GE Healthcare Camden Group Insights Blog

Infographic: Trends in Healthcare Payments

Posted by Matthew Smith on Nov 20, 2014 2:55:00 PM

Healthcare Cost, Revenue Cycle, PaymentsThe healthcare payments industry is changing rapidly due to consumerism and regulatory mandates, according to the fourth annual Trends in Healthcare Payments Report by InstaMed. Patient payments to providers have increased 72% since 2011 due to these market forces.

InstaMed's new infographic based on the report looks at how patient provider payments are changing administrative requirements by providers, the need for payment plans and how credit card and mobile will impact provider payments in the future.

To view a full-size version of the image, below, please click here.

Payment Trends, Health Directions

Topics: Infographic, Revenue Cycle, Healthcare Payments, Trends

CVC: A Key Metric for Managing the Physician Practice Revenue Cycle

Posted by Matthew Smith on Nov 6, 2014 9:06:00 AM
By Lucy Zielinski, Vice President, and Carmina Nitzki, Senior Consultant, The Camden Group
CVC, Collected vs. Collectable, Revenue Cycle
By monitoring the collected versus collectable revenue for physician practices, revenue cycle leaders can quickly detect consistent payer underpayment by procedure, diagnosis, and patient group. 

Only 24 percent of hospital CFOs expect a positive near-term return on their investment in physician employment, according to a recent HFMA survey. Revenue cycle management is part of the problem. Only a small minority of CFOs are “very satisfied” with the collections processes of their employed physicians. Just 15 percent of CFOs are “very prepared” to analyze physician-specific data.

Finance leaders need a simple method for managing the physician revenue cycle. By using a little known metric—collected versus collectable (CVC)—revenue cycle leaders can monitor the medical practice revenue cycle, manage practice performance, and communicate outcomes. CVC is cash actually collected compared to cash that should have been collected based on payer contracts.

CVC allows revenue cycle staff to monitor high-level outcomes while managing performance at a detailed level. In addition, CVC is easy for physicians to understand, so it is a useful tool for engaging physicians in financial goals.

Tracking CVC

The CVC ratio is similar to the net collections rate, but it enables a more accurate review of payments. The basic calculation: Divide payments received (cash) by all contractually allowable payment amounts (see exhibit below).

CVC, Collected vs. Collectable, Revenue Cycle

To track CVC, you will need data on cash-basis payments from payers and patients, and contractual allowables by payer and by CPT code. Allowables should reflect any special payment tiers based on unique coding (e.g., lower allowables for bundled services or assistant surgeon services).

How is CVC different from net collections or accounts receivable (A/R)? A practice’s net collections rate is calculated using payer-classified adjustments, so it is dependent on accurate payment from payers. Additionally, the net collection rate includes any and all adjustments, including non-contractual adjustments such as bad debt and others. The adjustments may be erroneously inflated, therefore invalidating the metric. In contrast, CVC is calculated using contractual allowable amounts determined from the actual fee schedules. That makes it an accurate indicator of effective collections.

The A/R days measure tells you how quickly claims are paid, but not whether claims are paid appropriately. It is possible for medical practices to have very strong A/R and net collections numbers, but poor collections on allowables.

Once revenue cycle staff begin examining CVC, they may find physician practices are leaving a lot of money on the table. CVC indicates clearly whether a physician practice is collecting all the money it is entitled to.

Using CVC to Drive Analytics

CVC monitoring allows finance professionals to manage medical practice collections proactively. Dips in long-term CVC trends or failure to meet benchmarks provide an early warning of revenue cycle problems (see the exhibit below).

Collected vs. Collectable, CVC, CVC Benchmark, Revenue Cycle

For example, say a health plan is consistently paying incorrectly for certain office-based procedures. Unless these procedures represent a very large percentage of total charges, the net collections rate will not indicate a problem. Even if net collections were noticeably low, the standard approach would be to examine payer denials.

