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R1 RCMNovember 12, 2020

Increasing Revenue Through Payer Contract Management

Financial recovery isn’t just an uphill battle for today’s physician practice – it’s a mountainous one of Kilimanjaro proportions. Most practices are making up for a substantial decrease in revenue that resulted from a 50% to 75% reduction in post-COVID patient visits. Recovering these losses in healthcare’s current environment can be challenging, especially with so many practices reporting lower than normal new patient volumes according to MGMA.

 

Revenue cycle strategies such as leveraging financial clearance and improving coding performance can help physician practices achieve financial resilience. Payer contract optimization can be one of the most valuable strategies, as once a contract is optimized, the practice reaps higher reimbursements for the entire duration of the contract’s term – without major process improvements or staff additions.

 

Complexities that stand in the way of contract optimization

Physician practice leaders have frequently shied away from payer contract optimization due to the complexities within their numerous commercial and government payer contracts. The advent of value-based care has created additional anxiety, as it introduces another layer of requirements for providers. Despite providers’ myriad competing priorities post-COVID, the use of value-based models remains on the rise.

 

But wait, there’s more! Adding to the looming revenue pressures, new “surprise billing” legislation – which addresses out-of-network billing – will effectively lower patients’ payment responsibility. Out-of-network practices and physicians may see reductions in their reimbursement. Practices currently strapped for resources are especially vulnerable to this legislation’s impact, as their staff may not have the time or capabilities to actively pursue in-network contracts. On top of that, surprise billing legislation differs from state to state so there’s not a consistent strategy for addressing it. The long-term impact of this legislation remains to be seen, but it may substantially harm many physician groups’ viability due to limits on amounts that out-of-network providers can bill.

 

Despite these facts, optimizing payer contracts is essential for today’s providers – read our infographic to learn why.

 

A proactive approach: Steps to increasing reimbursement through contract management

Despite many providers’ apprehension regarding these complexities, payer contract optimization is a valuable strategy for increasing revenue – and one that can expedite post-COVID financial recovery. It’s more than possible to achieve higher fee schedules and reimbursements from payer contracts, but specialized knowledge, a proactive approach and detailed data-driven analysis are all imperative for success. Due to these imperatives – and because on-staff contract negotiation experience is frequently limited – many physician practices engage with a partner that can demonstrate proven results. Especially now, as practices dedicate all available time to increasing patient volume and providing excellent service to these patients, outsourcing payer contract negotiation can be greatly beneficial.

 

Whether a trusted partner or internal staff, your team should adhere to best practices across contract optimization’s three main phases – reviewing current contracts, identifying potential opportunities and renegotiating with payers – to help maximize revenue:

 

1. Assembling essential data

Certainty is a necessity in contract management. If you know what your reimbursements will be from each payer, you can build a budget and operating plan around projected revenue. From there, your practice has a foundation to begin exploring the extent to which payers are open to contract restructuring.

 

An important first step is gathering all documents related to payer contracts and creating a centralized system. This gives your contract optimization team access to necessary data and helps keep payer-related information from falling through the cracks. The team can then assemble all necessary data for analysis, beginning with every source of practice revenue. Critical data points include each payer’s reimbursement requirements, fee schedule and requirements for timely reimbursement, as well as the contract’s notice period for renegotiation and termination. This data can help clarify which contracts represent the greatest percentage of revenue and where your practice has potential opportunities for optimization. For instance, as much as half of a typical practice’s reimbursements may come from Medicare and Medicaid. Although a growing number of patients pay out of pocket, the second half of practice revenue is usually derived from private insurance. On average, roughly 80% of commercial revenue may come from four or fewer health plans, and approximately 70% of it may be from just six E & M (Evaluation & Management) codes.

 

2. Building your negotiation plan

If you want to increase revenue from private payers, a persuasive rationale is imperative – and performance and contract data are your building blocks. With this data, your contract optimization team can analyze payer performance, prioritizing your practice’s most frequently billed services and the correlating rates.

 

Data about your practice is also helpful in payer negotiations; for instance, what makes your practice appealing and more likely to be chosen by patients? Leverage information about the local healthcare market: What does your practice do better, or what advantages can you offer payers, compared to other practices in your region and specialty? How might these advantages translate into more value for the payer – and in turn, better reimbursement rates for you? If you’ve engaged a partner, they can be instrumental in gleaning information to help build a persuasive story based on your market leverage.

 

Lastly, it’s helpful to discuss this rationale with key stakeholders such as your physicians, practice administrators and revenue cycle leaders. These stakeholders can provide additional perspective about your rationale and negotiating points; in particular, 1) if you’re clearly demonstrating mutual benefit to the payer, and 2) where you can afford to be flexible versus stringent during the negotiating process.

 

Want to learn more? Read our whitepaper to learn about a third best practice, Managing the Process.

 

Don’t leave potential revenue on the table

For many physician practices, it’s easy to get caught in the mindset that there’s no way to increase revenue from payer contracts. While it’s true the payer contracting landscape can seem almost impenetrably complex – not to mention rapidly changing – renegotiating and restructuring your practice’s contracts can have a huge payoff.

 

While MGMA estimates that practices are underpaid as much as 7% to 11%, R1’s contract optimization clients increase revenue by 4% to 6%. In this crucial period of financial recovery, don’t continue to be underpaid! If you don’t have anyone on your team who is well-versed in payer contract management, consider outsourcing this function to a trusted partner.

 

Contact us for a free assessment of your current payer contracts or download our infographic to learn more.