How to Manage Payer Contracts Effectively for Improved Revenue Cycle Performance

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Effective management of payer contracts is crucial. It enhances your healthcare organization’s revenue and efficiency.

This article explores key elements of payer contracts, identifies common challenges, and presents strategic solutions to improve management practices.

Finally, we’ll highlight the benefits of contract management and offer quick tips to boost efficiency. With the right approach, payer contract management can become a core strategic advantage, positioning your practice for greater financial and operational stability.

Understanding Payer Contracts in Healthcare

Payer contracts are formal agreements between your medical practice and payer organizations. This includes private insurers and government programs like Medicare and Medicaid.

They set the specific terms for how services will be covered and paid for. They include essential details like:

  • Service coverage: The medical procedures and services covered under the contract.
  • Payment rates: How much your practice will be paid for each service.
  • Billing protocols: Specific codes and billing procedures you must follow to get paid.
  • Claim submission guidelines: How and when to submit claims to ensure payment.
  • Dispute resolution: Steps to follow if your payment is denied or reduced.

Payer contracts directly impact your revenue cycle. Here’s how:

  • Contracts specify payment amounts for various services. Negotiating better rates boosts your revenue.
  • Not all services are covered. When you understand which are and which aren’t, you can avoid providing those that payers won’t reimburse.
  • Familiarity with billing protocols and claim submission guidelines reduces the likelihood of errors. This means fewer claim denials.
  • Knowing the timeline for claim submissions ensures payments are received without unnecessary delays.

RELATED ARTICLE: Revenue Cycle Management with DrChrono

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Common Challenges of Payer Contract Management

Managing payer contracts is not always straightforward. Several challenges complicate the process. Here are four to be aware of and how they impact your practice’s revenue:

1. Data and Information Overload

Payer contracts are loaded with data. This includes everything from rates and medical billing codes to service terms. The volume of information can be overwhelming.

However, overlooking or misinterpreting information can have far-reaching consequences. You might end up with unfavorable terms or error-prone billing practices. This can lead to payment delays, underbilling, and more denied claims.

You will also need to dedicate extra resources to correcting these issues. This diverts time away from patient care and other revenue-generating activities.

2. Poor Communication

Forty-four percent of employees say communication barriers result in delays and failures. Internal and external communication missteps can impact payer contract management:

  • Miscommunications within your team can lead to inconsistencies. What’s more, different departments may have varying priorities of what the contract should achieve.
  • Misunderstandings with payers can lead to agreements that fail to meet your practice’s needs. This can result in less favorable terms and conditions.

Communication gaps could lead to lower reimbursement rates. This reduces potential revenue.

3. Technical Terms

Healthcare contracts are filled with jargon. Examples of technical terms include:

  • Fee schedule: How much you get paid for each service.
  • Clean claim: A claim without any need for additional information to process.
  • Network requirements: Specifications for provider participation in payer networks.

Team members need to understand these terms to bill correctly. Or they may fail to comply with claim submission guidelines. This can lead to denied or reduced payments.

4. Different Types of Contracts

There are several different types of payer contracts. These include:

  • Fixed-term contracts are limited to a specific period. After this, terms must be renegotiated.
  • Evergreen contracts renew unless explicitly terminated or modified.
  • Fixed-price contracts involve a lump sum payment covering all services during the term.
  • Fee-for-service contracts have payments that vary based on the volume and service type.

Using different contract types requires administrative effort and expertise. Mistakes can lead to service mismatches. This occurs when services are provided but are not covered under the term.

RELATED ARTICLE: Common Challenges in Revenue Cycle Management and How to Overcome Them

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5 Strategies to Effectively Manage Healthcare Payer Contracts

Here are some specific strategies that can help you navigate payer contract management.

1. Use Contract Management Software like DrChrono

Contract management software like DrChrono centralizes the storage, access, and management of all your payer contracts. This streamlines the entire process.

It replaces manual tracking methods like spreadsheets or siloed file storage systems.

With a sophisticated platform like DrChrono, you can:

  • Reduce errors. DrChrono updates and syncs contract data. This reduces the risk of errors that come with manual data entry.
  • Improve access and visibility. All team members have access to the same, up-to-date information. This improves communication and enables quicker decision-making. A single source of truth eliminates confusion and delays.
  • Streamline workflows. DrChrono automates reminders for important dates such as contract renewals and expirations. You never miss an opportunity for renegotiation or adjustments. This ensures your contract terms are as favorable as possible.