In contrast, finance leaders who monitor CVC will detect consistent underpayment very quickly. Once CVC declines, managers can drill down by CPT code and identify the specific procedures being underpaid. The organization can then approach the payer with concrete information about codes, procedures, and payment shortfalls. Payers are more likely to address and resolve underpayments when presented in bulk.

While other metrics are process measures, CVC is an outcomes measure. This lets you measure the effectiveness of your revenue cycle at key points, then explore problems using other metrics.

Engaging Physicians

CVC provides a clear way for physicians to understand their practices’ collection goals and their actual collection performance. CVC metrics can be included in physician dashboards (see the exhibit below). This is especially important for physicians whose compensation is tied in part to collections.

CVC, Collected vs. Collectable, Revenue Cycle

Uncovering Contract Problems: A Case Study

A large multispecialty practice on the East Coast has included CVC in physician dashboard reports for the past several years. Recently, a gastroenterologist in the group noticed a steep one-month decline in CVC, so he called the business office immediately.

Quick analysis showed the problem was confined to one payer and a small number of codes. Follow-up revealed that the payer had recently enacted a new policy, bundling certain procedures that had always been paid separately. It was a relatively minor change, but it had a significant impact on this specialist’s revenue.

Contract language enabled the practice to reverse this new unfavorable policy. Without CVC, the finance department may have eventually picked up on the problem. But in many large practices, a relatively minor change like this can go unnoticed for months.

Supporting Financial Management

CVC data supports several important financial management functions:

Projecting practice revenue and cash flow. Estimating practice revenue based on historical revenue data can be inaccurate because this approach does not account for actual payment performance. The alternative is to apply payer-specific CVC rates to receivables. This will produce accurate projections of payments over the next month and quarter and an accurate estimate of future revenue.

Preparing for contract negotiations. Finance departments can prepare for contract negotiations by analyzing the CVC ratio. Comparing collected to collectable amounts by CPT code, physician, and service line will highlight chronic underpayments that should be addressed in the contracting process. Where rates are below Medicare payment, comparing collectable amounts to charges will allow revenue cycle leaders to identify specific components of the fee schedule that are due for renegotiation.

Managing the revenue cycle under new payment models. Because CVC is an outcomes measure, finance leaders can use it to monitor total performance under a contract for specific procedures, diagnoses, and patient groups. Custom CVC metrics will show whether payment is correct for a particular service bundle. CVC also allows you to compare bundled payment rates between different payers.

Implementing CVC Tracking

The first step is to obtain all fee schedules for existing payer contracts—or at least fee schedules for your top payers that cover 80 percent of provided practice services.

The next step is to load the fee schedules into the practice management information system or to create a fee schedule database using commercial database software.

Assign an analyst to set up CVC measures within the system, monitor the metrics, and produce regular management reports. Embedding an analyst within the hospital finance department will enable better management of the organization’s employed physicians.

Driving Results

Once revenue cycle staff start monitoring medical practice CVC, they will uncover many process bottlenecks and contract problems. Revenue cycle leaders must be committed to tackling the problems that show up in the data. Hospitals that devote resources to a CVC initiative will improve the operations of their employed physician practices. This will allow the hospital to negotiate better contracts and strengthen overall financial outcomes. 

Revenue Cycle, Key Performance Indicators, KPIs,

Topics: Revenue Cycle, CVC, Collected vs. Collectable

Straight From MGMA 2014: Are You Ready for Revenue Cycle 2.0?

Posted by Matthew Smith on Nov 4, 2014 11:01:00 AM

Revenue Cycle, Clinical Integration, DownloadDownload the latest Health Directions presentation: Are You Ready for Revenue Cycle 2.0? by Health Directions President/CEO Daniel J. Marino. Presented at the 2014 MGMA Annual Conference in Las Vegas, this presentation will share how to manage at-risk fee arrangements by coordinating discounted up-front reimbursement with future reconciliation payments.

Highlights include:

  • Manage bundled payment contracts by re-tooling revenue cycle processes to focus on disease state or clinical programs.
  • Harmonize billing among several care providers to ensure proper claim adjudication with payers and patients.
  • Modernize the verification process and use a practice management information system to ensure proper reconciliation of patient accounts to performance-based contracts.

