Published: Apr 11, 2024
Revenue Cycle Management

Best Practices for Contract Management: 9 Tips for Healthcare RCM Executives

Suzanne Delzio
Suzanne Delzio
8 minute read
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MGMA offers an editable payer contract evaluation spreadsheet that lets you centralize data on the gross collection, net collection, and A/R days rates of your payers’ contracts. You can even add columns to track any metrics you like. 

But how will you track this information if you can’t even find all of your contracts? 

Contracts are a mess at many healthcare organizations. Financial management software and services company Coupa’s Strategic CFO Survey of 600 CFOs and finance leaders across North America and Europe reveals that just 35 percent of these executives currently have a contract management plan in place.

That means 65 percent of provider groups, health systems, and MSOs have their contracts scattered across their organizations, typically with no one person in charge of managing them. A recent MGMA Stat poll asked medical group leaders how often they review payer contracts. While 58 percent review payer contracts annually, 16 percent checked the box “other,” which by means of option elimination, means every two years or more. 

17 percent report they never review their contracts. 

We weren’t surprised to see these figures, as we have many clients who haven’t looked at their contracts for five years or more. We also have clients who cannot seem to get their contracts from their payers at all.  

This is a sad fact, given that, when healthcare organizations do enact a proactive contract management program, they enjoy higher revenues via:

  • underpayment recovery
  • assertive contract negotiation empowered by current data and competitive intelligence
  • avoidance of missed renewal deadlines
  • avoidance of compliance penalties 
  • improved operational efficiency

If your organization is ready to capture this revenue by finally getting control of your contracts, start with these proven best practices. 

9 best practices for payer contract management 

1. Convince C-suite, peers, and reports that contract management is critical. 

Whether you are an RCM manager, practice owner or CFO, you will have others to convince of the importance of proactive contract management. Start by saying, “with contract management, we will know: 

  • which payers are underpaying us
  • which CPT codes trigger underpayments from which payers and by how much
  • each contract's impact on revenue​ 
  • contract renewal deadlines
  • any contract changes the payer wants to slip by us because we are too overwhelmed
  • which payers deliver the highest fees and terms.
  • which contracts bring in the most revenue.
  • how contract changes may impact cash flow.” 

Share case studies like this one that pulled in $10 million in underpayments, news articles featuring health systems suing payers for underpayments, and statistics like these that show that underpaying is widespread in healthcare. 

Remind them that you can start small with a pilot project and expand once it proves lucrative. Start with one of your biggest payers to establish a proof of concept that revenue is leaking. Expand from there.

Often, others with decision-making power settle on a mindset that organization viability means cutting jobs or costs. You can show them a third way to financial health: that of sweeping in more revenue. Present it as creating far less pain and disruption than dismissing employees and limiting supplies and equipment. 

Take a quick, self-guided tour through a powerful contract management and underpayments recovery tool:

2. Get a grasp on key contract terms

Contracts don’t have to baffle you. We make contract terms simple in this post so you can stand your ground. Scan your payer contracts for: 

  • “lesser of” language
  • percentage reduction of charges
  • stop losses
  • hold harmless
  • implants and supplies definitions
  • contract modifications
  • claim filing time frames

Once you’re oriented to these terms, you’ll find them quickly in your contracts. That article has examples of the language payers use to hold onto their revenue and the changes that make the contracts more fair.  

3. Assert your rights to your payer contracts

Have you misplaced a few of your contracts? Reach out to payers and explain that you need new copies. State that you have every right to get these in a reasonable amount of time, preferably two weeks. If the payer delays, explain that you can report them for unfair practices to your state insurance commissioner or the Department of Health and Human Services (HHS). Also, let them know that you’re documenting all of your outreach to back up your complaints and in case you need to take legal action. This squeaky-wheel approach should motivate them to respond. 

Do not be timid. Remember that payers make their money from you and your fellow providers.  

4. Construct your organization’s value to the payer

Clarity on your organization’s unique value to the payer arms you to negotiate contracts and fight for your underpayments with confidence. Create a statement for yourself that outlines just what you bring to the table. 

Emphasize your strong patient reviews, robust safety measures, your adherence to value-based care, and/or your willingness to work with payers on services offered. Share the analytics tools that help you identify care gaps and improve overall patient care quality. Find data throughout your system that backs up your claims. 

 You can also make it plain that you are one of the few specialty providers in your area or that your revenues are on an upward trajectory. You can also emphasize your research to prove your worth. Highlight any investments in innovative treatments, technology, and processes that promise to improve patient care and outcomes in the future. Outline any new medical technologies, research contributions, and development plans that indicate the organization's commitment to advancing healthcare for the community. 

5. Analyze your contracts

To start, select the three payers bringing in the most revenue. Start with the fee schedules and document what each pays for your top five or 10 procedures or treatments. Now you have competitive intelligence. Compare these figures with each other and against Medicare Benchmarks. According to a Kaiser Family Foundation meta-analysis, physician services are typically billed at an average of 143 percent of Medicare rates (within a range of 118 percent to 179 percent.)  Private insurers paid nearly double Medicare rates for all hospital services. 

