Managed Care Contracting: Strategies for Success

Reprinted with the permission from Surgical Management Professionals, as published in the Spring 2012 Issue of the SMP Connection,

Effective initial negotiation and ongoing maintenance and renegotiation of provider contracts play an essential role in revenue streaming and overall profitability of service lines. Developing aggressive strategies and refined negotiation and renegotiation techniques to ensure that reimbursement is optimal, can prove to be the most profitable revenue strategy at your disposal.

Optimal managed care contract negotiation begins with evaluation and interpretation of all current contracts as well as evaluation of contracting needs now and in the future. Doing your homework on targeted payers can prove to make a difference in all phases of negotiation — understanding payer covered lives in the provider’s demographic area and payer mix volumes of providers is essential data as you begin negotiations. To properly evaluate and assess contracts and contracting needs, the following items should be reviewed:

• Contract terms and historical reimbursement patterns of payors
Contract interpretation and how that is applied to provider billing processes is essential to ensuring that reimbursement outlined in current contracts is being effectively captured. Appropriate capture of implants, supplies, imaging and other revenue generating items as it applies to specific contracts is crucial to revenue capture. Too often, misinterpretation of contract terms and reimbursement language by billing staff can lead to missed revenue opportunities for your facility.

In addition, review of historical payor reimbursement patterns aids in providing the data necessary to identify trends or issues with current contracts that may not be apparent from the contract itself. Bringing these issues to the table is an important aspect in renegotiations, if there are trends that you can determine clarity on at the time of renegotiations, it may change your approach or tactic in getting the most out of it. For example, if you have implant reimbursement carved out in your contract but see a trend of denials stating the implant reimbursement is included in the payment for the primary procedure-you will want to clarify contract interpretation. If clarification leads to the implants not being paid separately, it is advantageous to account for this in your request for increased reimbursement on procedures.

• Provider demographic payor contracting trends
Researching payer reimbursement trends in your demographic area can be very helpful in evaluating how your contracts compare. This information is used to leverage the provider and ensure reimbursement expectations are set within competitive market ranges. This information is not always easily accessible. If that is the case, just make sure you do adequate homework so that you ensure a reasonable profit margin for your service lines.

• Procedure cost vs. reimbursement analysis and proactive pursuit of strong reimbursement for future volume
Compiling detailed analysis of procedure cost compared to reimbursement is very important in preparing to enter negotiations or renegotiations. This information is useful defense in substantiating a need for higher reimbursement than what is being offered. Also be sure to identify future trends in outpatient services to forecast future needs in contract reimbursement. This can prove very effective in getting aggressive rates for procedures such as sinuplasties, uni-knees, discectomies, emerging technologies and new service lines. Query your providers to ensure that you are fully armed with as much information regarding future service lines or emerging technologies so that proactive reimbursement strategies are put into place. This will save you time in the long run as you shouldn't need to come back to revisit these items later or have them fall into reimbursement patterns that are not advantageous to your facility.

Once you have fully assessed your needs, current reimbursement, payer trends and performed detailed data analysis, you are ready to begin negotiations. It's important to remember that when beginning negotiations or renegotiations, the payer is providing the initial proposal or renegotiation proposal so that you know what you are starting with and can effectively counter with reimbursement that makes sense for your facility. Allowing the payer to drive the negotiations is the last thing you want to do, if they see your starting point first, you could be cutting yourself out of reimbursement that the payer may initially offer.

Many times working with a consultant can prove to be money well spent as reimbursement rates have long lasting effect on cash flow and overall profitability. SMP works with its clients to ensure that they have leverage in negotiation. Leverage comes in many forms from facility association or partnerships to special services provided by the facility or physician staff. Our objective is to know and understand the client and its needs, so that we are able to strategically work as an extension of the client to increase overall reimbursement, ensure competitive rates are obtained and educate staff on interpretation so that maximum reimbursement is attained for all service lines.

More Articles Featuring SMP:

Physician-Hospital Involvement: Why It's Not Too Late: Q&A with Mike Lipomi of Surgical Management Professionals

Surgical Management Professionals Launches Medical & Pharmacy Cost Reduction Program

10 Statistics for ASCs to Track

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