7 Managed Care Contracting Best Practices From Industry Experts

Here are seven best practices from managed care contracting experts to help you get paid fairly by third-party payors.

1. Give yourself ample time to negotiate a contract.
To convince a payor that you deserve fair reimbursement usually requires patience and persistence. ASCs need to allow ample time to negotiate contracts or the consequences can be devastating.

“The one thing the doctors do not understand is that negotiating a big contract — let’s say their top three carriers — the time frame for that has probably gone to eight months or a year for a good contract,” says Caryl Serbin, RN, BSN, LHRM, president and founder of Surgery Consultants of America and Serbin Surgery Center Billing. “I’m talking a lot of hard work, and no one seems to grasp that. And so they give up, they sign lousy contracts and they kill their center prematurely. It’s just out of the ground and they’ve signed rates they can’t make money on.

“Just how (the payors) are going to wear you down, you have to wear them down,” she says. “I think that’s where everybody fails on the managed care piece. You have to have the stamina, the time and the staff to wear them down.”

If you sign a bad contract, it is likely that you are going to violate our next tip.

2. Do not sign a contract that will cause you to lose money on procedures.
It’s not uncommon for an ASC to sign a contract that includes reimbursement rates that will actually cause it to lose money on some of the cases it performs. The reasons given can range from desperation to work with a new payor to conceding losses on some cases for gains on other cases. But if the contract you sign includes reimbursement rates that are too low to ensure a profit on cases you want to and will perform, you are likely doing more harm than you realize.

“I listen to doctors who say that it’s okay to lose money on certain cases,” says Ms. Serbin. “I hear that time and time again. We don’t make enough money in any ASC to be able to do cases where we purposely lose money.”

Consider the possible implication if the payor with which you contract is then acquired by another payor or has relationships with other payors. That poor rate you agreed to could become the limit that payors push you to accept in the future since you’ve agreed to it the past.

You can also expect the original payor you signed the contract with to be very hesitant in the future to consider moving much higher than that rate.

“You’re demonstrating to the payor that you can perform that surgery at that rate, so you lose your negotiating power,” says I. Naya Kehayes, MPH, managing principal and CEO of Eveia Health Consulting & Management. “As soon as you start performing surgery with consistency on these cases and you try to tell the insurance company they’re not paying you enough, your actions speak louder than words. You have effectively told them that you can afford to do those cases.”

You’re better off stating your arguments for why you can’t perform those cases and then do not perform them if you cannot get fair reimbursement.

“It’s really important that the ASC refrains from doing those cases if they cannot afford to do them, and communicate that to the insurance company,” says Ms. Kehayes. “Keeping the cases you cannot afford to do in the ASC at the hospital sends a very loud message. This is what helps them to understand and see the opportunity of saving money by working with the ASC.” 

3. Prioritize up-front collections.
You should already have a strong policy and procedure for up-front collections in your ASC. If it is weak or non-existent, it is critical that you focus on the process, says Ms. Kehayes.

Payors are looking for higher premiums from employers, and employers are eager to keep premiums low. A mechanism for insurance companies to reduce premiums is to give more of the risk to the patient.

For example, let’s say a payor contracting with an employer has had the payor pay 90 percent of the allowed amount and expected 10 percent from the patient. The payor tells the patient’s employer that it wants a 20 percent increase in the employer’s premium and the employer asks how to decrease this premium.

The solution is to shift the burden of the premium to the patient, so now perhaps the patient has to cover 30 percent and the payor 70 percent.

If your ASC was able to negotiate a 10 percent rate increase with the payor but you have poor up-front collections, your cash can actually go down because you are receiving so much less from the payor and not collecting from the patient.

“You’ve negotiated a good contract but you’re not realizing the cash because your business office isn’t collecting from the patient up front,” says Ms. Kehayes. “That trend is going to keep going because employers can’t afford 20 percent increases every year and that’s how employers are able to keep their premiums from going so high — by shifting their risk to the employee. You think you’ve negotiated this stellar increase, but unless your business office is doing the job up front, you may not see the money.”

If you don’t collect money from the patient up front, you’re likely going to struggle to collect it after the procedure.

“Any billing company will tell you the probability of collecting after the fact than collecting up front drops immensely,” says Ms. Kehayes.

4. Watch out for evergreen clauses that lock in your rates.
If your contract includes an evergreen clause, you may think that the contract doesn’t expire and will just rollover to the next year. While this is may be true, the problem is that the rollover often does not include a rate boost, thus leaving your reimbursement stagnant for another year.

