Contributors to Less Than Accurate Contract Rates

INSURANCE PRODUCT AND PATIENT REGISTRATION RECONCILIATION:

WHY LOADING CONTRACT RATES IS LESS THAN ACCURATE.

Over the past thirty years, the accurate price of a healthcare visit continues to evade our healthcare industry.?Despite the legal threat and roll out of the Transparency Order & No Surprise Act, our industry continues to face tremendous challenges in producing what price will be charged for a particular visit for a particular health insurance plan. Legislation, advanced technologies, analytics, and a myriad of consultants’ hours and efforts have not provided much clarity on the actual price of healthcare.?There are several difficult questions to consider that will generate many contested opinions on this topic.?However, the result of our high cost of collection for payers and providers continues to remain too high and meaningful improvement in price transparency remains elusive. Without a doubt, the high cost of collection is the true test of transparency, and our industry has not made meaningful progress to date.?

Why does this pricing conundrum continue? Why have our revenue cycle management technology systems not solved these issues? What forces create this disparity in price versus payment? Why does contract loading within revenue cycle management systems fail to lower the cost of collection?

First, this pricing conundrum has historically been considered a proprietary asset for each healthcare plan or product. Payers and health networks compete for business based upon the pricing contracts and terms that each plan or each plan’s product has with their provider network. Networks and health insurance companies attempt to keep these pricing structures confidential and out of the hands of their competitors.

Second, healthcare providers have historically contracted in multiple ways. Providers may be contracted with a payer directly through their practice as well as through an IPA, CIN or ACO. Identification of which patient and which payer identification card is attributed to which contracting entity is virtually impossible to determine from the cross-contract incentives provided by the industry. All providers understand the concept of market share when negotiating a new managed care contract.?

Payer plan rate sheets are the algorithms for ingesting a provider’s charge and reducing or repricing that charge to the actual contracted price under that insurance contract or product.?Unfortunately, a managed care contract between an insurance company or health network allows for averages and incidence-rated pricing among various insurance products under one contract that eliminate the ability to accurately price an episode of care.?For example, a doctor executes a commercial insurance contract with ABC health plan.?This health plan contract has terms that cover several insurance products like PPO, POS, Premier plan, etc.?The contract has language that allows different price under each product.?Therefore, despite having one contract, the provider actually has six or seven contracts due to the different pricing terms within each product.?Through our aCALIBRATE? solution, we have seen one contract accommodate over twenty plus plans.

Patient registration continues to be a critical, but often neglected element of a healthcare practice.?Patient registration continues to be the primary source of data capture and the beginning of the road along the revenue cycle process.?Turnover rates for patient registration in medical groups continues to be very high creating a high level of inconsistency in workflow processes, data accuracy, and insurance knowledge.?With the significant development and deployment of technology around our revenue cycle management functions, there has been little to no reconciliation of the most critical elements of the cost of collections:?contract integrity with patient registration.?If a provider does not have a means to load and update all insurance products covered by each contract, there is no means to accurately determine the price of an episode of care for revenue cycle management or transparency purposes.

Many revenue cycle systems offer a contract load function whereby a client can load an estimated amount to be paid by the payer for a particular episode of care.?The challenge is these figures are estimates and not actual amounts.?As mentioned previously, one contract may have numerous products and amendments during the year that nullify the value of loading such contract values.?Looking at past values may be indicative but not accurate of current prices based upon current managed care contracts or the insurance products covering the patient’s healthcare.?Patient registration, based upon the insurance card, shows multiple instances and naming conventions for the same insurance plan but also has multiple insurance products with the same billing address.?How can anyone align these individual patient registrations with various insurance cards to the managed care contract load prices within the revenue cycle management system??With frequent deeming letters as well as average pricing, the inability to reconcile the patient registration insurance product with the managed care contract eliminates the value of loading your contract allowables.?Having an estimate of payment can create two operational issues that should be considered:?(a) inaccurate credit balances or overpayments, (b) inaccurate underpayments.?Both overpayment and underpayments create additional operating expense of at least six to ten dollars per account in operating expense to resolve.?Loading an inaccurate contract can create compliance issues and additional unnecessary work and its associated costs.

While one might boast of a high net collection ratio or lower accounts receivable days outstanding due to loading contract allowables based upon historical data and ignore the significant challenge of patient registration reconciliation, collection efforts and accounting accuracy will underperform and be inaccurate.?The cost of collection will remain high to achieve these two traditional methods of revenue cycle performance and pricing transparency will continue to be an objective.

Healthcare contract integrity and revenue cycle management have been isolated for too long.?In fact, until one receives contract integrity on price of an episode of care, no claim appeal efforts should occur.?Claim appeals are for underpayments … not for contract issues.?Our current experience and information have shown that contract issues account for five times the dollar amount of underpayments from the larger health insurance plans, rendering claim appeals of a contractual issue ineffective.?If a provider has contract integrity and knows the price of the episode of care, claim appeal efforts are focused upon workflow efforts (i.e. pre-registration issues, post-operative notes, etc.) and the allocation of the price, (i.e. patient responsibility).

Without the price known by the provider at the time of service, the patient, provider and even the payer are faced with higher operating costs in attempting to derive the price of the service.?Imagine your doctor handing you an Explanation of Benefits at the time of service detailing the price and your portion of the bill.?This would eliminate the expensive and highly dissatisfying, “we will bill you after insurance pays” scenario.?This pay after insurance results in a very high cost of collection through patient statements, text systems, email systems, call center operations, HIPAA violations and overall dissatisfied patients, providers and employees.?Having a real time contract management system and contract integrity platform, a provider can provide an Explanation of Benefits to their patient before the claim is even billed to eliminate this historical process that has driven our industry’s cost of collection higher.

Electronic Remittance Advice (“ERA”) is a common means of accepting and posting healthcare payments via an industry standard 835 file format.?While the file format is consistent, the fields within the file are not consistent, especially with facility and DRG payments.?In addition to the challenge of reconciling patient insurance registration to contract load within the revenue cycle management system to the managed care contract, the ERA payment file generally does not pass the appropriate information to align with the insurance product contained within the payer’s claim repricing systems.?Patient insurance registration within the revenue cycle management system does not contain this required insurance identification number to align with the 835-remittance file to reconcile the patient’s registration and the plans’ pricing.?Again, this inability to acquire this disparate date from the payer’s system via the 835-payment file into the revenue cycle management system eliminates the value of loading contracts for price transparency, revenue cycle yield, contract integrity and accounting accuracy.?In short, revenue cycle management system and payer claim repricing systems are different in function and structure.

SUMMARY

Loading managed care contract estimates within revenue cycle management systems attempts to determine the price of an episode of care for revenue cycle management valuation as well as price transparency.?Unfortunately, loading managed care contracts are estimates of the cost of such care due to the incidence rate pricing, use of average prices, and the inability to reconcile patient insurance registration with the contract allowables.

Managed care contracts cover many insurance products, and each product may have a different pricing structure under one managed care contract.?Patient registrations from insurance card have duplications within the revenue cycle management system and are not actively aligned to each contract and associated insurance contract.?Therefore, it is almost impossible to determine which patient insurance registration is aligned with which managed care contract and associated rate structure.?Additionally, inaccurate contract loads will generate inaccurate overpayments and underpayments which incur additional operating costs to resolve.?These inaccurate contract loads increase our overall cost of collection.?

Our payer repricing systems and revenue cycle management systems are technologically and structurally different in their purpose and orientation.?Efforts to translate these differences have been expensive and not effective to date as our overall cost of collection remains too high and is expected to continue to increase over the near term.