MCO Contract Housekeeping: A Challenge for Most Critical Access and Rural Hospital Executives

In the heartland of America, and in rural towns and mountain communities, these friendly, unassuming critical access hospitals (CAHs), are most often situated in charming hamlets and desert dustbowl intersections alike. The population is small. Everyone knows one another. When strangers stop at the only traffic light in town, people wave.

The managed care organizations that operate a health plan in the state view these hospitals as more or less a nuisance and a cost center. That’s because every contract they add to their network costs them money to set up, list in the directory, pull all the levers in the software to assign payment amounts to claims, verify provider and facility credentials, licenses, accreditation or certification and have someone who lives in more urban areas and rarely ventures out to these small towns assigned to manage the relationship with the providers.

Nonetheless, rural hospitals are essential to the communities they serve. With numerous closures announced each month and a third of critical access and small regional hospitals across the nation facing closure, there is a dire need to sign reasonable contracts with payers. That's actually easier than it seems on the surface.

The men and women who are charged with the leadership and management of these hospitals are miracle workers. The community rarely knows the challenges these brave servant leaders face each week, trying to keep the doors open, insurance premiums paid, debt serviced, and to retain medical staff and nurses and other support staff so they don't run off to the big cities for higher pay, or how they struggle to provide on-site staff training that is almost 100% on-the-job and very hit or miss.

National seminar sponsors, trade and professional association meeting planners, and even state associations rarely schedule training conferences and events near them. Community colleges and vo-tech centers don't offer training on managed care contract analysis and negotiation or hospital revenue cycle strategies, tactics and operations. Not in person. And not online, either. There's no close airport that can get them to national training events without long drives and exorbitant airfare prices. Rarely do airlines offer discounts and airfare sales to these forsaken regional and municipal airports with very few flights each week and only one or two gates.

Access to capital, just to have a little cushion week to week would be nice, but President Trump's tax reform sacrificed them as canon fodder from the elimination of their ability to issue tax exempt bonds in 2018.

These hospitals see new technologies, treatments, specialty lines of service and grimace. Innovation takes money. The money tree lost its leaves long ago. There isn't any money for innovation, new technologies, telehealth, remote monitoring so that very sick and frail people don't have to travel hours to reach the hospital for a check up or diagnostic service.

Most insurers are often insensitive to rural healthcare providers

Insurers decide upon innovations and business models that involve value-based purchasing, cost containment, and seek to return profits and dividends to shareholders. They redesign their contracts, business models, pricing formulas, fee schedules and claims payment rules and then implement them on the big city providers who have staff to adapt and comply. Self-funded employers, small commercial insurers and government payer subcontracted health plans then sign up subscribers in these geographically isolated communities who expect that when they need the hospital and "doctoring", they head on over to the hospital any time of the day or night and expect someone to welcome them, care for them, and help them get better or save their life.

Rural patient communities are made up of people of modest means

Many of these people are just humble souls who work for a living. Sure there are some wealthier than others, but they all bleed red. And they all need healthcare. They trade off many things like convenience and access to a broad array of healthcare suppliers. But most live in rural areas because they enjoy a simpler, unfettered life. I know I do. I've lived in LA, Fort Lauderdale, Las Vegas, and Denver and have lived temporarily in places where I was engaged in longer term projects abroad. Now, I live in a small town. And for the most part, I really enjoy the pace, the fact I can get across town in 10 minutes. I can get to Las Vegas in under two hours but there's one hospital in my town, and some specialists don't have a presence nearby. I have to drive more than an hour in each direction to see a doctor in those specialties.

When droughts hit or blights attack crops, or hailstorms, or tornadoes, they risk loss of their livelihoods, their incomes, and their savings. A tractor accident on a farm or a fall from a horse can give rise to as bad a trauma as a 30-car pileup on the interstate.

Car accidents and rock slides or mud slides on old, desolate poorly maintained highways and bridges or mountain passes often exacerbate trauma because the first responders are often staffed 100% by volunteers who must assemble at the station and wait for team members to show up so they can head on over to the scene of the accident to help. (I know, I was one.)

These trauma cases can wipe out any family's savings and more in two minutes' time. Add a trauma case to a failing farm or a blighted downtown retail shop or restaurant that loses market share to a new Walmart or fast food restaurant and suddenly people are forced to choose which bills to pay despite wanting to honor their obligations. As such, they stop paying their hospital bill, no matter how proud or how much integrity and honorable intention they may have. And at that moment in time, what's the hospital executive or the doctor to do? They still need to keep the lights on! The care has been rendered. It had associated costs in salary, overheads, drugs, supplies, insurance. Now what?