Learning Objectives

  • Identify traditional revenue cycle processes that represent weak spots
  • Manage documentation, billing, collections and payment allocation under shared savings contracts and at-risk arrangements
  • Re-engineer revenue cycle processes for value-based contracts by coordinating billing and receivables across providers

To download the PDF of this presentation, please click on the buttown below.

Webinar, Webcast, Revenue Cycle, Health Directions, Ambulatory Payment

Topics: Bundled Payments, Clinical Integration, MGMA, Revenue Cycle, Daniel J. Marino, Download

Live from MGMA 2014: Are You Ready for Revenue Cycle 2.0?

Posted by Matthew Smith on Oct 23, 2014 11:08:00 AM

MGMA, Medical Group Management Association, Revenue CycleHeading to the MGMA 2014 Annual Conference this weekend in Las Vegas? If you are, make sure you join Health Directions President/CEO Daniel J. Marino for his presentation Are You Ready for Revenue Cycle 2.0? on Monday October 27 from 10:15-11:15AM. If you're a media member and would like to schedule a time to talk with Dan either prior to or at the conference, please email Matthew Smith, Health Directions Director of Marketing with your request.

Presentation Description

The session will show how to manage at-risk fee arrangements by coordinating discounted up-front reimbursement with future reconciliation payments. Participants will learn how to manage bundled payment contracts by re-tooling revenue cycle processes to focus on disease state or clinical programs. Harmonizing billing among several care providers will ensure proper claim adjudication with payers and patients. Participants will explore techniques for modernizing the verification process and using a practice management information system to ensure proper reconciliation of patient accounts to performance-based contracts.

Learning Objectives

  • Identify traditional revenue cycle processes that represent weak spots
  • Manage documentation, billing, collections and payment allocation under shared savings contracts and at-risk arrangements
  • Re-engineer revenue cycle processes for value-based contracts by coordinating billing and receivables across providers

Presentation Details

Date: Monday, October 27th

Time: 10:15-11:15AM

Location: N250

CEU Credits: 1

Content Area: Revenue and Cost Strategies

MGMA Link:

To download an existing Health Directions Revenue Cycle presentation, please click the button, below.

Revenue Cycle, Key Performance Indicators, KPIs,

Topics: Bundled Payments, MGMA, Value-Based Contracting, Revenue Cycle, Daniel J. Marino

Complimentary Webcast on 10/16: Revenue Cycle Strategies In the New Healthcare

Posted by Matthew Smith on Oct 15, 2014 1:12:00 PM

webcast, Health DirectionsJoin Health Directions and McGladrey on an ambulatory payment update webcast tomorrow, October 16 from 1:00-2:30PM, EDT. 

With the rise of incorrect or unpaid insurance claims, increasing patient debt, mounting operational costs and the burden of ever-changing compliance demands, health care organizations are feeling the squeeze to successfully manage a complex revenue cycle landscape. From pricing to payment challenges, there’s much to be concerned about.

Revenue Cycle Strategies In the New Healthcare: Ambulatory Payment Update

Presenters: Jim Sink & Dan Clark (McGladrey), Lucy Zielinski (Health Directions)

Relevant insights will be shared from the outpatient prospective payment system, ambulatory surgical center and physician annual Federal Register updates. Taken together, these outpatient payment strategies and updates bring increasing significance, with the reduction of inpatient admissions, increased financial incentives, encouraged preventive care services and site-of-service payment incentives, all while the payment system, overall, migrates toward pay-for-performance, accountable care and increased procedure and payment bundling strategies. 

We hope you can join us for this informative webcast that will address challenges and provide concrete ideas to implement now to improve your revenue cycle strategy going forward.

To register for this event, please click on the button, below:

Webinar, Webcast, Revenue Cycle, Health Directions, Ambulatory Payment

Topics: Revenue Cycle, Webinar, McGladrey, Ambulatory Payment, Ambulatory Care

New Download: Denial Management Through Process Improvement

Posted by Matthew Smith on Oct 14, 2014 11:44:00 AM

Denial Management, According to University Health Consortium (UHC), rejected claims are the number one challenge facing the business offices of physician practices today. Every 1% of claim denials can cost an organization $7,000 to $20,000 per physician in annual net revenue.

