Five Ways to Better Manage Payer Contracts

May 7, 2015
Janet Kidd Stewart

From actually locating your payer contracts to making negotiations effective, here are five strategies for your medical practice.

Doctors can understandably feel a bit like a father of the bride: Stuck with the bill after the marriage of wider coverage mandates and declining reimbursements.

Practice management consultants say the financial squeeze on their clients is palpable, and physicians themselves are beginning to come to grips with the notion that revenue streams are changing.

"You really have to learn the [payer contract] game because if you're not willing to get engaged in it, then the declines in reimbursement are not going to stop," says Douglas Jorgensen, a pain medicine specialist who also is a co-founder of The Jorgensen Group, a practice consultancy. "You have to find ways to keep business coming through the door."

Doing just that comes down to managing your payer contracts better, watching out for hiccups, and being ready for even more changes, experts say.

1. Start with the basics

While seemingly hard to believe, there are practices operating today that let payer contracts collect dust in a drawer, say consultants who work with physicians. And some can't even find the drawer.

"A lot of practices do not take care of the basics. I'll walk in as a new consultant and say, 'Show me your managed care agreements,' and they can't find them," says Reed Tinsley, a Houston-based accountant and practice consultant.

It is a lot to manage, he adds. "Payers rarely do group contracts, so if your group has 20 doctors, you've got 20 contracts to manage from every payer."

Jeffrey Milburn, a consultant with Medical Group Management Association, echoes the frustration.

"I've gotten involved occasionally with groups of 15 or 20 doctors that you think would be large enough to know better," he says. "It's probably better than it used to be because practices are hiring managers with better training, but I still find myself repeating [to clients] that they need to find their contracts."

2. Get organized

Once the contracts are located, if your practice management software doesn't do this automatically, create a spreadsheet of fee schedules, effective dates, and contract specifics across all your payers, says Susan Fink Childs, founder of Evolution Healthcare Consulting in Rougement, N.C.

"Establish a tickler so that whenever the contract is set to expire it sends an alert," she says. "And be aware of how soon you need to notify each payer of upcoming contract renewals. Some won't talk until the agreement is 120 days from expiring."

Even relatively low-tech offices can laminate a spreadsheet with its payers on one axis and its most-used codes and their standard reimbursement rates along another and keep it next to the computer screen of the person who posts payments, says Tinsley. And make sure to input what each payer reimburses in common terms for each code, he says. (Some express a dollar figure while others put it in terms of a percentage relative to current Medicare rates.)

3. Mine the data

Now you're ready to use all that data to leverage better results.

For example, you'll now be able to more quickly notice changes to customary reimbursements, says Childs.

"Watch out for notices of updates that are really contractual agreements for the next three years, or for managed care companies changing reimbursements without even telling you," she says. "They will say it was on their website but even they can't seem to locate the notice."

You'll also have more ammunition to ask outlier payers to get more in line with others, or to flag incorrect payments.

"Missing incorrect reimbursements is a huge problem," says Tinsley.

Other data-mining opportunities can happen once you've better tracked payers over a period of time, Milburn says.

"I suggest [practices] track metrics with payers over time and do some trend analysis of collections and which payers are representing the biggest percentage of their business, which may impact marketing," he says. "Another thing to look at is claims processing problems - number of denials, how they handle appeals, and the like.''

4. Let them know you're watching

Jorgensen takes note of which payers are the biggest problems, whether because they generate the most claim denials, constantly change reimbursement rates or are just the ones on which staff has to spend the most time.

"Which patient population do they represent? Unless it's a federal contract, you don't have to accept the contract as is," he says. "One time, I read through a contract and crossed out a line that said the payer reimbursed at 110 percent of Medicare. I changed it to 170 percent, initialed it and mailed it back. I got a call from the company that they couldn't possibly do 170 percent. 'The most we can do is 145 percent,' they said, and just like that the contract was much better,'' he says.

He cautions it's not always that easy, but uses the example as a reminder that simple negotiation still can pay dividends.

Consultants also advise not to sulk in silence too long because patience generally isn't rewarded.

"Some [payers] work in 5-percent increments, some only 2 percent at a time, so don't let periods of time go by without negotiating because they won't play catch up," says Childs.

5. Trust but verify

Finally, becoming more thorough about tracking contract provisions and reimbursements sends a signal to staff about your professionalism, but remember that embezzlement happens, Jorgensen says.

Make sure your practice is bonded and insured. Now that you are more efficiently tracking contracts, if a concern arises about missing money you don't have to be sheepish about asking questions, he says, because you'll be legally bound to hunt for the lost money.

Janet Kidd Stewartis a freelance writer based in Marshfield, Wis. She holds a bachelor's degree and master's degree from the Medill School of Journalism at Northwestern University. She can be reached at editor@physicianspractice.com.

This article originally appeared in the May 2015 issue of Physicians Practice.