Strategies for Payer Contract Adherence and Payment Integrity

The following is an important excerpt from the recent HFMA Executive Roundtable titled Monitoring and Managing Payer Performance.

Reform-related regulatory changes are bringing greater complexity to the payment landscape, including shifts in coverage. Faced with these changes, hospitals need to intensify their strategies to ensure that valid healthcare claims are paid accurately, quickly, and efficiently. With this in mind, this HFMA Executive Roundtable, sponsored by Emdeon, explores ways healthcare executives are using process change and technology to support contract adherence and payment integrity.

How does your organization monitor payer performance?

Philip Hardin: Monitoring should be done in two ways: One is by claim in real time, so you are able to follow up on issues and resolve them immediately. Second is monthly and quarterly reports to assess your overall control of the process and to follow up with payers on overall issues.

Julie Tipps: We do an annual satisfaction survey of about 500 employees who work with managed care payers on registration, billing, care coordination, or collections. We use this information to detect and track process issues, such as problems with eligibility, authorizations, mistaken denials, and discharge planning, and we measure the administrative cost per claim filed. The results of this survey are shared with payers annually. The other half of the report card is ongoing financial analysis, which includes administrative costs of billing and collecting per case, dollars tied up in clinical denials, and late payments and underpayments as a percentage of cases and as a percentage of net revenue. Because the information is used to improve performance, and not to be punitive, the report card is “blinded” meaning no payers names are used. In addition, we meet with payers monthly or quarterly to review performance. FY09 was the first year we appealed outpatient denials, which resulted in $3.7 million in recoveries. In all, more than $10 million of the $12 million denied by all payers was recovered on appeal.

Jason Adams: At MultiCare, we share a structured scorecard with payers in hopes it sparks competition to improve their operations. We monitor denied claims, A/R turnaround time, and the quantity of denied claims that have been overturned. For the past three years, we have met monthly with our top 10 commercial payers, who make up about 95 percent of our commercial revenues. We have seen A/R days drop by about four to five days over the past couple of years. This improvement has had significant effect on cash flow; a day amounts to about $10 million for us.

Lyman Sornberger: We have a paper scorecard with 26 metrics that we share with payers, as well as the costs of doing business. These monthly payer scorecards are presented internally at the enterprise, facility, technical, and professional level. This dashboard shares with the payers all of the metrics that Cleveland Clinic uses to measure ourselves internally, including days in A/R, denials management, payment floor, and aging. The scorecard is shared with the payer in context of the payer’s market competitors with data from other payers blinded. Our intent is not to present the “report card” as a punitive measure. We want to provide the information so we can work together to improve performance and save costs for both parties. In addition, we survey our staff and the payers annually at the payer level and share the results with the payer and health system.

David Wurcel: We model every claim and perform a detailed review of variances between the estimated contractual amount owed and the amount paid. Variances are tagged for daily review by our patient account analysis team. We then use root cause analysis to determine the true cause of variance. Such efforts give us detailed information that we can use to address issues in our own processes and with insurers. When we go to the insurer, we can be very clear on what we need. The efforts are paying off. Our entire denial issue is in the 1 percent range, and we are sitting in the mid- to high-30s on days in A/R. Such performance is all due to having good, productive relationships with our payers.

What can you do to address inadequate payer performance, such as excessive underpayments or mistaken denials?

Tipps: We have a dedicated denial resource center staffed with nurses and clinical representatives. They are versed in the relevant issues; it’s not like someone who is trying to manage these functions on top of regular collection duties. The resource center staff get every claim that has a denial and prioritize it by time and dollar amount. We have an 89 percent denial overturn rate for inpatient claims. We also have a dedicated contract compliance unit that handles underpayments and other issues that have not been resolved through normal collection efforts. They have special training in contract interpretation and work directly with our managed care payers regarding contract issues, interpretation, and enforcement.

Wurcel: If we feel like we’ve done everything we can for resolution and a denial or underpayment is still on the issue list after six months, I will escalate the matter to a managed care senior vice president. Such action isn’t taken lightly. I don’t want to discuss it with an SVP until I’m certain all administrative and clinical review processes have been exhausted. When I do have to speak with an SVP, I’ll say, “No one is right or wrong, but we have a contractual legal issue that is at an impasse, and it is time for a decision.” If discussions at the SVP level don’t bring resolution, then we will issue a notice of violation. But such action happens very seldom.

Sornberger: We provide feedback on a regular basis to our payers. Our meeting frequency varies based on current contracting timing and performance issues by either party. We also will address inadequate performance in contractual negotiations. Finally, we have worked with payers and continue to collaborate through various project alignments. These meetings are more strategic in nature and both parties strive to improve the metrics and decrease the cost of doing business. The outcome is a host of metrics that we agree the two entities will use to measure the success of the collaborative effort.

Participants in this HFMA Executive Roundtable:

Jason Adams
Vice President of Revenue Cycle, MultiCare Health System

Lyman Sornberger
Executive Director of Patient Financial Services, Cleveland Clinic

Julie Tipps
Strategy Consultant, Office of Managed Care, Baylor Health Care System

David Wurcel
Vice President, Corporate Business Services, Yale New Haven Health

Philip Hardin
Executive Director of Provider Services, Emdeon

Read this HFMA Executive Roundtable in its entirety to find out more on strategies for monitoring and managing payer performance. Discover Emdeon’s suite of Payment Integrity Services today! Call us at 877.EMDEON.6 (877.363.3666).

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