The use of denial metrics support proactive management and can significantly improve your practice’s profitability making effective denial management the key to revenue enhancement and efficient processes.

This new PDF presentation from Health Directions examines current trends in Denial Management and provides reporting tools to allow physicians and practice managers to manage the process and prepare for the future: ICD-10, value-based contracting, reimbursement analysis, etc.

Key topics include:

  • The shift in revenue cycle activity
  • Top denial reasons
  • Where do you begin to manage denials?
  • Denial key performance indicators
  • Collected vs. Collectable metrics
  • Case study of a 90+ provider, multi-specialty group practice

Also included are tools for you to use to begin improving your denial rate, including:

  • Sample Denial Survey
  • Sample Denial Report
  • Sample Action Plan

To access this presentation, please click the button below:

Denial Management, Revenue Cycle,

Topics: Revenue Cycle, Download, Rejected Claims, Denial Management

Download: Improving the Physician Revenue Cycle Through KPIs

Posted by Matthew Smith on Sep 19, 2014 10:36:00 AM

Download, Revenue Cycle, Health DirectionsThe healthcare revenue cycle is complex and interconnected. A few flawed processes can weaken the entire reimbursement chain and lead to poor financial results. Fortunately, this also represents an opportunity.

Optimizing business office processes, payer relationships, patient flow and information system configuration can bring about exceptional gains in both cash flow and net revenue.  This is especially important as organizational structures, reporting requirements, and reimbursement methods are changing to accommodate the new realities of the healthcare system. 

Asking the following questions can help healthcare leaders evaluate the revenue cycle strengths and weaknesses of employed physician practices.


  • Does the practice verify insurance info (using batch eligibility) prior to appointments?
  • Are the patients informed of payment expectations prior to arrival for their appointment?


  • Is the staff trained to collect co-pays, deductibles and past-due balances at check-in?
  • Does the practice have a written financial policy that is provided to all patients?


  • Does the practice verify coverage for specific services?
  • Does the practice update procedure and diagnosis codes annually, as well as perform a coding audit?

Charge Capture/Claim Submission

  • Does the practice capture 100% of office and hospital charges?
  • What is the lag time from date of service to date of claim submission?
  • Are claims submitted daily?

Cash Application

  • Does the practice use electronic funds transfers (EFTs) and electronic remittance advices (ERAs)?
  • Does the practice load payer allowables and track payment variances?

Denial Processing

  • Does the practice track denials?
  • Does the practice monitor write-offs and have an appeals process?

Accounts Receivable Follow-up

  • Does the practice follow up on all outstanding balances: payer and patient?
  • Does the practice have a dashboard report that is reviewed monthly and compared to industry standards?

This Health Directions presentation discusses the use of key performance indicators to improve the revenue cycle in hospital owned physician practices. 

To access this presentation, please click the button below:

Revenue Cycle, Key Performance Indicators, KPIs,

Topics: Revenue Cycle, Physician Revenue Cycle, Charge Capture, Cash Application, Claim Submission, Download

14 (More) Managed Care Contracting Do's & Don'ts (Part 2 of 2)

Posted by Matthew Smith on Jul 30, 2014 11:51:00 AM

Provider Contracting, Physician Contracting, Revenue Cycle

Yesterday's HD Insights Blog Post identified fourteen common traps for basic hospital and physician contracts, and the negotiating strategies around them. Today's post delivers Part II of this article--with fourteen more tips. Again, some of these tips are obvious, yet one would be surprised how many payers’ “boilerplate” or “standard” contract templates do not address these issues in a manner that provides reasonable protections for providers.

We hope that you find at least one valuable insight from the 28 tips mentioned in these combined articles, and encourage you to comment below on other tips you might wish to share with others. (Ed. note: Nothing in this article or the member comments below should be construed as encouraging a party to deal or not to deal with a payer.)