Managed care contract housekeeping chores often get pushed back indefinitely. Here's why:

So among all these other tasks, managed care contracts must be reviewed, negotiated and maintained. I call this "contract housekeeping". It takes time, data, know-how, and a system.

Contracts at some of these hospitals haven't been renewed since 2010, or earlier. The rates haven't increased since then. Imagine going 9 years without any increases in contracted reimbursements while attempting to reward staff for longevity, advancement, learning, or to purchase new equipment, keep older equipment in service, pay for insurance, lawyers, auditors, and others and outsource services when you have no time or staff to help out.

Thus, if we know that the true nature of the relationship partner to be exploitative, then contracts housekeeping becomes that much more critical.

Meanwhile, when the rural hospitals ask for an increase, they are dismissed with "that's not in the budget" by the people assigned to assist them and maintain payer relationships. Okay, so why wasn't it in the budget? Did they forget? Or did they have no intention to raise reimbursement a smidge each year? And if it was an intentional oversight, is that any way to run a company? Because that smacks of intentional unfair advantage. In a relationship, we don't take unfair advantage of the other party. That's considered exploitative.

Since we know that time does not stand still and costs always go up, what business intentionally decides that costs won't go up and plans for a reality of no cost increases? Only one that intends to exploit the tiny small town hospital. That's what kind.

Thus, if we know that the true nature of the relationship partner to be exploitative, then housekeeping becomes that much more critical.

Provider relations representatives are rarely afforded the necessary professional development before they negotiate with rural hospitals

I find that often hospital representatives in the discussion erroneously assume that the plan has more leverage than the hospital (not always true) and more knowledge than the hospital. That's why many hospital folks feel intimidated when it is time to negotiate or re-negotiate. When one feels intimidated, one tends to avoid the situation that causes the intimidation. That means putting off the dreaded contract reviews and negotiation discussions as long as possible. The cure: Repositioning one's mindset about leverage and replacing intimidation with in facts and preparation.

Ignorance is frustrating. We expect someone from a big insurance company to either appear at our door or email us or call us on the phone prepared to engage in discussion. Negotiation is the process of achieving agreement through discussion.

The discussion requires preparation:

1. Data (past revenues, payer report cards, market insights, book of business, etc.)
2. Specific objectives (business rules and actions or results you wish to avoid)
3. Regulatory compliance (not asking for things without a lawful purpose or unenforceable terms and conditions to be added to the contract)
4. Revenue goals (to keep pace with increasing costs and service intensity), and
5. Relationship goals (key performance metrics, collaboration, innovation, partnering, etc.)

Therefore, one expects each side to come to the discussion prepared, with certain things like regulations that are enacted in law to be perfunctorily stated or established in the agreement. But they aren't. I am referring to things like the minimum 101% rule and payment for the plan's share of Medicare bad debt.

Here's the most basic thing about rural hospital negotiations that most provider relations representatives either don't know or play "dumb":

Each year, Medicare sends out a rate letter to the hospital stating the rate it will be paid by Traditional Medicare. Critical access hospitals are paid for most inpatient and outpatient services to Medicare patients at 101% of reasonable costs. To be eligible for the 1% "bump", They must maintain no more than 25 inpatient beds that may also be used for swing bed services. They may also operate a distinct part rehabilitation and/or psychiatric unit, each with up to 10 beds. and have an annual average length of stay of 96 hours or less per patient. They must be more than 35-miles from any hospital or other CAH or located more than a 15-mile drive from any hospital or other CAH in an area with mountainous terrain or only secondary roads. 

Just because the minimum rate is 101% plus payment for the Medicare bad debt doesn't mean that 101% is "the price". It means that's the minimum a plan must pay. If Medicare doesn't cover actual healthcare costs, why are you negotiating less than what it reasonably costs you to care for a Medicare patient? What number is the "right number" so that you don't illegally cost shift to others? What is the Medicare Advantage plan's fair share? Did they not budget to pay their fair share? Did they not budget for the established minimum as it moves year-by-year?

To dismiss the hospital request for a legitimate, non-greedy increase by saying it isn't in the budget, why isn't it? That's a fair question!

When we drive a car, we check the gas to make sure we have enough to get where we are going. We check the brakes in advance of the need to use them at the stop sign. They didn't budget for regulatory compliance?

