How Do Your Payers Stack Up?

June 2013

As a former Wellpoint, Inc. (Anthem BCBS of Maine) contractor, I know firsthand the diligence that payers take in preparing for contract negotiations.  Point blank, payers do their homework.  So should you.  This is much easier said than done with multiple payers, plans and member populations to analyze.  The task can be daunting but, however intimidating it may be, it is vitally important both financially and strategically for your organization.  Here are some suggestions for keeping your process clear and focused.

At a minimum, contracts with payers should include the following:

  • Clear payment methodology including rates, bonuses, incentives and penalties should be clearly outlined.
  • Claim filing requirements / medical necessity verification / preauthorization process / prompt payment duties.
  • Default and breach clauses.
  • Language should be compliant with laws, policies and procedures (i.e., State of Maine Title 24A, Chapters 56A and 24A).
  • Dispute and appeal process (legal fee responsibility).
  • Covered vs. noncovered services – If noncovered, obtain permission to bill/collect from guarantor.
  • Be cautious regarding “most favored nation” provisions, subcontracting relationships and participation in “silent PPOs” (preferred provider organizations).  Ideally there should not be any and reassignment should be forbidden without mutual consent.
  • Renewal, termination and exit procedures (i.e., duties for ongoing patient care).  If automatic renewal clause, does it include inflation index?

Contracts should support your organizational goals.  As such, contracts should, first and foremost, allow practitioners to provide appropriate patient care and should not be so unilateral that the payer is given the opportunity to deny necessary and appropriate services that are rendered.  You should also ensure that all contracts are operationally feasible and can be implemented and maintained without a significant administrative burden.

Be proactive and preemptive with your contract negotiating.  Build a workflow that addresses the following points:

  • Ensure organizational readiness – Implement a test run through your organization from patient registration through coding and billing.  Can you comply with utilization management, pre-authorizations, nurse audit documentation and any reporting requirements?  It is a vital necessity to have the personnel, software, policies and procedures in place prior to the contract.
  • Scrutinize any standard verbiage that payers want included.  There is a good reason for the inclusion from their side or they would not request it.  Ensure there is not a negative impact for you.
  • Conduct a financial model – Pull past plan and membership data and run methodology and rate changes against this population.  Ensure that financially these changes are in your best interest.
  • Is the contract in line with your organization strategically?
  • Have a payer specific contracting policy.
  • Does the contract follow business rules?
  • Plan and test your exit strategy.

On a quarterly basis, payer and plan contracts should be monitored and analyzed.  This is where data is your best and strongest ally!  Be sure to not only evaluate each payer separately but also each of the payer’s different plans.  This task should not wait until negotiation time.  Without the cloud of negotiation pressure, it is much easier to recognize what you would like to see changed either because it perhaps does not work in your current contract or because a particular change may be advantageous to your organization.  Some key factors to consider when monitoring your contracts are:

  • Determine contract performance indicators – These indicators should be measurable unilaterally across all payers and should be key to achieving organizational success.  Furthermore, set goals or benchmarks as to how you ideally would like your payers to perform.  Nonperformance may be a point of leverage during your next negotiation round.  You can also measure these indicators against your competitors.  What are they getting that you could be getting?  HFMA’s MAP Revenue Management program has a multitude of indicators available at http://www.hfma.org/mapkeys/.
  • Which services are being utilized and at what profitability?  When analyzing your contracts, it is prudent to ensure that all the costs are being considered.  There are a lot of hidden expenses that can erode profitability such as administrative cost, denial management costs, contract analysis and negotiation costs, as well as contract maintenance costs.

Hopefully with these suggestions and insight, the discomfort of contracting with your payers can be somewhat alleviated.  This process should not be taken lightly since failing can have a lengthy, detrimental impact on your organization’s financial health.  If done properly, however, this process can give you the advantage of knowing what you need and the leverage to get it.

The above suggestions are not intended to be all inclusive and are not intended to supersede any contract legal advice. If you would like to discuss this matter further, please contact Brett Seekins or your BNN advisor at 1-800-244-7444.

Disclaimer of Liability: This publication is intended to provide general information to our clients and friends. It does not constitute accounting, tax, or legal advice; nor is it intended to convey a thorough treatment of the subject matter.

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