  1.  Protection from Bad Debt. Bad debt can be worth 3 percentage points or more of the total yield on a managed care contract. As employers push an increasingly large portion of financial responsibility onto employees, providers’ bad debt and the cost to collect patient liabilities will increase. Benefit plans can be designed to reduce the provider’s bad debt exposure (e.g., by deducting a patient’s financial responsibility from his or her pay check and remitting it directly to the provider). Depending on what kind of products and benefit design the payer sells, your exposure as a provider could increase or decrease. Talk with the payer about how you can be protected from bad debt exposure. And make a provision for it in a yield guarantee (see below).
  2. Get a Yield Guarantee. Simple concept, tough to operationally define, tougher still to negotiate, but the ultimate protection. Concept: At the end of the year, did I get the percent of charges I thought I would when I negotiated this deal, or did the “fine print” cheat me out of it?  For some payers, the fine print can be worth 6 – 8 percentage points or more. Plus the administrative hassles. The details can get excruciating, but don’t give up. If necessary, agree to hire a mid-level audit firm familiar with healthcare experience to play referee. Payers are giving this. If they intended to pay you x percent of charges, then they shouldn’t protest. But it has to cut both ways.
  3. Look backs. Limit look back periods to 12 months after payment is received. Both parties. Don’t allow exceptions in the case of “fraud”, unless fraud is very carefully defined. Otherwise, a vaguely defined fraud exception just becomes a backdoor way to allow look backs forever.
  4. Recoveries. Do not agree to allow recoveries to be made against future payments. And hire a recovery firm of your own to review otherwise closed accounts. These firms usually work on a percent of recoveries, so there’s no expense to you. Make sure they provide detailed reports of their findings so you can learn from your mistakes (e.g., change the way you do billing and/or change provisions in the contract next time it comes up for renewal).
  5. Waiver of rights. There are many state laws that were put on the books to protect providers against the bad deeds of insurers. Examples include interest penalties on late payments and the right to balance bill certain patients. Standard language on some contracts would have you waive those rights. Don’t do it. Laws were created for a reason. If the payer doesn’t plan to violate those laws, they shouldn’t mind following them.
  6. Conflict resolution. Used to be, arbitration was a good thing. Experience has shown it costs as much and takes as long as the courts, but the process requires you to give up certain rules of evidence and the right to appeal an adverse decision. Avoid both binding and non-binding arbitration. If a conflict arises, the parties can always agree to non-binding arbitration later. But to make it a contractual requirement just adds a year or more to the resolution you might otherwise get through the courts. Of course, the jurisdiction should be your home state. Don’t agree to a bench trial, juries love to spank misbehaving managed care companies. And don’t waive your right to join in a class action lawsuit either.
  7. Evergreen Terms. Anticipate that difficulties may arise during contract renegotiation. Allow for evergreen periods. Make sure they include annual inflators pegged to inflation indices relevant to the healthcare industry. Otherwise, the payer has all the incentive to drag out discussions or even not renew the contract, and you have to “eat” inflationary costs.
  8. Avoid “Forever” Contracts. Read carefully language about termination, including termination at the end of the contract term. Some “standard” contracts may construe the very right to terminate as being subject to the contract’s dispute resolution provisions. Is the right to terminate the contract itself subject to arbitration?
  9. Gag Rules. While it is certainly appropriate for certain terms of the contract (e.g., rates) to remain confidential, don’t allow overreaching limitations on your rights to communicate directly with employers, patients, the media, etc.
  10. Signing bonuses. If there’s a “special project” you’re pursuing and capital funds are tight (e.g., that new electronic medical record system you are eying to improve patient safety), don’t be afraid to ask. But do so after all other key deal points are negotiated. Don’t trade off a one-time signing bonus for other concessions that may have a higher value over the life cycle of the contract.
  11. Haste Makes Waste. As managed care companies have consolidated, the skill level of their negotiators has increased commensurately. Providers who negotiate only a handful of contracts a year are little match for highly compensated (e.g., often in excess of $1.0 million in total compensation per year) professional negotiators who work argue their boilerplate contracts every day, and have a ready answer for every issue. Resist getting boxed into committing to finish negotiations by a date certain. Once you put your head in that noose, it’s “burn the clock” time for the other side. Rather, commit to a certain number of hours per week. And don’t feel apologetic for having to take a time out to attend to other responsibilities. That’s just another pressure tactic.
  12. Take a “Time Out”. Prior to signing the final documents, take a few days off to regain perspective. Do a fresh read of the documents, and come back for one last round of discussions if there are issues with which you’re still not comfortable. If it still bugs you now, just think how you’ll feel about it later.
  13. Don’t Waive Your Rights. After you have a deal, payers are beginning to request/demand a separate agreement be signed that gives up group rights to join any and all class action suits during the life of the contract – and even beyond. Try to avoid entering into these agreements, or at least restrict it to certain categories of class action. After all, if they don’t intend to do anything wrong, why should they need this kind of super-ordinate protection. But they do tend to be tenacious.
  14. Sunset Clauses on the Back End. Be sure to have “sunset clauses” for protections on the back end, and do a careful editing of definitions and other language to ensure appropriate terms “survive” the termination of the agreement. For instance, you should seek protection that they will keep paying you after termination as claims run out, that the same policies and procedures would be in place post-termination for claims incurred while in network, etc.
© Copyright Health Directions, LLC, 2014

