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Managed care, revenue cycle performance strategies are critical to increasing payer yield

Understanding contract loopholes, and being self-advocates during negotiations, can help community hospitals increase their collections.

Jeff Lagasse, Associate Editor

For community hospitals in particular, maximizing reimbursement and improving payer yield are critical components to achieving financial health and sustainability. Hospitals typically spend a lot of time and effort controlling costs to address declining reimbursement, but if they fail to implement a coordinated managed care and revenue cycle performance strategy, they can see lower-than-expected payer yields -- defined as cash collected vs. net expected reimbursement.

Collections are being left on the table, according to Wanda Wright, associate vice president of managed care at QHR, formerly Quorum Health Resources, which provides healthcare consulting, management and educational resources.

One Midwestern community hospital in need of better financial returns decided it needed to examine how it handled contracts with its payers, according to Wright. There was a wide delta between what the contract said the provider would receive and what it was actually getting.

A major problem was the payments that were coming in the door. There were several factors impacting reimbursement, from a lack of education among staff to understanding what the terms of the payer contract really were. They needed to come to terms with a simple reality: If a payer says, "This is your payment," that's not necessarily always correct.

"In understanding how they were collecting the money and validating the payments, it set the stage for what needed to be negotiated," Wright said.

If the hospital was expecting 85 cents on the dollar but only getting back 40 cents, that left a 45-cent gap which prompted the question: Are we billing this correctly? The facility needed to fall back on a behind-the-scenes payment process to help them understand what they needed to address on the front end from a negotiation perspective.

The hospital started by looking at the claims going out the door to ensure they were being billed correctly, and closely monitoring those claims when they came back. The patient financial services department was briefed on what they needed to watch for.

On the revenue cycle end, it was critical to see where patterns were emerging. If the hospital billed for something and the payer didn't pay, or paid less than what was expected, it was important to understand why.

"A lot of it was working with the team, understanding all the little caveats in the contract when we're getting claims from that payer," Wright said.

THE IMPORTANCE OF NEGOTIATIONS

Importantly, the team learned what specific indicators they needed on the claim in order to get paid accordingly -- a necessary consideration even when the claim is clean from the get-go.

"Most hospitals don't have the funds to have a full-time managed care person on staff, so you get a lot of CFOs or the financial services team, they're doing the negotiating in their mind," said Wright. "They don't have the expertise, that level of experience. They may have spreadsheets or run some numbers to get a foundational quote, but where payers leverage them is they don't have a true sense of how the process works."

That's not to say that hospitals should regard payers as the "enemy." Costs are on the rise, and to avoid the crisis of a bursting healthcare bubble, more health systems and payers are increasingly realizing that working together may be their best hope of staying on the leading edge of analytics and cost savings. And a payer-provider union may be the only way forward for many in a market where UnitedHealthcare, Kaiser Permanente, and other large, integrated healthcare entities are aggressively expanding, threatening legacy health system and health plan incumbents.

Rather, hospitals' role at the negotiating table should be informed advocates for themselves. Many community hospitals are filling an important gap, and being reimbursed correctly and in a fair manner is sometimes the only way to prevent charges from going up to keep the hospital running.

Wright recommends taking that case into negotiations. Ultimately, it's not about who "wins," but about providing a service, and getting all the right pieces in place to make that happen.

"Hospitals have to be honest with the payer: 'This is beyond what the system can handle,'" said Wright. "You need an open relationship and dialogue with the payer, and put those issues in front of them."

In the real case of the hospital not named by Wright, executives had an open dialogue with payers and the results were impressive: total payer yield increased 18%, and total commercial payer yield increased more than 52%.

Those numbers were achieved largely through the educational component, as teams could now notice patterns; for example, if they noticed a clean claim that wasn't paid by the payer within a certain amount of time. The hospital closed loopholes by first learning where the loopholes were.

"When you submit a claim, start the clock and follow up," Wright said. "It really opened their eyes on things they need to follow up on to manage the contract performance. … It goes down to overpayments, underpayments, the chargemaster and how they administer what they charge. Hospitals should be full-spectrum -- everybody plays a part. It's registration, patient access, all those things that come together in the resolution of that claim."

Wright hopes more community hospitals continue to adopt a more proactive approach to handling their payer contracts.

"A lot of these hospitals are in need of assistance," she said. "There's always opportunity for improvement, always opportunity to bring more money through the door."

Twitter: @JELagasse

Email the writer: jeff.lagasse@himssmedia.com