Payer Contracting and Negotiating Strategies

Payer Contracting and Negotiation Strategies

Payer contracting and revenue viability are critical challenges implantable hearing solution providers face today. While there have been significant changes and improvements to some health plan contracting efforts, it is imperative that the provider and the financial team review and analyze their contracts, proactively and with scrutiny.

It is critical that providers read and understand both their existing health plan contracts as well as contracts they are preparing to sign and/or re-negotiate relative to implantable hearing services.

Importance of the Managed Care Contract to your implantable hearing program:

• Cannot be overstated.
• Will include provisions that will impact the patient-provider relationship.
• Has a significant impact on the program from a business aspect.
• Can result in controversy and additional cost to administer if contract provisions are overlooked or glossed over.
• May result in unpredictable controversy that requires additional interpretation that may not result in a positive decision from the provider's perspective.

Begin by assessing your implantable hearing program:

• Connect the dots - the terms of your current payer contract directly affect the performance of your program (reimbursement, payer policies, and/or administration of your current contract).
• Identify your payer mix.
• Review your current coding and documentation to identify any problematic areas.
• Identify your current contracts and payment methodologies. (has the payer reimbursed according to the terms? Are payments below what other payers are reimbursing and below your costs?)
• Begin to develop an evidence-based outcome program to help the payer understand the value of the implantable hearing services you provide and substantiate higher reimbursement.
• Determine the importance the contract has to your program. Have a solid understanding of what an individual health plan contract means to your program in terms of revenue and expenses. If the program is too heavily dependant on a single contract, the program should examine long-term strategies for possibly diversifying the source of its patient base.

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Opportunities for improving your implantable hearing technology reimbursement

When a program receives inadequate reimbursement from a payer, the following factors are usually involved:

• Generalized reimbursement methodology creating an unacceptable risk for the hospital.
• Inadequate reimbursement for implantable hearing technology.
• Unclear and undefined payment terms and time frames.
• No terms addressing cost shifts in service line volume and/or costs related to new technologies or procedures.
• Significant administrative burdens resulting in a higher cost to provider services.

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Begin by developing a data tool to analyze the following:

• Query your patient accounting system
• Analyze at least a year's worth of complete utilization data by payer. Start with the largest payer by volume to the lowest and include:
• Number of accounts
• Type of service/procedure by CPT and HCPCS codes
• Gross charges
• Implant costs (if applicable)
• Expected payment
• Adjusted net revenue
• Average APC Medicare revenue
• APC Medicare weighting
• Comparison of reimbursements of other payers with similar volumes
• Commercial reimbursement method
• Percent of charges (your hospital's billed charges)
• Percent of usual and customary charges (may not be your hospital's billed charges)
• Commercial APC - Medicare adapted for commercial contracting
• ASC groupers (if this method is used, compare the commercial ASC groupers to Medicare ASC)
• Fee schedule
• Visit
• Discount cap
• Case rate
• Carve-out payment methodology (percent of charges/invoice) for implants/prosthetics

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Some of the key elements to consider in negotiating effective rates on implantable hearing solutions include the following:

• Do not assume that the payer is basing their APC or ASC payment methodology on the way Medicare defines their APC or ASC groupings. In many cases, payers will adapt the Medicare methodology to help manage outpatient costs. However, in these instances, payers develop their own proprietary groupings that look nothing like Medicare.
• Commercial payers may: rearrange, delete, and/or add procedures/services from the established Medicare methodology.
• Some payers may move procedures into completely different groups to minimize costs.
• Most commercial payers still do not use the APC payment methodology for outpatient services. However, these payers are trending towards recognizing APCs as an alternative to effectively managing outpatient costs, hence this may change.
• Commercial payers will adapt Medicare APCs to meet commercial needs.
• Ensure thorough understanding of the structure developed by the commercial payer and your hospital's ability to administer their model.
• Your hospital submits cost reports to Medicare that may adjust the final Medicare reimbursement your hospital receives.
• Commercial payers do not include a "true-up" mechanism if your hospital costs exceed payment.
• Commercial payers do not often include additional reimbursement to compensate your hospital for higher cost procedures/services.
• Contract payment methodology is based on a percent of charges.
• Ensure the payer is basing payment on your hospital's billed charges. in many cases, hospitals assume that the payer is reimbursing the hospital's billed charges when, in reality, the payer is using usual and customary charges that may differ significantly from your hospital's billed charges.
• Usual and customary charges may also be based differently, subject to geographical area.
• Discount cap.
• Include language in your contract that limits the maximum discount on any particular claim and/or that limits the overall contractual discount a specific payer can obtain.
• Be wary of contracts that impose a cap for percent of charge discounts.
• Case rate.
• Evaluate and identify if the rate adequately covers the cost of the procedure and the hospital's average cost of implants used in the procedure.
• Ensure the device/implant is included in a case rate and the reimbursement is high enough to cover the cost of devices/implants used the majority of the time.
• Consider a procedure type of stop-loss for each case rate to protect the hospital from high-cost procedures and correlating hearing implantable device costs.
• For hospitals, the hearing devices/implants should be clearly identified by Revenue Code in your Chargemaster and Item-master system.
• For hospitals, devices/implants by applicable Revenue Code (e.g. RC278) in your contracts to ensure the payer's claim system can process payment correctly. If you do not reference a specific code associated with implants/prosthetics, the payer's claim system will not have a mechanism to reference additional payment.

