The value of addenda in payer contracts
The provider manual stipulates the policies and procedures used to collect information about the full scope of the patient’s episode of care, all the way from precertification to discharge. However, the same market power that the contract manager exercised in negotiating fair payment rates can be leveraged to modify the insurer’s [utilization review] UR requirements. Hospitals can request contract addenda to make changes to these policies, and in the current economy, more hospitals are insisting on terms that are balanced and fair. Note, however, that it is not feasible to amend the provider manual, which is typically a generic document applicable to hospital markets across the country.
Contract negotiations can make or break a hospital, because in addition to setting the price list for services provided to the insurer’s members, the negotiations also affect the resources that the provider expends to comply with the contract terms. These negotiations are critical in a competitive market, with significant implications for the organization, the patients, and the communities served. Facilities have been known to shut their doors because they passively negotiated and accepted whatever rates a payer offered. It’s also been well publicized when negotiations result in a standoff and the hospital or payer walks away, leaving communities stranded. Hospital contract managers generally regard payers as being the hospital’s bank—payers hold the money and control the processes.
When the contract manager goes into discussions with the payer, their priorities include setting a rate schedule that works for the hospital, crafting contract terms that simplify claims processing, and protecting against arbitrary denials. It is best to approach the process with a win-win attitude—there are plenty of opportunities to fashion contract provisions that benefit both the plan and the provider. Both parties should recognize that the contract must include terms that define the parties’ mutual obligations for greater administrative efficiencies, such as the timeliness of payment and improvements in claims processing, and both are expected to walk out of the room having successfully negotiated a contract that allows each to profit. Hospital representatives also look for ways to improve contract language to cover payment for high-cost drugs, new technologies, sophisticated procedures, and medical devices. Note that, although the chief financial officer or contract manager gets knee-deep in financial discussions, it is rare that they discuss the peripheral issues of UR requirements.
No matter who negotiates these commercial insurer contracts for the hospital, they need to have sufficient data to support their position regarding addendum language and to maximize the UR team’s results. The negotiator should use objective information on volumes, payer responsiveness, and denial history to support requests for language changes. For example, if there is little history of clinical denials for a particular payer, then language can be added to reduce the frequency of information requests.
Editor’s note: This article is an excerpt from “The Hospital Guide to Contemporary Utilization Review, Third Edition” by Stefani Daniels, RN, MSNA, CMAC, and Ronald L. Hirsch, MD, FACP, CHCQM, CHRI.