In today’s complex, rapidly changing healthcare environment, hospitals are facing enormous financial pressures and tight operating margins. For hospitals to stay in business, they must use every available tool to reduce costs, manage their relationships with health insurers and minimize claim denials by third-party payers. But hospital managers often overlook a key way to improve payer reimbursements: strengthen managed care contracts. To start, here are five ways hospitals can better manage their provider-payer contracts to boost the bottom line:
Don’t leave ratified contracts in the file drawer. Denials management begins with the provider-payer contract. And even if a contract is already signed, don’t leave it in a file drawer—pull out the contract periodically and review the payer reimbursement rates against member utilization. Then put analytics to work to determine the strength of the contract and assess what is working and what is problematic. Don’t be afraid to renegotiate problem terms, amend the contract to achieve a better balance or terminate an unworkable agreement.
When negotiating, include a requirement for the payer to reverse unreasonable claim denials. Patients don’t always arrive in the Emergency Department alert, oriented or with their insurance information readily available. Similarly, even when a hospital exercises due diligence in researching patient insurance coverage, online databases for government and commercial health plans sometimes contain eligibility errors. And with the migration to electronic medical records and billing systems, the deployment of new software may come with glitches that interfere with timely claim submission. Therefore, the contract should include an affirmative requirement for the payer to reverse claim denials when the provider can show that a delayed admission notification or claim submission was beyond the provider’s control, and the provider made reasonable efforts to resolve the situation. Payers may insist on a reduced payment, even for short delays in notification or claim submission. But a 50 percent reduction in reimbursement due to a 24-hour notification delay, which does not otherwise adversely affect the payer or care provided to the patient, amounts to a disproportionate forfeiture. Typically, such liquidated damages clauses do not stand up to court review.
Include a provision for retrospective clinical review. While the mantra of managed care is “the right care at the right place at the right time,” utilization review of that care does not have to be, nor is it realistically, concurrent in all cases. Managed care review nurses are usually available to review clinical information 9 a.m. to 5 p.m., Monday through Friday. Frequently, payers deny claims for patients admitted and discharged on a weekend when submission of clinical information does not occur promptly on the following Monday. By this time, the care review is already retrospective. Therefore, a contract provision to allow for retrospective clinical review for all cases, especially those in which patient care takes place over a weekend, may benefit the hospital and is fully justified. The downside for the managed care entity is the inability to manage the care in real time, but that can’t be avoided on a weekend.
Insist on at least two levels of appeal. State law may govern appeal rights, but at a minimum, the contract should include two levels of appeal. Many denial letters make clear that only a cursory review (if that) was afforded at the first level, with no meaningful review of the facts of the claim or applicable law. Clearly, the denial of a first-level appeal should not be the last avenue of redress for an improperly denied insurance claim. Having a second bite at the apple with sufficient time to file the second appeal—a minimum of 30 days from the date of receipt of the first-level denial—allows the provider to present the case to a fresh set of eyes. Furthermore, even when the hospital has exhausted its appeal rights under the contract, there may be other avenues to address claims with the state insurance regulator or pursuant to a dispute-resolution provision in the contract.
Ensure the dispute-resolution clause allows for prompt claim resolution while containing costs. If an appeal letter doesn’t do the trick, the provider may have to escalate claim denials according to the dispute-resolution provision in the contract. The dispute-resolution clause should allow for prompt claim resolution while containing costs. Standard dispute-resolution terms can vary as to forum and time frame, as well as who decides the case. The insurer frequently insists on an arbitration provision to ensure privacy and avoid any negative publicity surrounding a lawsuit. Arbitrations also can benefit the provider because they proceed much more expeditiously than cases in the overburdened court system.
Dispute resolution typically starts with a party filing a notice of dispute, followed by an intervening period of about 90 days to a year during which both sides can work toward claim resolution. Unless the parties reach an agreement to toll the statute of limitations, an arbitration must be filed by the specified deadline or the claims may be time barred. Hospitals should always insist on a minimum of one year to file an arbitration following a notice of dispute—90 days can go by too quickly when parties are trying to work out differences.
Arbitration provisions often specify which rules will govern the process and the number of arbitrators to hear a claim. The dispute-resolution provision may specify the American Arbitration Association Commercial Rules or the more recently created Payer Provider Rules, which pertain to healthcare claims and have an expedited process. Under the Commercial Rules, the insurer may insist on three arbitrators, the cost of which can be prohibitive for the hospital. With arbitrators charging anywhere from several hundred dollars an hour to several thousand dollars per day, not to mention fees for expert medical witnesses, the cost of prosecuting an arbitration can be daunting. Insurers are banking on the cost factor’s deterring providers from exercising their dispute-resolution rights. While cost containment is important, hospitals should not select an arbitrator solely based on cost—careful research into the arbitrator’s background can pay dividends, as well.
The above tactics are just the tip of the iceberg; there are myriad strategies hospitals can employ to negotiate managed care contracts that are fair and cost-effective. The attorneys at Anderson Quinn have a wealth of experience appealing denied insurance claims, as well as litigating and arbitrating against managed care entities. Contact the firm for help with claim denials or for review of a managed care contract.
Anderson & Quinn, LLC is a renowned law firm based in Rockville, Maryland, providing individuals, businesses, corporations, and healthcare institutions with the legal and litigation support they need.
