Impact of Successfully Managing Payer Contracting on Specialty Practice Financial Performance

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Specialty healthcare practices currently face a number of new challenges to their established reimbursement strategies and revenue cycle management (RCM) processes.  As bundled payments, value-based care contracts, and other risk-based models gain ground across the nation, specialists are finding it challenging to maintain financial performance goals which depend in part on negotiating favorable terms with payers.

As we have explored in previous blog posts, specialty care frequently demands the efficient delivery of high-value services – often in large volumes within a short period of time.  The failure to recognize and react quickly to inaccurate or denied payment for even a small subset of these activities dramatically skews a practice’s financial results.  It is critical to equip RCM staff to know exactly what to expect from their payers – and when to expect it.

Full visibility into payer contracts, combined with the ability to manage these contracts in a proactive manner, is key to maximizing reimbursement for clinical services including the administration of high value pharmaceuticals and other therapeutic modalities.  According to the Texas Medical Association, practices that do not adequately track and manage their payer contract rates experience revenue reductions averaging 4 percent (4%) below their peers who employ strong contract management processes.

In contrast, use of a comprehensive, highly integrated health IT solution to manage payer contracts, reconcile charges with payments, and identify opportunities for contract performance improvement boosts the sustainability of specialty practices while simplifying contract management workflow.

Examining the challenges of payer contracting for specialty practices

The healthcare payer landscape is incredibly diverse, running the gamut from plans with tens of millions of members to those with just a handful of beneficiaries in a specific region.  Specialty practices must carefully asses their local mix of coverage options to choose which payers to contract with and how to structure those agreements.

These decisions are becoming even more complicated due to the rise of bundled payments, episodic payment models, and risk-bearing contracts aimed at improving outcomes and controlling the costs of specialty care.

Negotiating favorable contracts requires a complete understanding of the terms and conditions in these binding legal agreements, including fee schedules for included services, base rates for common services or pharmaceuticals, definitions for the amount and frequency of reimbursement increases, and clear timeframes for payment.

Practices must be able to easily evaluate how proposed contract terms will impact their revenue cycle operations, from clinical documentation inputs to billing and coding standards to claim outputs.  This is especially important for value-based care models where correct documentation and coding can mean the difference between earning incentive payments and owing a percentage back to a payer.

Once a contract has been negotiated and is in effect, RCM staff must be able to quickly and accurately flag variances in payment rates, contest underpayments or denials appropriately, and collect outstanding revenue in a timely manner.

Staff members must also stay aware of renewal windows, negotiation deadlines, and fee schedule changes so their practice can remain nimble and proactive when discussing contracts with payer partners.

Developing a streamlined, efficient contract management process

In order to overcome these challenges, practices will need to employ a combination of workflow changes and sophisticated health IT solutions.

Practices can begin by making sure they stay ahead of regular cycles of contract negotiation and fee schedule changes.  Most payers operate on the calendar year, making changes quarterly or yearly.

Specialty groups should maintain a master list of contact information for each contracted payer in case of questions or disputes about reimbursements.  This documentation should also contain information about contract expiration dates and the timing of fee schedule adjustments to help RCM staff stay on top of their activities.

Provider organizations should update the business rules in their revenue cycle management solution quickly when contract changes are announced to prevent days, weeks, or months of invalid charge accrual, improper claim filing, and preventable denials.  Taking this recommended baseline step will avoid the need to spend manual time and effort adjusting charges and reconciling variances after errors have been made.

RCM solutions should have deep integration with clinical documentation, billing, and coding functions to give staff members a complete, accurate, and timely view of reimbursable charges.  This visibility makes it easier to automatically flag incorrect payments and identify emerging patterns in clinical care that may affect future negotiations.

For example, if sub-specialty expansion leads to increased use of an effective pharmaceutical or medical procedure, the aware practice can prepare for payer discussions focused on securing a targeted reimbursement rate increase that is specific to the increasingly significant service(s). Focusing contract negotiation efforts on smaller groups of frequent services rather than a broad, general reimbursement increase will enhance the likelihood of securing a material revenue increase, especially for specialist groups that routinely utilize high-dollar drugs and complex clinical services.

Perhaps most importantly, practices should ensure that all RCM and payer contract negotiation staff are on the same page about what role technology can play in improving the process.

Oftentimes, the person in charge of working directly with payers does not use the practice’s RCM software on a regular basis and may not understand the importance of sharing key contract information with the rest of the team.

Practice leaders should consider investing extra time in making sure these conversations happen on a regular basis and that all staff members are working in a coordinated, proactive manner to support the practice’s financial health.

Preparing specialty practices for a sustainable financial future

Taking a more structured approach to contract management, with the help of a well-qualified and robust RCM solution, can allow specialty healthcare practices to stay ahead of their finances today while preparing for tomorrow.

With the right technologies and workflows, bundled payments and risk-based models do not have to be prohibitively complex to administer.  Practices which prepare themselves now with strong contract management competencies will be well-positioned to take advantage of emerging innovative reimbursement models designed to bring benefits to payers, providers, and patients.

By keeping track of contract negotiation cycles, proactively identifying areas of financial focus, and leveraging health IT tools to flag discrepancies and report on variances, specialists can maximize their reimbursement opportunities as the financial landscape continues to evolve.