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Preparation for payer negotiations:

• Complete the full analysis of your implantable hearing solutions program.
• Identify and track when contracts are up for renewal.
• Review payment rates across patients within the same health plan to identify continuity of payments.
• Review payment rates per code across health plans to facilitate your negotiations and rate variance.
• Pay particular attention to the services/procedures that generate significant revenue.

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Negotiating carve-outs for Implantable Hearing Solutions (IHS)

If carve-outs for IHS are based off of a percent of hospital billed charges, you may need to demonstrate:

• Need for additional reimbursement to cover the costs of implants/devices associated with IHS surgeries.
• How the devices meet the clinical needs and benefits of the health plan's members.

In some cases, hospitals have agreed to cap the percentage of charge increases in consecutive contractual years.

If carve-outs for implants and prosthetics are paid on an invoice basis in your hospital contract:

• Ensure your vendors can provide you with a patient-specific invoice for implants/devices. Health plans will not typically accept invoices other than those obtained from the vendor.
• Ensure your patient accounts' department can easily access to obtain patient invoice information so as not to delay claim submissions and facilitate timely payments.

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Rate Escalators for Multi-year Contractual Agreements

If your hospital enters into a multi-year contract with a payer, you may want to consider a rate escalator for each consecutive contract year.

If you include rate escalators, define in writing:

• What the increase is based on.
• The effective date of the increase.
• Who will define the increase.
• Confirm that your patient accounts' department is aware of the increase and ensures compliance in claim payments.

Cochlear Implant and Baha® Surgeons and Audiologists

Negotiating contracts with payers is often an intimidating process for many. However, your knowledge of your business, market, and costs is an excellent way to begin preparing for negotiations. Obtain a complete fee schedule with all of the CPT codes you frequently bill for Cochlear Implant and Baha® services provided in your office or clinic.

Before you can determine what reimbursement is adequate, you must be able to determine your practice/ clinic costs. A thorough cost analysis helps you:

• Understand how much it costs to provide services.
• Develop a negotiation "road-map" to address your requirements with payers.
• Benchmark with similar types of clinics and practices to identify ways to increase your financial health and efficiencies.

Begin to prepare for your negotiation by organizing your current commercial contracts and list the following information:

• Payer name.
• Initial effective date and term of the contract.
• Termination/re-negotiation clauses.
• Current reimbursement by CPT code.
• Volume by CPT code and payer.

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Develop a spreadsheet of the following information on each payer, then compare them to determine where you may have opportunities for negotiating better reimbursement:

• All billing codes.
• Description of each billing code referenced.
• Practice charge by CPT code.
• Number of times CPT code charged.
• Medicare reimbursement by CPT code.
• Medicare RVU weighting by code.
• Medicaid reimbursement by code.
• Payers in order of volume (Payer A, B, C, etc.).
• Payer A reimbursement by CPT code as referenced on contractual fee schedule.
• Payer A reimbursement variance to practice charge.
• Payer A reimbursement variance to Medicare.
• Payer A reimbursement to actual payment.
• Expand the spreadsheet to include each commercial payer to identify specific trends.

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Quick Tips

If the payer is basing your fee schedule on a percent of Medicare, you may want to analyze the following information:

• Is the percent of Medicare referenced for every CPT code billed or is it an aggregate amount based from the total of all CPT codes?
• What Medicare rate year is referenced?
• What Medicare rate is in effect for consecutive contractual years?
• How does the payer reimburse for "unlisted codes? You can negotiate a fee usually based on a percent of charges.
• If the health plan uses a fee schedule, what is it based on? is there a weighting factor assigned to each CPT code? how does the weighting compare to Medicare?
• How often is the fee schedule updated? Who is responsible for the updating? Do the new rates automatically go into effect or do you have the ability to negotiate?
• Do you have financial protection for consecutive contract year such as medical CPI?
• Does the health plan send your new fee schedule to you in advance of its effective date or do your claims automatically process at different rates without your knowledge?
• Are you reimbursed on your practice/clinic's billed charges or usual and customary charges?

