Managed care contractual provisions affect payment, departmental organization, billing procedures and confidential records. Contracts can also impact clinical decision-making. They are a formidable force to be considered by healthcare executives at every step in the revenue cycle—from initial procedure scheduling to claims processing and collections.

Holding contract details within the confines of the managed care contracting department does little to serve the greater good of the larger healthcare organization. Knowledge sharing is necessary to achieve financial goals.

What’s Lacking in Today’s Contract Management?

For years there’s been a loose term around hospital and health systems called “contract management” intended to:

  • Manage the length and terms of the contract
  • Adjudicate financial provisions between provider and payer

What’s lacking is the ability to manage rules of engagement, the business rules between payers and providers. When a contract is signed, a payer typically attaches a manual with medical policies for contract administration beyond the expected reimbursement calculations. This is where payers have the advantage over providers.

Payers know how to manage and invoke both financial and administrative provisions. Consequently, the contract may not pay as much as it should due to denied claims and adjustments based on operational missing links—authorization provisions, medical policies and dispute resolution clauses.

Payer Dispute Resolution

Virtually every contract has a dispute resolution clause. Every commercial payer has an internal grievance process that entitles the hospital to submit reconsideration or file an appeal. Yet 90 to 95 percent of hospitals fail to pursue dispute resolution past the payer’s internal grievance process. One reason is that managed care directors want to maintain relationships with payers. Positive relationships matter but should be based on mutual understanding and application of the rules.

The main reason hospitals get denials or downward adjustments is because payers know how to manage the business rules. Organizations should adopt a proactive approach to pursue every avenue under their contract.

Many hospitals and health systems fail to enforce their entitled rights under the agreements they sign. Final settlement provisions are rarely invoked even though hospitals have a dispute resolution clause—a path to mediation or arbitration. Why?

Often there is a failure of communication among those trying to collect the dollars, those appealing the dollars and those who have the opportunity to engage the payer in some final resolution. Firm resolve in actuating full payment is required.

  • Share the administrative business rules in the contract, especially the final settlement rules of dispute resolution.
  • Make sure the business office is pursuing every possibility of payment by third parties.
  • Create a strategy to move forward once the payer has made the final decision to uphold a denial.

Patient’s Right to Appeal

Another avenue hospitals should consider is invoking the patient’s right to appeal under a managed care agreement. Hospitals and health systems have the right to appeal, or represent the patient in the appeal process, which transfers assignment of benefits and patient appeal representative rights to the hospital. If the patient wins the appeal then the hospital gets paid. This is especially important with employer-sponsored plans and Medicare Advantage plans.

Many hospitals are not familiar with the steps involved in the escalation process. We’ve worked with health systems to incorporate language into their front-end procedures. For example, “If a claim is denied for any reason, we the hospital will act as your representative in an appeal process.” That provides two tracks of opportunity.

Also testing the mettle of hospitals today is the growth of Medicare Advantage plans. According to a new report from the HHS Office of the Inspector General (OIG), “Medicare Advantage Organizations (MAOs) overturned 75 percent of their own denials from 2014 to 2016.” In addition, “Beneficiaries and providers rarely used the appeals process, which is designed to ensure access to care and payment.”
And the key takeaway: “High numbers of overturned denials upon appeal, and persistent performance problems identified by CMS audits, raise concerns that some beneficiaries and providers may not be getting services and payment that MAOs are required to provide.”

Further, when an insurance company acts as the Medicare contractor, the advantage is more for the payer than for the patient. Under Medicare Advantage, the insurance company makes the rules of engagement and providers have no rights to appeal. Again, consider using the patient’s right to appeal.

Communication Between Payer and Provider

The vast majority of communication regarding a dispute or audit is done by snail mail or fax. As a result, dispute correspondence often gets lost or mislaid—sent but not received. This archaic practice is an administrative burden that poses financial risk for hospitals and health systems. We recommend that e-communication be an absolute requirement, not just a policy or clause. If a payer wants to dispute what a hospital has billed, the managed care contract should require electronic correspondence.

Payers have portals that are used for submitting and checking the status of claims. Yet providers are not allowed to submit an appeal via portal. One option is for managed care directors to say, “Our hospital cannot do business with you unless you agree to an electronic communication provision for handling disputes.”

Proactive Strategies for CFOs

Proactive change comes from the top down—from CEOs and CFOs down to those in billing, collection and managed care. Executive leadership must steer the ship in the right direction when it comes to dealing with managed care companies and communicate at all levels Here are five strategies to consider:

  • Implement a proactive approach to ensure managed care compliance. Manage the information and apply the rules of engagement to mitigate and prevent revenue risk.
  • Align goals of the organization among managed care, revenue cycle, clinical documentation, health information management, utilization review—all departments involved in response to denials and audits.
  • Work with managed care, the business office and health information management to establish post-payment review limits and business rules regarding audit processes.
  • Demonstrate resolve to get paid what is due. Pursue every avenue of payment within the bounds of your agreements. That means all levels—external review, arbitration, mediation and dispute resolution.
  • Protect your revenue with a combination of appeal services and revenue recovery technology.

Finally, keep in mind that it’s not over until it’s over. Fight for every dollar—every opportunity, every avenue. What are you missing? Collect that last 5 percent—the most complex collection effort the hospital makes. Involve physicians, nurses, billing, compliance and attorneys in a systematic way to apply your rights.

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