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Ready to Renegotiate Your Managed Care Contracts?
Evaluate existing contracts now so you'll be set for what the new payment system brings.
Alicia Cooper
Publish Date: October 10, 2007   |  Tags:   Financial Management

When CMS finally gets around to issuing that new payment system we're all waiting for (it's supposed to happen this spring or early summer), you're going to have a lot on your plate. Not only will you have to figure out how to cope with payment cuts on current procedures, procedures' migrating to other surgical settings and the addition of procedures that are suddenly profitable, but you're also likely going to have to renegotiate some, if not all, of your third-party contracts. Here are some tools to help you become more knowledgeable, keep organized and, hopefully, come out of contract negotiations a winner.

Get organized
A cover sheet (like the one below) containing general contract information should be a standard part of each contract file. Then you won't waste time digging for contact information, figuring out the status of the contract and other basics. If you update as needed, you'll be in good position any time you start assessing a contract to prep for negotiations.

Sort and rate
The best way to come out of negotiations with your facility's bottom line intact is to enter them armed with complete knowledge of your current contracts and their clauses. Relax - you won't have to memorize every clause or pore over them for days at a time, trying to take notes on what seems important. I've made it easy for you with a standardized contract review format. I'm not saying reviewing each of your contracts won't be time-consuming, but it's exponentially better than starting from scratch.

I've come up with a 45-point checklist of what are likely to be the most important clauses in your contracts from operational and fiscal standpoints. Feel free to modify as needed to tailor the checklist to your facility's needs. To keep track of which points need to be negotiated on each contract, I record whether the term is acceptable, then prioritize using a one-to-five rating scale, with one meaning "deal breaker," two being "must negotiate," three being "important," four meaning "good" and five being "win."

So if, for example, multiple procedures are being paid as the first procedure at 100 percent, the second procedure at 50 percent and subsequent procedures at 25 percent, and you want a higher percentage for the second procedure - but you'll survive if you don't get it - you may want to rank that as a three. If you're happy with the terms of that clause, mark it a four or five and focus your energy on changing the deal-breakers and must-negotiates. You'll want to tackle the ones first, then move on to the twos.

Now that you have an idea of how the system works, let's look at what the most critical clauses should say (for space reasons, not every one is listed here; the entire 45-point checklist is available online at www.outpatientsurgery.net/forms).

General representations, warranties, terms of administration
These points are fairly basic; you want to ensure that, on both sides, you're starting on solid medico-legal ground. Contracts with most third-party payers should be up front about these terms. If you run into a problem getting a payer to agree to mutual indemnification and hold-harmless language, for example, don't be afraid to reject the contract.

Roles and responsibilities of payers and providers
The clauses listed on page 44 establish your responsibility for credentialing surgeons, the payer's communication regarding changes, marketing of services, your access to electronic filing and interfacing and other factors that help set the framework for your relationship with and the flow of information between your facility and the payer.

When making notes, don't skim the details. There may be a clearly established process for arbitration, for example, but that doesn't mean the process is an acceptable one. One contract that came across my desk wanted all arbitration proceedings carried out in North Carolina only - I would have had to travel quite a distance, at great expense in terms of both time and money, if such a situation were to arise. That surely would have put a damper on whether it was worth it to fight a rejected claim.

Make sure you have the ability to terminate. Even if you have to give 90 days' notice, this is crucial to your being on even footing with the insurer, as is being able to request amendments. You want to push for mutual consent on amendments; if you can't get that, try to at least get as long a notice period as possible. That way, you'll have enough time to file a grievance or initiate termination.

Roles and responsibilities of members/beneficiaries
In all cases, you need to understand the population the third-party insurer represents; how it's currently represented and served; how service access is directed or controlled; and whether your services match the population's needs (see page 46). On the flipside, you should have contract terms in place to ensure that patients also understand what they're getting. If patients understand eligibility and payment, they're less likely to have a surprise on the day of surgery - and more likely to be satisfied with their experiences.

Reimbursement issues
Now for the good part: Examining the clauses to break down how - and how much - you get paid. The terms are generally self-explanatory, and it's really up to you to decide how the specific terms can best meet your facility's particular needs.

Renewal and re-evaluation
This lets you re-evaluate in advance. A few weeks before the contract is up for renewal, update contact information, population served and marketplace information. Review claim payments in accordance with contractual reimbursement parameters: Has the payer lived up to its end of the deal, or has it brought you nothing but headaches? Finally, prepare a summary of issues presented, those you've resolved and any you still want to take care of in order to move ahead.

Stand up for yourself
Stay on top of the status of your contracts: Current ones come up for renegotiations, new contracts may hit your desk when a new surgeon starts at your facility, or you may want to start negotiations because it's time for an increase in payments to ensure your facility continues to function profitably.

Learn the lines of communication and the decisionmaking process for contract and reimbursement issues, and embrace your authority level in the negotiation process. Yes, you should understand the authority level of whom you deal with, but don't act as if it's a privilege to even be at the negotiations table. You're the one making the payer more marketable, and you have the right to ask for concessions that will benefit your facility.