Contract Language (Please consult an attorney on contract provisions. These are suggestions that may or may not be applicable to your situation.)

Many providers concentrate heavily on the reimbursement component of their contractual negotiations and often forget about the contract language. The rates you have negotiated so hard to obtain can be diminished if there is not equal concentration on the contract language. Unclear contract language can increase administrative burden and costs of providing services.

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To Facilitate Negotiating Better Reimbursement for Implantable Hearing Solutions:

DO

• Seek a definition of those payers that will have access to your contract terms and pricing.
• Be aware of the existence of different policies and procedures for different payers that may be included under one contract.
• Be aware of terms like "lesser of" in the payment methodologies and their effect on your reimbursement.
• Seek to collect interest for outstanding "clean claims."

DON'T

• Overlook the payer's policies on down-coding and bundling.
• Fail to clarify the payer's payment policy on multiple surgical procedures.
• Agree to recoupment of overpayments or payment errors through "offsets" against future claims.
• Accept vague or misleading language regarding timely payment and claim reconciliations.
• Accept incomplete fee schedules.
• Settle for inadequate compensation for implants/prosthetics.

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Usual and Customary

Many payer contracts will reference reimbursement based on usual and customary charges. Keep in mind however, that:

• The usual and customary charges referenced by the payer are not necessarily your hospital, clinic, or physician charges or those specific to your geographical area.
• You clearly understand the payment methodology associated with percent of billed charges. this will ensure you will not have to collect a greater portion from the patient.

Effective Date and Termination Clauses

• The effective date of the contract should begin after contract negotiations have been completed.
• Retroactive effective dates can increase administrative costs and reconciliations.
• Be aware of evergreen contracts and know how the reimbursements will change, if at all, from contract year to contract year (contracts that continue to roll over from one year to another without renegotiation or a termination date).
• Make sure that both parties execute the agreement and keep a fully signed copy in your files.
• Seek to include language allowing you to terminate an individual payer. This clause is pertinent in contracts administered by one party (not financially at risk) with numerous payers involved (PPO network contract).

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Medical Necessity

• Clearly define medical necessity in your contracts with payers.
• Make sure that you know who is making the determination and on what basis.

The American Medical Association has an excellent reference for you to use in defining this term.

Payment Claims Submission and Payment Claims

• Make sure the contract includes a clear definition of a "clean claim." This is important information for your hospital/practice/clinic in producing clean claims that will result in expedited payment.

Other provisions you will want to consider are:

• Language addressing timeframes for submission and payment of clean claims.
• Obligate the payer to notify you in writing within a specific timeframe when a received claim is not considered "clean."
• Language should specifically address who is responsible for claim payment and where the claim should be sent.
• Include specific language with established timeframes for submission and resolution of claim appeals.
• Identify whether the timely filing provision allows for processing of coordination of benefits claims. You may be unable to adhere to the timely filing requirements because the claim was sent to the primary insurer and was not processed in time to meet the timely submission requirements of the contractual terms.

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Other Key Areas of Consideration

Some of the other components of the contract have significant ramifications on your staff's ability to easily administer the contract. Although each payer contract is different, there are some common clauses for which you may want additional clarification and information that may enhance your practice/clinic/ hospital's administrative and financial viability related to contract administration such as:

• Request a list of payers attached to the contract and include language to obligate the health plan to provide you with an updated list in writing at least 30 days prior to activation of new payers.
• Ask the plan to provide you with copies of their member identification cards. some health plans issue cards with multiple health plan logos on it making it difficult for your staff to determine what contract is applicable for authorizations, claims submission, and payment.
• The contract should include a provision for a 30-day timeframe for you to issue a check to the payer for an overpayment rather than allow the payer to offset future claims.
• Include a provision allowing both parties 365 days from date of service to reconcile under or overpayments.

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Standard Contract Roadblocks

In most instances, the health plan will provide a standard contract and will maintain that there is little or no flexibility to negotiate or modify it. Even though the health plan may appear unwilling to modify the standard contract, the provider must thoroughly understand the contractual content prior to attempting to renegotiate. To position yourself proactively, the following tips apply:

• Obtain a complete copy of the contract including amendments, addendums, appendices, exhibits, and a completed fee schedule based on all billing codes utilized by your program.
• Review and understand every section of the standard contract. Seek assistance or guidance from an attorney specializing in health law if you do not understand the terms of the contract.
• Ask the health plan for clarification on sections or policy referenced.
• Assess your program's ability to comply with the health plan's policies and procedures.
• Red-line the contract and insert alternative wording for clauses you want changed.
• Make sure the contract is not "one-sided."