DENVER - In a move expected to reduce physicians’ administrative workloads, Colorado Gov. Bill Ritter has signed into law a bill to make the language in payer-provider contracts more transparent.

Senate Bill 79, a rewritten and revised version of a previous vetoed bill, is the result of a year’s worth of effort to find middle ground between the state’s healthcare stakeholders.

Provider advocacy groups say the bill, which takes effect in January 2008, is key to reducing the burden of administrative costs associated with processing multiple payer contracts, all of which have different language and conditions.

“Physicians are absolutely overloaded with paperwork, and dealing with different payers with different rules causes a lot of administrative problems,” said Alfred Gilchrist, executive director of the Colorado Medical Society.

S.B. 79 aims to reduce that paperwork by ensuring that contracts are drafted in plain language and use a standard set of terms.

A study by the Medical Group Management Association found that the average 10-physician practice spends as much as $247,500 annually on wasteful administrative tasks.

The bill “is not a panacea for all the ails of mankind, but it makes the contract language more specific,” said William Jessee, MD, MGMA’s president and CEO. The original version of the bill called for a fully standardized contract form to be issued by the state’s insurance commissioner, he said. And while S.B. 79 establishes standards for contract language, physicians may continue to lobby for more standardization in payer contracts.

A key aspect of the bill is that it requires payers to notify physicians of changes and updates to their contracts. Previously, payers might make changes of which practices might not be aware, and those added or revised conditions often adversely affected finances.

“Before, if you didn’t regularly check the payers’ Web sites, you might miss out on things you didn’t notice,” Jessee said. Under the Colorado law, providers “are now not obliged to accept those changes automatically.”

Colorado’s initiative may have an industry-wide effect if other states follow suit. The Ohio General Assembly is mulling similar legislation that would require payers to put contract terms in plain language and electronically offer eligibility information to providers, via electronic data interchange or a Web portal.

Standardizing payer-provider processes is the best way to reduce extraneous spending on administrative costs, Jessee said. “It’s sort of low-hanging fruit, if you’re looking to find some money,” he said.

He noted that the United States spends more than twice as much as other western nations on administrative procedures in healthcare.

Gilchrist said the greater significance of S.B. 79 is that it shows the ability of providers and payers to compromise on reform issues. “That’s the story of this bill: It doesn’t hurt to talk, it doesn’t hurt to listen, and it doesn’t hurt to learn from each other’s point of view,” he said.