Revenue Cycle, Key Performance Indicators, KPIs,

Topics: Revenue Cycle, Managed Care Contracting, Hospital Contract, Physician Contract, Payers

14 Managed Care Contracting Do's & Don'ts (Part 1 of 2)

Posted by Matthew Smith on Jul 29, 2014 12:48:00 PM

Contracting, Hospital, Physician

Some perspectives on managed care strategy and contract negotiation can only be gained with experience over a number of years, and with a number of different payers and negotiators. This article focuses on some of the revenue cycle management issues in contracting.

It identifies some of the common traps for basic hospital and physician contracts, and negotiating strategies around them. Some of these tips are obvious, like our opener, “No Logo, No Discount”, yet one would be surprised how many payers’ “boilerplate” or “standard” contract templates are silent about this or do not address the issue in a manner that provides reasonable protections for providers.

We hope that you find at least one valuable insight from the 14 tips mentioned in this article, and encourage you to comment below on other tips you might wish to share with others. (Ed. note: Nothing in this article or the member comments below should be construed as encouraging a party to deal or not to deal with a payer.)

  1. No Logo, No Discount. It’s obvious, but it’s unlikely you’ll see it in the “standard” contract language or boilerplate the payer sends you. Even if you do, the protections provided you may be insufficient, and the administrative processes imposed upon you may be excessively burdensome.
  2. No Logo, Part II. Who has access to the contract?  This is a variation of the “No Logo, No Discount” point above. Be sure the contract specifies who the actual payer is, especially in contracts with insurance companies that have a high percentage of administrative services only (ASO) business. Who stands behind the contract if the ASO client fails to pay the insurance company with whom you have a contract?  Beware of “affiliates”. Specifically address rent-a-networks, out-of-network benefits being made available to other insurance plans, silent PPOs and discount cards. The only parties who should have access to your contract are the payer’s fully insured business and self-insured ASO clients of that same payer.
  3. Definition of a Clean Claim – Denials of claims is a major concern in revenue cycle management. Engage the See if you can get definitions of things that matter to you. For example, what is a “Clean Claim”?  How many ways can claims be “pended”, “denied”, “disputed” or otherwise held up from being paid?  What is “Medical Necessity” and how is it determined?  Which “charges” are to be used: yours or some payer-defined subset of your customary charges (e.g., “eligible”, “allowed”, “usual and customary”, etc.)?  What is “fraud”?  For every term you define, be sure to establish a performance expectation (e.g., a “clean claim” is to be paid within 15 days if submitted electronically) where appropriate.
  4. Representations and Warrantees of the Payer. Typically payers ask providers to warrant more things than they offer to warrant of themselves. How about a warrant that the rates specified by the payer represent x percent of charges?  That way, if it is subsequently determined that they represent less, you have a better basis for pursuing recoveries, supporting allegations of misrepresentation, etc. How about warranting the solvency of the self-insured employers who are ASO customers?  Payers will say they can’t do that. So you should ask for reasonable protections (and reward) for taking credit risk. Then what protections will they provide for this legitimate risk and area of concern for the provider?
  5. What “products” are you participating in and at what rates?  Get a complete listing of the products offered by the payer. Be clear what products you are negotiating to be “in network” with. What steerage will there be?  How will you be listed on payer’s website, especially as it relates to “quality” and “efficiency” measures?  What rate will you receive for each product?  If you are only going to be listed in the “higher tier” (more expensive) network, then you should get higher rates. How can the payer change what networks you’re in after you sign the contract?  Generally, one rate for all products provides you with the most protection. Besides, it costs you the same to provide a day of care to an HMO patient as it does to a PPO patient. If there is a different rate for different products, what is to protect you from the payer shifting all the volume in the higher paying product into the lower paying product?
  6. Uses of Data. Payers seem to know a lot more about your pricing with competitor payers than they should. Presumably payers are getting access to this information through data sharing services like Ingenix and consultants like Reddon & Anders. With the recent investigation into Ingenix, there is enough of a spotlight being shone on these data sharing practices that providers should reasonably ask for some protections. Payers have a legitimate business need to have sufficient data to perform coordination of benefits and administer out-of-network benefits, but providers should argue that this data should not be shared with the contracting arm of the payers. One solution would be an outright prohibition of the sharing of competitor rate information with the contracting area of the payer. An alternative solution would be a licensing agreement that explicitly spells out how your claims data can and cannot be used. This would force the payer’s hand to disclose their business practices, and provide a basis for cause should data be misused.
