHITEPAPER

What is Contract Management?

The hospital contract management system is the key to maximizing nancial performance,

minimizing risk, and ultimately managing all aspects of payer contracts to get reimbursed

accurately.

A contract management system is designed to help keep track of Healthcare payer agreements and

calculate the rates and terms of those agreements.

This includes access to reporting tools that help analyze data and model potential contract changes

to provide the necessary information to make nancial decisions.

Specically, contract management systems should have the ability to:

• Calculate reimbursement for individual claims as well as analyze all posted

transactions including payments, contractual and administrative adjustments

• Accurately identify correctly and incorrectly paid claims and provide detailed

analysis of denials and payer performance

• Model proposed contract reimbursement changes to aid in negotiations and

provide analysis of upcoming payers trends

Mystery Contracts

The importance of having reliable sta dedicated to managing and renegotiating your contracts

cannot be understated. This starts with identifying the hospital’s top 20 payers and completely

understanding all the reimbursement methodologies those payers use.

The following should be part of the contract management process:

• Organized method of tracking the eective and renegotiation date for every one of the

hospital’s payer agreements

• Saved copies of each contract, addendum, and fee schedule electronically to allow the

collections team to access

• Process in place for communicating all reimbursement changes internally as well as to the

contract management vendor

• Tracking reimbursement changes from the payer

• Regularly attending payer meetings and government update calls

Contract management software should be able to display changes and trends that sta can easily

handle with the payer in a timely manner. It is important that underpayments and overpayments

are reviewed as soon as they are received and posted into the system.

Registration Errors

The Registration desk has a notoriously high turnover rate so it is important that hospitals have a

comprehensive on-boarding process and training program.

Inconsistent training or lack of supervision will result in sloppy insurance plan registration and low

collections of patient balances.

Accurate patient registration starts with verifying plan eligibility.

Incorrect plans can cause claim rejections but are easily preventable if good processes are in place.

It’s recommend that each facility use an electronic process to verify insurance coverage at the time

of admission.

Tips To Maximize Reimbursement With Contract Management

Price transparency is important to patient collections as well. Potential registration pitfalls to look

out for include:

• The primary payer may be entered but the secondary plan is missed

• A generic place holder payer mnemonic may be used such as ‘Commercial plan’ or

‘Medicare HMO’ which are not tied to a specic insurance plan. These may be entered because the

Registrar does not have a way to correctly identify the correct payer or verify eligibility.

• Take the time to review the payer master quarterly and make sure a good process is in

place so that adding new ones is controlled and the registration team has the tools they need

to identify the correct plans for all patients

Additionally, the Registration manager should meet often with Billing and Collections managers so

that issues caught downstream can be corrected quickly.

Billing Errors

Incorrect or inconsistent billing and coding practices can result in lowered payments or even

complete denials. A billing policy manual that is updated often is crucial for correctly coded claims

and compliance to government regulations.

It’s also important to address current processes for posting payer payments.

Using billing software to automatically post electronic transactions into the system is faster, more

accurate, and helps free up sta to perform other work.

Common billing errors include:

• Missing or incorrect use of modiers

• Missing charges and late charges

• Posting errors

• Non-covered services

• Bill types

• CCI edits

• Missing Authorizations or pre-certications on claims

Denied Claims

Prevention is the best cure for claim denials whether they are denied at the Clearinghouse or later,

when the claim is received. Contract management vendors should be able to provide reports as

well as other tools to quickly identify the most common cause of denied claims.

Hospitals should also be able to see the biggest payers by volume and charge amount as well as the

most common reason claims or line item services are denied for payment.

It’s recommended to divide denial types into a minimum of three categories:

1. Clinical- Ensure a process is in place for tracking provider trends as well as payer habits

2. Administrative- Coding and billing errors should be quantied and tracked for process

improvement

3. Contractual- These can be vague and may require a call to the payer. These denials should

be researched against the contract to make sure they are legitimate.

Tips To Maximize Reimbursement With Contract Management

Commercial Payer Tactics

It’s likely that hospitals have identied their “problem” commercial payers, but it’s important to

track all payers’ performance.

Here are some of the most common commercial payer tactics that should be monitored:

• Silent PPOs – These are instances of commercial payers moving patients to dierent payer

contracts that reimburse at lower rates. This is only caught if the collections team regularly

monitors payer reimbursements using a comprehensive contract modeling tool.

• Length of Stay (LOS) underpayments – Payers will sometimes reduce the approved Length

of Stay days so the payment to the facility is reduced. It is highly recommend that you have

adequate resources reviewing your payer payments for all accounts, not just the big dollar claims

so that patterns and trends can be identied.

• Medical necessity denials

• Vague denial and remark codes – Some insurance plans have been making subtle changes

to payer agreements adding changes to contract wording, so if there is a sudden increase in any

type of denial for a payer that has a new agreement in place, it is possible this policy change was

missed by billing sta.

• Paying under old rates

• Bundling - Incorrectly bundling specic codes has always been a common tactic by some

commercial payers.

• Service denials for outlier accounts

Medicare and Government Reimbursement Changes

Hospitals are entitled to recoup underpaid dollars for government payers just as they are for

commercial payers. Many Medicare and Medicaid HMOs routinely underpay Emergency room

services, inpatient days, and ignore outlier provisions.

Additionally, there have been many changes in state Medicaid reimbursement recently, making it

that much more important to have a reliable wayto identify underpayments.

Hospitals should be doing the following:

1. Reviewing government denials and underpayments

2. Keeping track of inpatient and outpatient cost-to-charge ratio updates and make sure they

are being paid correctly by Medicare HMOs

3. Identifying recovery opportunities for denied LOS, Transfers, ER services, Observation, and

outlier thresholds due to recent changes that HMOs have not kept up with

Contract Modeling

Contract modeling is an extremely useful tool that empowers Managed Care with information on

how proposed reimbursement changes will impact the nancial bottom line in advance.

