It’s easier than you think to monitor key provisions of multiple contracts and to act accordingly.
Are you neglecting some of your practice’s most important financial assets? Need a hint as to what they are? We’re talking about the contracts you’ve signed with payers.
Payer contracts represent cash that your practice should pull in for providing reimbursable services to patients assigned to those payers. Understanding these agreements can even help you decide when - or if - you can add facility space, physicians, or new services. You’d think such an important asset would occupy center stage in every medical practice’s business office. Unfortunately, many business managers just file payer contracts away deep in a drawer after doctors have signed them.
Cynthia Dunn, RN, a Cocoa Beach, Fla.-based medical practice consultant, recalls an engagement with a practice that she identifies only as “the worst practice I ever visited.”
“I asked to see the contracts for their top three private payers, and all they had saved were the signature pages. They tossed everything else,” she says. “You can go to your provider reps and ask for a copy of your contract, but the chances of getting what you actually signed are about nil.”
Dunn says many managers rarely glance at contracts unless it’s renewal time or a big problem comes up. If you never look at a contract after you sign it, how will you know whether that payer is playing by the rules or even what the rules are?
“You have to know what your assets are and keep track of them, so at a minimum, gather up all of your contracts with payers and keep them in one place, like a folder,” says Debbie Welle-Powell, MPA, vice president of payer strategies and legislative affairs for Exempla Healthcare, a multihospital integrated healthcare system in Denver.
Welle-Powell uses Microsoft Access, a database program that also allows her staff to track key contract provisions, but many practices find that a straightforward spreadsheet does the job well.
“It may sound like too much extra work for the business office, but you can keep it simple, and it’s definitely worth it,” Welle-Powell says. “I was doing this when I ran a three-physician practice, so I know it can be done.”
What could a few hours a month eyeballing payer contracts be worth in dollars? Consider what a Medical Group Management Association (MGMA) survey of payer performance found. MGMA surveyed medical practices in Colorado in 2005 and discovered that the practices that failed to do even basic payer contract surveillance ended up with 4 percent lower reimbursement on average per evaluation and management (E/M) code billed. That can add up quick.
Suppose a West Virginia practice’s contract with a payer calls for 110 percent of the 2007 Medicare allowable ($56.40) for CPT 99213 (mid-level office visit by an established patient). Now what if instead of getting the 110 percent ($62.04) that the payer promised, the practice receives 4 percent less ($59.56)? That missing $2.48 per visit becomes serious money by year’s end. And that’s for just one code.
At the very least, sample whether your largest payers are following through as promised for your practice’s highest reimbursed codes, suggests Philip W. Armstrong, MPH, MBA, administrator of the Oregon Clinic, a 120-physician multispecialty group in Portland.
“A large practice like ours can have a full-time position just tracking contract rates and issues, but it’s not a huge, complicated effort to just audit contracts at a basic level,” Armstrong says.
He notes that the large settlements that medical societies won a few years ago on behalf of physicians - securing hundreds of millions of dollars from the nation’s largest private insurers - should have opened eyes about the need to carefully monitor contracts.
“You should never take it for granted that you’re getting paid accurately,” he says.
Gather thy contracts
Mark Twain’s wisecrack about savings (“Put all your eggs in one basket and watch that basket”) may or may not work in financial markets, but it is sage advice when it comes to monitoring payer contracts.
Welle-Powell says a filing system for contracts can be as simple as keeping paper copies in a three-ring binder with pockets to hold the memos and addendums that payers send throughout the year. The idea is to keep the folder handy for quick reference when denials come back or other problems occur, she says.
To keep the tracking process from becoming a burden, Dunn suggests focusing on the contracts that make up the bulk of your practice’s contracted sources of revenue. In most practices, this will be four or five contracts.
Dunn, who worked as a practice administrator for nearly 30 years, says monitoring payer reimbursement and contract compliance isn’t an impossible chore, no matter how small the practice. She suggests:
Welle-Powell also recommends setting up a basic reminder, or tickler, system to alert you at least 60 days in advance of each contract’s renewal date and any contracted rate adjustments.
“If you don’t put in the effective dates of rate increases, then July 1 or January 1 may come and go but you may not notice until the following month that they kept paying you at the old rate. It happens all the time,” Welle-Powell says.
Don’t rely on memory to track the expiration dates for the various insurance products that your practice most likely has contracted to provide. And don’t expect insurance companies to call up and suggest that it’s time to renegotiate the contract - they’d prefer a simple extension, Welle-Powell says. Missing a renewal date can cause a contract to get extended - usually with no fee increase, she says.
Other key indicators to track are:
All this tracking can pay off in contract negotiations. “Everything we can do in auditing services throughout the year seems to help us when it comes time to renegotiate rates or other parts of the contract,” says Welle-Powell.
With a monitoring system in place, start tracking key indicators to make sure that the practice allowables and discounts are proper and that payers abide by state laws for timely payment.
Routine monitoring has other benefits, as well, says Bill Webb, administrator of Prime Care Family Practice in Colonial Heights, Va.
“I’ve told my staff to notify me immediately whenever they post a payment that doesn’t have an adjustment or contractual write-off because maybe there’s an error or maybe we’re missing out on what they owe us,” he says.
Webb says that keeping a close watch on payers helps him understand market conditions better.
“If I have one major carrier offering a lot more money, I’ll be in a better position to go to the other carriers and suggest that market conditions seem to be changing,” he says. “I can’t tell them which carrier is offering what, but because of secondary coverage paperwork they could all see each other’s EOBs to know exactly what the others are doing.”
Watch for errors
Sometimes, underpayments or denied payments are your fault. Other times, the payer might bundle the wrong codes together or deny a payment unjustly.
Twyla Fuertes, business office manager at Texas Orthopedic Sports & Rehabilitation Associates in Austin, says she relies on software and outside advice to spot errors. Using the contract management services of Medical Present Value, Fuertes says she’s able to run reports of missing claims. The software digs through every charge entered and claim filed by the practice’s 12 physicians. She uses the service to mine for missing allowables, underpayments, missing payments, and incorrect adjustments.
“The software has a database of our charges for every code we bill and the complete allowables and other rules from our 30-some contracts,” she says. “It gives us a heads up so we never leave money on the table that should be ours.”
If sophisticated software, data mining, and outside auditing are out of your practice’s budget, there’s still no reason not to put some time into monitoring. Webb says he makes time to look at every payer reimbursement check and every electronic funds transfer coming into the six-physician family practice.
“I just feel I get a better handle on what’s going on by looking at denial codes, bundling [of services], and all of those other items,” he says. “And you’ve got to remember that payers are trying to do things more quickly with fewer people, so they make errors, too.”
Do something about it
Once you know what payers are, and are not, doing, it’s time to do something about it. That means:
Webb says all of these reports can add a new perspective about the practice’s payers. “I can look up the last time we had an increase from each payer and know that if we haven’t seen one in the last 18 months, it may be time to see if we can’t get a fee increase,” he says.
You may not have the budget to hire a full-time staff member to monitor payer contracts, but any time you can spend on contract monitoring and maintenance will be well worth it.
Adds Welle-Powell: “The goal of all of this tracking is so we know our business, and we manage this important asset so the physicians will know what’s happening with their practice revenues and why.”
Bob Redling has written on practice management topics for 10 years. He formerly served as practice management editor for Physicians Practice, a Web content editor, the senior writer for the Medical Group Management Association, and as a speechwriter for the American Academy of Family Physicians. He can be reached via firstname.lastname@example.org.
This article originally appeared in the September 2007 issue of Physicians Practice.