Next, after reviewing guidance on common payer fees and terms (link to these above), start documenting the terms you want changed. Think about organizing your requirements into three tiers: essentials, preferences, and ideals. For essentials, brace yourself to engage in firm negotiations. Should the payer resist any essential requirements, prepare to walk away. 

6. Acknowledge that current staff is insufficient

Payer contract managers (should they exist) typically handle more than a dozen payer contracts for both professional and facility components. Provider groups and healthcare MSOs can be dealing with tens of thousands or even hundreds of thousands of annual patient visits. Reviewing payments manually requires the manager to check every payment coming in against the chargemaster and fee schedule. They have to apply multiple procedure discounts, modifiers, and other payer-specific algorithms. This tedious process dominates their time. 

While some use their patient management system to track underpayments, too often these reports require them to manually add the contract amounts, another time suck. 

Healthcare organizations undergoing digital transformation are turning to contract management software to handle this necessary work. Grandview Market Research predicts that the global healthcare contract management software market size, over one billion currently, will grow at a compound annual growth rate of 22.8% until 2028 when it will reach USD 4.59 billion in 2028. As explored in Deloitte’s 2023 Digital Maturity Index Survey, digital maturity fuels operational efficiency. The organizations Deloitte perceives as the most digitally mature enjoyed a 12 percent improvement in EBITDA and a 19 percent improvement in revenue in the four years from 2019 to 2023. 

This growth doesn’t surprise, as robust contract management software far outstrips the functionality offered by practice management systems. This dedicated software handles the following critical tasks: 

  • search capabilities for quick access to dates, clauses, and terms
  • automated alerts for key dates, such as renewals and expirations
  • contract management expertise built into the functionality
  • the ability to track contract performance and identify risks early on
  • a messaging center so all communications are accessed and stored centrally
  • a fully defensible history of all actions completed for a contract
  • easily accessible contract centralization
  • contract forecasting/modeling for examination of the revenue impact of proposed changes  
  • analytics that identify trends, evaluate payer performance, and develop strategies to increase profitability
  • workflow automation for task delegation to staff

A reliable contract management software vendor will feed your most current contracts into their system. From there, it will digitize and analyze all contract data to get the above answers. When providers just cannot get individual payer contracts, if you wish, you can ask the vendor to find other sources where that payer lists their reimbursement rates by CPT code. Their contracts with other clients could provide this guidance. In the worst-case scenario, your contract management solution provider can compare actual payment amounts to Medicare rates. 

7. Set up a contract renewal alert system

Contract renewal dates occur throughout the calendar year, and no staff member can remember when each comes up. Setting up an alert system reliably grasps one of the many balls you have in the air. Set the alert ahead of time enough to provide plenty of time to review contract terms and determine the changes you need. Most likely, the payer will also send along changes they want to make, and you’ll have to explore these as well. Set up your alert system to trigger weeks before the final renewal date. 

8. Determine payer hassle level

During a time when 90 percent of the 205 CFOs and VPs of revenue cycle in the U.S. from large health systems and physician groups are experiencing an RCM staffing shortage (and some report 50 percent of these roles are currently unfilled), you cannot risk staff frustration. You and your staff have neither the time nor bandwidth to make follow-up calls to payers about sending recent contracts or negotiating fees and terms.  

Consider creating a hassle measurement on a scale of one to five. This information will help your whole team recognize that they are not alone in dealing with problematic payers. It also gives you ammunition to share with higher-ups when making a case about payer selection. 

9. Determine costs to deliver key services

This step provides more ammunition for you when you go to negotiate fees and terms. When you demonstrate you know every item involved in providing treatment, payers cannot counter easily. 

Determining costs for a treatment or procedure starts with those incurred during the gathering of patient and insurance details during pre-registration. Charge capture and coding translate the medical services provided into billable charges, which are critical for claim submission and reimbursement. Each of these steps is crucial for accurately determining treatment costs and ensuring financial sustainability for healthcare providers.

Leverage contract management expertise and automation to sweep in net revenue

Effective contract management in the revenue cycle is not merely about tracking payments and ensuring compliance. It's about strategically managing payer relationships, optimizing contract terms, and leveraging technology to streamline operations—all aimed at enhancing revenue and financial health. These points can form a solid argument for prioritizing contract management at every level of the organization.

MD Clarity's RevFind helps practices, physician groups and MSOs manage and control payer contracts first by digitizing and centralizing all agreements in a single location. This system scrutinizes each actual payment coming against the stated terms of the contract. It highlights any discrepancies so staff can reach out to payers and rectify the improper reimbursement. It also compares your reimbursements with national benchmarks, including those set by Medicare. RevFind not only equips you with the necessary insights for proactive negotiation but also identifies costly trends for meaningful revenue recovery. By identifying systemic root causes as well, you can  avert future underpayments. Schedule a demo to see how RevFind sweeps in the net revenue you’ve already earned.

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