Payer Contracting – Part of Revenue Cycle Integrity

by Elizabeth Lamkin, MHA, ACHE

There was a recent thread on the RAC Relief Google group about Managed Advantage plans and the problems providers are encountering with the various plans. As I read this thread, it occurred to me that this is really part of a larger discussion on payer contracting in general.

Effective contracting is a team sport that requires input from the whole revenue cycle team (see figure below). Once a payer contract is in effect, there is very little recourse when Care Management (CM), Physician Advisors (PAs), billers and other members of the team discover issues with that contract. Time spent in getting input, studying, clarifying and negotiating contract terms prior to signing will pay off big on the back-end with fewer denials and more clean claims.

Blog image contract mgmt post 091415

Typically, providers face two areas of concern: unfavorable contract terms such as a limited appeal process and misinterpretation of regulatory guidance by Managed Advantage (MA) plans. Effective hospitals tackle these real problems with a systems approach and develop a permanent multi-disciplinary team for ongoing review and input. The team should include not just finance and contracting, but CM, the PA and clinical staff. During the year, these contracts are treated like other vendors with data collected on key performance indicators (KPIs) for tracking and trending for the team to review, monitor performance and suggest changes. There are numerous resources such as the Healthcare Finance Managers Association (HFMA) that publish KPIs for contracting, but as the regulatory landscape changes, teams may wish to add specific indicators for the facility including time required by PA to manage each payer.

Within the contracting team, the experts on regulatory and utilization can inform the contract staff on contract terms needed and how the plan is adhering to the terms. The accounts receivable staff can provide feedback to the utilization management team on how their management of patients translates into favorable or unfavorable reimbursement. Is it a matter of internal improvement, or has the payer strayed from contract terms?

In the day-to-day management of contracts, CM and PAs should also have real-time online access to a summary of terms for each contract in order to maximize management of current patients. Even small facilities can manage this process with existing resources, and most likely the finance department will have the summary of each contract for billing purposes already on-hand. Without knowledge of the terms of payer contracts, it is like driving blindfolded and then wondering why you have a three-car pile-up. If the facility is concerned about rates becoming public, the team can sign confidentiality agreements, but keep in mind that transparency is the only route to effective contract management.

Finally, forget departments as separate functions as these are just names for siloes. As stated earlier, contract management, like most effective hospital systems, takes a team effort and is a continuum of linked activities. A hospital must use each resource to maximum value for the organization. The Quality department knows how to create KPIs, the education department knows how to educate staff, the compliance department knows the regulatory environment and on and on. By bringing all the players and resources together in one initiative, hospitals will gain spill over improvements in other systems because of the shared knowledge.

To join the RAC Relief Google Group, go to and search for “RAC Relief”