  7. Payment Policies, Protocols, Pre-Certification, “Medical Necessity” and other administrative guidelines, policies and procedures.
    • Attach all current and existing policies to the contract as an exhibit.
    • Do not grant the payer the right to change these policies at their sole discretion at any time during the contract, unless you can get some form of protection from the adverse impact these changes could have on you (e.g., a “yield guarantee” as described below).
    • Require changes to be provided in writing, clearly marked, with 90 days advance notice.
    • Don’t be deceived by “make whole” provisions whereby, if you can prove loss of reimbursement or increased administrative cost, rates will be adjusted. It’s a great sound bite for the payers, but it’s a war of attrition with all the cards (and, as usual, the money) in the payer’s hands. The burden of proof is on you, and it probably won’t happen. So if they’re offered, take them, but don’t do so if you have to give up something else (e.g., a yield guarantee).
    • Include a section spelling out the order of legal precedence of various documents and exhibits included in the total package of your deal. After state and federal law and your organization’s Board policies, the contract you sign should trump any attachments, especially any administrative policies the payer has the right to change at a future date at its sole discretion.
  8. Charge master protection. Charge master increases have been abused too much by the industry, and all the payers have sniffed this out by now. It’s a concession you have to give. But get something in exchange for it.
  9. Fixed pricing structure. With increased transparency and cost shifting to the member, you will be competitively disadvantaged if your prices can’t be stacked up against those of your competitor on the payer’s website. So agree to fixed pricing, as long as you have sufficient guarantees that you’ll get paid what you thought you negotiated for. This should apply to both the inpatient and the outpatient side too, although beware of the effect of APCs which, by their nature allow bundling and elimination of “related” charges. Use groupers, DRGs and APC methodologies consistent with Medicare rules.
  10. Avoid Black Boxes. Example 1: payer-specific “proprietary” DRG and APC payment methodologies that do not follow Medicare guidelines. Example 2: Payer “medical necessity” guidelines that are not based upon peer reviewed medical literature. Many other examples could be found. Black boxes are “licenses to steal”. If you must agree to a black box (e.g., because it’s a “national policy” that “everyone else has agreed to”), get protections for the downside. Payers should readily agree to grant these protections because surely they didn’t mean to misuse their black boxes anyway, right?  It’s always a good idea to test run a number of your cases through their payment model before the contract term period begins to see if the yield is as expected. But don’t be tricked into foregoing a yield guarantee which would protect you for anomalies outside the sample universe and future changes to payer’s policies over which you have no control.
  11. Push profits back to the inpatient side. Take lower rates (as a percent of charges) on the outpatient side. Patients faced with increasing financial responsibilities will become increasingly price sensitive. By the nature of the services, more comparison shopping is done on the outpatient side.
  12. Performance criteria for adjudication and payment of claims should be spelled out. For example, if you are not notified of a problem with a claim within 30 days, it is automatically deemed clean. How soon should a clean claim be paid?  How long do you have to submit a claim, and corrections of a claim, additional documentation, etc.?  Be sure to have a clear definition in the Definitions section of any measures around which you want an enforceable performance target. Look at some of the recent class action settlements on physician contracts for some additional ideas.
  13. Partial denials. Hold out for language that says if part of a claim is denied, the entire claim is not denied. Similarly, if a portion of a claim is in dispute, payment for the undisputed portions of the claim should still be paid promptly.
  14. Principle of the Reciprocal. Example of the principle: If the payer can deny payment of a claim received after the deadline for submission, they should lose their discount if they don’t pay within their deadline. Every demand of the payer should have a reciprocal in-kind protection for the provider. You should be willing to provide reciprocal protection or consideration to the payer for every demand you make. Fair is fair. Applications of the principle: they want “predictability” in the form of fixed DRG and APC rates. That’s great. So do you, in the form of a yield guarantee.
© Copyright Health Directions, LLC, 2014
Watch for Part II of this article tomorrow--with 14 more tips for successful managed care contracting.