2. Scrutinize All Clauses and Information

Take the time to review all clauses within your payer contracts thoroughly. Pay special attention to:

  • Reimbursement rates
  • Fee schedules
  • Claim filing deadlines
  • Termination conditions

Examining these clauses allows you to:

  • Optimize financial terms. Knowledge is power. When you understand the ins and outs of your payer contracts, you can flag less favorable terms. Armed with this insight, you can renegotiate.
  • Ensure compliance. Contracts should reflect changes in regulations. By checking that the contract terms are compliant, you avoid potential fines or legal issues.
  • Manage risk. Be aware of the conditions under which contracts can be terminated or renegotiated. This prepares you to manage whatever obstacles come your way.

3. Set Reminders for Renegotiations and Termination Dates

Identify critical dates related to renegotiations, renewals, and terminations. Then, use contract management software to set automated reminders.

These let you:

  • Stay proactive. You are always prepared for renegotiation discussions. This gives you the leverage to lock in more favorable terms.
  • Avoid automatic renewals. You can prevent undesirable automatic renewals. These could trap you into less advantageous terms.

4. Monitor Performance

Define and track key performance indicators (KPIs) and service-level agreements (SLAs):

  • KPIs show how well a healthcare organization meets business goals. An example is the claim denial rate. It measures the percentage of claims denied by payers. A lower rate suggests better billing and coding.
  • SLAs are formal contracts that outline expected service levels between providers and users. An example in healthcare is the turnaround time for claim processing. It might state that 90% of claims should be processed within 20 days.

Ongoing performance monitoring provides:

  • Data-driven insights: Regular analysis of contract performance helps identify trends. You can find opportunities for improvement and areas of concern.
  • Enhanced decision-making: With accurate and timely data, you can make informed decisions. These affect contract continuation, modification, or termination.
  • Accountability and compliance: You can check and enforce compliance with contract terms.

5. Perform Vendor Credentialing

Vendor credentialing checks that vendors have the right qualifications and follow the rules of the industry. This makes sure that only qualified and trustworthy vendors work with healthcare facilities.

The benefits of vendor credentialing and oversight include:

  • Robust compliance: Credentialing lowers the risk of legal problems.
  • Improved service quality: Regular checks ensure that vendors always meet performance standards. This makes service better and increases patient satisfaction.
  • Revenue protection: Credentialing helps avoid payment delays or denials. This is important when providers who do not meet requirements try to offer services.

FROM ONE OF OUR PARTNERS: Using Software to Grow Your Medical Billing Company

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Benefits of Enhanced Payer Contract Management

Optimized payer contract management unlocks many benefits. Here are three:

1. More Streamlined Revenue Collection

Better management of payer contracts leads to simplified revenue collection. Understanding and applying the terms of your contracts ensures accurate billing. It also maximizes reimbursement rates.

This drives:

  • Increased revenue: Optimizing contract terms boosts reimbursement rates and reduces denied claims.
  • Quicker payments: Efficient contract management shortens the time from service delivery to payment. It minimizes billing errors and accelerates the claims process.

2. Reduced Staff Workload

Efficient contract management optimizes daily processes for your billing staff. This includes claims submission, denial handling, and reimbursement tracking.

The impact:

  • Decreased administrative burden: About one-quarter of the US’s nearly $4 trillion spent on healthcare annually goes to administrative costs. Automation reduces the time staff spend on manual tasks and billing issues.
  • Improved accuracy: Tools and guidelines help your team submit claims more accurately. This cuts down on rework and follow-ups on denials.

3. Enhanced Financial Predictability

Detailed knowledge of your contracts helps with revenue forecasts and financial planning.

This enables:

  • Budget stability: Familiarity with rates and terms leads to more precise budgeting.
  • Strategic decision-making: Better predictability paves the way for more informed decisions. These can help you achieve growth.

RELATED ARTICLE: Using Technology for Streamlined Revenue Cycle Management - A Guide for Healthcare Practices

Boosting Your Payer Contract Management Efficiency

Use these three tips to boost your payer contract management efficiency today:

  • Familiarize yourself and your staff with critical terms. Make sure everyone involved in billing and contract management understands key contract terminology.
  • Add contract renewal dates to your calendar. Schedule reminders for contract renewal dates well in advance. This gives you ample time to review terms and prepare for renegotiations.
  • Research contract management software. Invest time in exploring software options like DrChrono. These can automate and streamline contract management tasks. This can lead to improvements in accuracy and efficiency.