“If you let it roll at the same rate, you can then lose the opportunity to negotiate again for another year depending upon what their clauses say,” says Ms. Kehayes. Make sure the payment terms include an annual escalator. If they are following the “current” Medicare ASC methodology, it might be advantageous to includes language indicating the rates will be adjusted in accordance with the transitional payment  percentages with the system. Of course, this is assuming that the case mix of the center result in a favorable increase by converting to the new payment methodology, she says.

“Surgery centers leave money on the table [with such an oversight],” she says. “The ASC has a responsibility and has to take accountability for calling the insurance company on a regular basis for increases. Have a reminder notice going off three to six months before their contracts are up for renegotiation and, at a minimum, they need to ask for 4 to 5 percent each year to keep up with the Consumer Price Index.”

5. Review termination clause language closely.
If a proposed payor contract includes a termination clause, you will want to closely scrutinize its language before agreeing to the terms as you may be limiting when you can and cannot terminate the contract.

“You have to look at your notification and termination clauses — there’s a difference between a termination clause with an anniversary date versus one that doesn’t have an anniversary date,” says Ms. Kehayes. “You can have a contract that says you can give 90 days notice at any time versus another clause that says you can send notice only 120 days before the anniversary date, and if you don’t do it at that time, the contract automatically rolls on the same rates for another year.

“Look for anniversary date language that may limit your time period for providing notification to the payor on renegotiation and/or termination of a contract,” she says. “You can get yourself locked up for another year, and sometimes it says it rolls for another two years.”

6. Put physicians to work.
If the responsibility of negotiating your ASC’s contracts falls solely on the administrator, this is a process to seriously reconsider.

“Shame on the center that allows the administrator make that unilateral decision, and shame on the administrator for doing it,” says Ms. Serbin.

Your ASC’s board of directors should review any contracts to help identify areas of concern and prevent bad contract signings.

“They know the ins-and-outs of the contracts, and they can help make educated decisions,” Ms. Serbin says.

You can take their involvement one step further — bring them into the contract negotiations. However, make sure you’re bringing the right voice and personality into the process.

“We’ve primed physicians with what to say and then had them call up to the carrier and chat about the disappointment in the negotiations and the rates, and (the payor) takes a little bit of a different tone when they’re talking to a doctor,” says Ms. Serbin. “But the caution there is that if you know the doctor is a screamer, a yeller, a not-nice-on-the-phone type, that wouldn’t be the doctor to have call as I’ve also seen where physicians can hurt that process. But if they can get on the phone, not lose their temper and talk intelligently and sort of woo them over, that works a lot.”

7. Take a proactive approach to claims accuracy.
Even the smallest error on your claims can lead to a denial and delayed payment. The good news is that the information you need to fill out your claims is available to you. You just need to seek it out, and do so on a regular basis as it can change regularly.

“When I was on the third-party payor side, one of the biggest frustrations for us was the education of the business office staff,” says Elizabeth Smallwood, CMPE, vice president, contracting and reimbursement, for Blue Chip Surgical Center Partners, and a former director of contracting for Humana of Ohio, with experience working for Aetna, and Anthem Blue Cross and Blue Shield. “They need to be proactive in going out to the National Uniform Billing Committee (NUBC) and pulling down its instructions. Before they even submit their claims, they need to be accountable and just make sure their system libraries are mapping to the correct form blocks.”

In some cases, a payor’s requirements will differ from the NUBC, says Ms. Smallwood. Assigning someone on your staff to visit to all of your payors’ Web sites quarterly to look for any changes is a wise decision.

“Those instructions are out there on all of the payors’ Web sites and they even have example forms and definitions,” she says. “You can’t just check them this year and leave it in place forever. Assign a specific staff person that is accountable for reviewing that information and updating that system. Office managers often think the software vendors are responsible for making changes to their electronic billing or their libraries, and they’re not.”

What’s the harm in missing a change? Consider that, this year, Maryland’s workers’ compensation changed the way it’s reimbursing its claims, having moved to the Medicare guidelines and a grouper system from a system based on a percentage of billed charges.

“Had we not constantly been out there looking at our payors on a quarterly basis, we never would have known that,” says Ms. Smallwood. “Our claims would have went in, they would have been denied and it would have taken 90 or 120 days to get that cash, so it would have seriously interrupted cash flow.”

In addition to visiting the payors’ Web sites regularly, make sure someone is watching your mail and e-mail closely and reviewing anything that could serve as notification of a pending change.