Topics: Revenue Cycle, Managed Care Contracting, Hospital Contract, Physician Contract, Payers

HIMSS: Revenue Cycle, Financial Modeling Draw Hospital Interest

Posted by Matthew Smith on May 7, 2014 2:19:00 PM

Revenue Cycle, KPI, Health Directions

Revenue cycle and financial modeling applications are positioned for accelerated growth among hospitals, according to data from the HIMSS Analytics Essentials of the U.S. Hospital IT Market, Spring 2014 Edition. The Spring 2014 report evaluates the health IT applications most used by hospitals across the United States.

Using data from the HIMSS Analytics® Database, the report profiled 26 operational applications being used in hospitals across the U.S. and conducted a matrix analysis of their market penetration (saturated, mature to maturing) against their projected sale volumes (decelerating, marginal to accelerating). Bed management, ERP and financial modeling technologies were observed as notable opportunities for health IT vendors, having both a maturing market penetration status and an accelerated projected sales volume.

“The first-time sales outlook for these three operational applications is grounded in the industry’s ongoing efforts to create a cost-efficient and clinically effective environment,” said Lorren Pettit, Vice President of Market Research for HIMSS Analytics. “The fact that the three applications represent varied aspects of a hospital’s operations suggests providers are looking for efficiencies in a multiplicity of ways.”

Following closely behind the three applications slated for the highest growth opportunities, the report found that the sales outlook is also positive for two additional applications in the financial decision support category: contract management and financial data warehousing/mining. Medical necessity checking content applications, which belong to the revenue cycle management category, also fall within the same ranking – mature in terms of market penetration with an accelerating projected sales growth. The relatively low market penetration for all of these applications suggests that opportunities for vendors in this area are very positive.

The 26 applications observed, most of which can be characterized as standard business tools, are divided into the following six categories:

  • Business Intelligence
  • Financial Decision Support
  • General Financials
  • Human Resources
  • Revenue Cycle Management
  • Supply Chain Management

The report also covered the popularity of each application in the marketplace at more than 5,000 U.S. hospitals tracked by HIMSS Analytics. The popularity assessment for each application is determined by its frequency of installation.

Revenue Cycle, Key Performance Indicators, KPIs,

Topics: HIT, HealthIT, HIMSS, Financial Modeling, Revenue Cycle

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