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5 Ways to Maximize Profitability in Contract Negotiations

Troy Roth, for HealthLeaders Media, March 16, 2011

Many contracts are complicated by specific “second dollar” stop losses, exclusions and high-dollar case rates. The modeling process brings transparency to contract terms and rates being proposed by payers and influences better decision making based on facts. Some facilities have contract modeling databases in their contract management solutions that automate the manual processing, improve accuracy and afford users to better align contract forecast to annual budgets. Requesting decision support information joined to current CDM for manual calculations is no longer needed as this functionality should exist within existing tools.

2. Invest in Training Employees – Information gleaned from contract modeling software is only as good as the claims that are available within the system. This is why employees are a hospital’s greatest asset when it comes to contract negotiations. It is employees who must select the proper set of claims and corresponding data and then interpret that data – a process that can be difficult for contract auditors who haven’t been specifically trained. Providers should empower employees to ask the “why” questions: why are we losing money in service lines; why are we not getting reimbursed correctly; and why are payers denying claims? Then, give them the tools and the authority to collect underpayments and fight for net revenue the organization is contractually owed. It’s crucial to educate and train employees on a hospital’s contract management solution to demonstrate effective utilization of the system. Organizations can also create individual policies and procedures to enable a repeatable process for recovering all they are owed and promoting better financial forecasting.

3. Examine Your Source – If you have problems with a certain payor, it’s likely that you have that same problem with other payers on similar service types, and it’s important to acknowledge that the problem might be on your end. Improper billing, coding, and charging patterns and incorrectly loaded contract terms are often the culprits. Services that are often affected include cardiac care, high cost drugs and implants. It’s crucial to look for the root causes of your issues, and you should be prepared to implement true cultural changes to resolve the challenges.

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1 comments on "5 Ways to Maximize Profitability in Contract Negotiations"


Stefani (3/16/2011 at 12:01 PM)
Another factor not mentioned is the contract language. House of economic negotiations can all go down the drain it the contract language regarding pre-certification, utilization review, and medical record access puts the hospital in a defensive position requiring investment of excessive resources to meet contract lanaguage requirements. In my experience, hospital contract negotiators fail to consider the hours expended by hospital staff members to meet payer demands. Contract addendums spelling out these processes must be negotiated along with financial considerations.