Payors are struggling to manage contracts that vary from facility to facility, from procedure to procedure, with significant deviation within each contract. The situation is likely to become exacerbated by bundled payments, escalating regulation, and evolving reforms.
Taking contracts and associated claims from negotiation to adjudication has never been more complex.
Payors struggle to manage contracts that vary from facility to facility, from procedure to procedure, with significant deviation within each contract. These highly complex agreements are usually negotiated by hospital administrators and lawyers, and are frequently expressed in phrases that must then be interpreted by the operations staff and put into precise terms that can be executed by claims systems or processed manually by claims staff.
This is a daunting task as these terms are typically highly nuanced. For example, a policy may state: “If an ER visit turns into an inpatient stay, the health plan will be billed only for the inpatient stay.” The burden then falls upon the operations staff to determine if this applies to an inpatient stay that follows an ER visit within 24 hours. What about 36 hours? What if the stay becomes an observation visit? Who decides?
Payment Systems Pushed to the Breaking Point
Today’s contracting processes and claims systems are being pushed beyond their stated purpose and designs. Many health plans use legacy systems that were implemented during simpler eras, when payors dealt with one claim at a time. Even some updated systems lack the flexibility to handle changes to standard plan policies, enforce new complex policies, and make appropriate connections between separate claims that should be grouped.
For example, a plan may have a policy stating: “When a member has a test, such as a preadmission lab test, followed by an elective admission, both the test and admission will be treated as a single episode.” But in the negotiation process, the payment policy may be disregarded in order to get a concession in another area or win in a particular facility. Today’s payment systems lack the capabilities to adjudicate these types of variances to standard policies.
Policy enforcement can be another hurdle, especially when it comes to grouping separate claims—which may also stymie the payment system. A contract that was negotiated on a DRG basis may state that a re-admission within 30 days will be considered part of that DRG. In this scenario, a plan could have a member who had a knee surgery and then was re-admitted for an infection due to that surgery, but if the contract did not specify that such an infection would be considered part of the DRG then the plan would pay additionally for the infection admission.
A very sophisticated system is needed to tie those two separate claims together and determine that they should be treated as part of the original admission and DRG. This is beyond the scope of the vast majority of today’s systems.
Simply put, current payment systems were not designed to accommodate the ever-increasing complexities that are an outgrowth of the current negotiation process. The result is a payment environment that does not meet the needs of payors or providers. And this situation is likely to become exacerbated as we move towards a future of bundled payments, escalating regulation and ever-evolving reforms.
A New Class of Systems to Meet Complex Needs
Addressing payors’ existing and future contracting and claims challenges requires a new breed of payment system. As a starting point, plans need to view contracting as an extension of payment, not just as a negotiation or workflow vehicle. They also need to consider medical policies, payment policies, contract terms, and waste and abuse prevention as part of the payment continuum versus separate pieces.
Claims can’t be paid in a vacuum. The audit department is a great place to see if claims performance is really being managed as a continuum. If adjustments are continually being made within the audit department, it is probably because there are inconsistencies along the way.
In addition, plans must look for systems with the capabilities to look across claims and providers. Systems that cannot accommodate complicated policies must give way so that payors can facilitate appropriate master payment for contracts as they exist today and how they will be in the future.
Payors will have an opportunity to view payment performance more holistically as they start looking at payment policies and contracts for ICD-10 conversions. This can also become an important step towards developing the capability to execute bundled payments and episodes of care with contract terms and payment policy rules that look across facilities and providers.
The good news is that next-generation payment management systems are available. They can address the payment performance continuum and work alongside the existing claim processing system to automate clinical payment policy, business rules and contract terms, delivering the critical intelligence that is needed for virtually every payment decision. Payors that implement these new, end-to-end payment management solutions will be able to realize significant savings today through increased efficiencies and reduced penalties and rework. Most importantly, they will be positioned strategically to address the intricacies of emerging bundled payment and episode of care initiatives.
Jim Evans is Vice President of McKesson Health Solutions.
Margaret Dick Tocknell is a reporter/editor with HealthLeaders Media.