The ability to understand the impact of new payer contracts with new potential contract rates and

terms is invaluable.

Each hospital’s patient populations are dierent, so the contract management vendor should oer

tools that can be used to test and model payer contracts during the negotiation process.

Two examples of how powerful this type of tool can be:

Tips To Maximize Reimbursement With Contract Management

1. As a hospital was negotiating a new contract proposal, they realized that the commercial

payer was dropping ER rates by a small percent, but in exchange, was oering a big increase in

their orthopedic service (i.e. knee replacements).

After analysis, the hospital realized that with its patient mix, the new result would be a signicant

loss in revenue because their ER utilization was so high. The hospital rejected that proposal and

negotiated one that was more benecial.

2. Adena Health System, a three-hospital system in Ohio, faced the challenge of their payer

contracts moving from percent-ofcharge to value-based reimbursement. With 32 dierent

commercial payers, predicting the change in reimbursement became especially dicult. Adena

chose to strategically target their top ve largest payers and model their proposed terms.

After running the calculations, Adena realized they would have lost $3.7 million in reimbursements

if they just accepted the contract terms from their commercial payers.

As more state Medicaids are beginning to move to dierent reimbursement methods- especially

APR-DRGs, contract management software should be able to process the information and analyze

the nancial impact on your reimbursement.

This information will help hospitals weather these changes and reduce any negative impact on the

bottom line.

Reporting

Contract management systems should have a robust suite of reports, including:

• Recovery Productivity – It is strongly recommended to track the collection team’s

productivity on a monthly basis. Make sure to have a reliable method of tracking the accounts

individual collectors are working that includes successful and unsuccessful recovery appeals.

• Underpayment and Denial Recovery Collection – It is recommended that underpaid

account recovery eorts be tracked separately from denials. This type of reporting should also

include payer trending analysis and a root cause analysis so denials can be evaluated and

processes put in place to prevent them.

• Claim Inventory and A/R Reports – One area that is often missed is unbilled claims. If the

billing system does not provide an easy way to identify unbilled charges, contract management

software should. Billed claims should be compared to charge code les to make sure each patient

is billed in a timely fashion. If a high number of unbilled claims exist, it is important to identify the

gaps in the processes to correct it quickly.

• Slow Pay and Unpaid Claims Analysis – Slow pays should also be tracked. Each payer

contract should have a contract provision addressing timely payment for clean claims, so make

sure each payer is following those rules. There should be someone responsible for working claims

that error out at the electronic claim clearinghouse.

• Denial Trend Reporting – This should also be watched closely. For example, if denials for a

specic code are rising, it could be an easy x. The explanation for one facility who noticed a

sudden rise in denials for CT and MRI services was the payer changed the precertication

requirements but that change was not communicated to the Radiology department.

6 Things To Do Now

1. Meet with collections and determine areas of improvement - Many facilities nd that dif-

ferent departments are separated and operate in silos. It is crucial that these dierent departments

are brought together regularly so they can work together to solve problems.

2. Meet with the Management team (Registration, HIM, Coding managers, Billing oce,

and Collections department) to identify urgent issues- Work with the budget oce to solve re-

source issues if adequate sta is not available. Discuss areas that could be outsourced, even tem-

porarily, to improve revenue reimbursement. For example, business oce functions or collection

work can be supplemented by an outside vendor while new sta is lled.

Tips To Maximize Reimbursement With Contract Management

3. Identify the top payers and most common reasons for denials- Identify current reports

that outline the top payers as well as detailed denial trends. Insight into these two areas will help

focus collection eorts to maximize reimbursement.

4. Make sure a Chargemaster review was completed in the last two years- Find out when

the last charge master review was done or when prices were most recently raised. If it has been

over a year, make sure a thorough analysis is done that also compares fees with other local

facilities to remain competitive. It is crucial to ensure charges remain competitive within the market

and that revenue opportunities are not getting away due to charges lower than the market.

5. Assess all electronic processes that aect reimbursement and make automation a

priority- Automation of many business oces processes can prevent errors that lower payer pay-

ments, so take the time to review all areas that could improve with more electronic functionality.

6. Meet with your contract management vendor to discuss reporting needs- Finally,

identify realistic revenue benchmarks and set goals for the collections team. Track progress

carefully and communicate it to all areas in the business oce, as it’s important for all departments

to be engaged to make sure goals are met.

Tips To Maximize Reimbursement With Contract Management

About The Author

Kristen Wood

Sr. Account Manager, Contract Management, PMMC

Kristen Wood, CPC, PMP is a Senior Account Manager at PMMC. Kristen brings over 30 years of

Revenue Cycle, Medical Coding and Billing experience to PMMC. Kristen has software

implementation and training experience at over 100 medical practices nationwide.

PMMC provides high value revenue cycle software and services to improve the nancial

performance of healthcare organizations. PMMC’s unique combination of software with 30

years of revenue cycle expertise reveals greater nancial accuracy and missed revenue

opportunities in the areas of underpayments and denials, pricing transparency, and

value-based reimbursement – resulting in a 10:1 ROI.

PMMC is a Microsoft Certied Provider and earned the Healthcare Financial Management

Association (HFMA) Peer Review designation in 2013 for its CONTRACT PRO and ESTIMATOR

PRO solutions, meeting an objective third-party assessment of overall eectiveness, quality

and value.

For more information, please visit: https://www.pmmconline.com/

Tips To Maximize Reimbursement With Contract Management

15720 Brixham Hill Ave, Suite 460

Charlotte, North Carolina, 28277

ph: (704) 543- 8103