Medical records copy fees

Medical records copy fees are part of the state law in many states. Yet the contract states they pay zero for medical records copy fees. And yet the contract also states the contract is interpreted under a state's laws. Why doesn't the contract state that the plan will pay for medical records at the state set fee amount?

Coordination of benefits

Most states have established statues and codes about coordination of benefits. Yet the contracts don't mirror the language of the statutes and we have to argue to swap out the verbatim rules of coordination of benefits. There are different regulations on COB for Medicare, ERISA, auto MVA, Work Comp, and other types of plans. Yet the plan tries to get away with contract boilerplate documents that allow them to pay nothing on coordination of benefits.

Timely payments

The laws state the time frames in which clean claims must be paid. The states all have set amounts for implied interest. Why must we fight to get the implied interest paid when the claim is paid late for no good reason?

Coding and billing

The CMS developed the National Correct Coding Initiative (NCCI) to promote national correct coding methodologies and to control improper coding leading to inappropriate payment in Part B claims. The CMS developed its coding policies based on coding conventions defined in the American Medical Association's CPT Manual, national and local policies and edits, coding guidelines developed by national societies, analysis of standard medical and surgical practices, and a review of current coding practices. The CMS annually updates the National Correct Coding Initiative Coding Policy Manual for Medicare Services (Coding Policy Manual). The Coding Policy Manual should be utilized by carriers and FIs as a general reference tool that explains the rationale for NCCI edits. So why doesn't the contract state this for the record. Instead, the plan takes liberties to recode claims and rebundle services and then uses codes for services that are less accurate than the codes originally submitted to report the services rendered. Why? The person at the plan who is doing this re-coding wasn't at the hospital when services were rendered. What gives them the assumed "privilege" to change what was submitted? The contract does.... unless we establish a business rule that reserves the privilege by negotiation to not mess with the coding and billing as submitted. Why must we waste the time to do that? Because of the potential for exploitation. How do we do this? Through contract housekeeping and having the business rules established and stand by them.

Retroactive chargebacks, clawbacks, and offsets

Retroactive chargebacks, clawbacks, and offsets of amounts due plague revenue management folks in healthcare. There is no entity other than Traditional Medicare and Medicaid (which does not include their subcontracted administrative contractors) that can do this by law. Everything else is by negotiation. So, why does the draft contract offer include the privilege to unilaterally take retroactive chargebacks, clawbacks, and offsets of amounts due? Is this intentional? If the hospital negotiator doesn't know better, they allow it to remain in the contract. That's exploitation of the relationship. Is it not? That's why we need a business rule to set the expectation that retroactive chargebacks, clawbacks, and offsets of amounts due are not permitted except by convenience and mutual consent of the two parties to the agreement.

The Provider Manuals

The Provider Manuals are often changed without notice or awareness or amendment by mutual consent of the parties. Instead, the contract has language that gives the MCO tacit agreement in advance to whatever the plan wants, whenever it wants it. Is that not exploitation? So they change the nature of the base agreement by changing the referenced provider manual and avoid notice and amendments on the base agreement, because the base agreement didn't change; the manual did.

So, why is the manual exempt from notice and amendment provisions of the contract. Oh, that wasn't in the budget either? The plan would have to give proper notice by certified mail with a return receipt. So, why wasn't that in the budget? Didn't they plan for change and the costs associated with these changes?

So, that means we need a business rule to prevent tacit approval of unilateral changes to any part of the Entire Agreement. And we need a business rule that states that the manual, fee schedules, and attachments, exhibits, etc., are all part of the Entire Agreement and thus, subject to the Notice and Amendment provisions.

When Plans Understand Your Value Why Don't They Negotiate Better Deals?

Imagine you chat up the provider relations coordinator about the value they can get from you. They see what makes your products and services the best option for them. You remove all doubts. Won't they agree to negotiate better terms and conditions you need to stay afloat?

But does that happen when you talk with most provider contracting reps? Nope. Why is that? If they came to exploit you, nothing will change. Knowing what to say, so provider contracting reps want to agree, is the main requirement for making sales. But still, many hospital executives fail to put significant effort into figuring out what to say, what to present. How to negotiate. Either they don't know how or they don't have time. It isn't a priority.

Many are so mired in the much of big picture views and other executive and business survival preoccupations of the moment and then wonder or merely accept the outcomes they get, instead of the ones they should push for.

And then, there's the issue that the person who may come to negotiate with them isn't authorized to agree on changes. That happens more often than not. So inevitably, the executive from the hospital regards the whole exercise as one of futility. It's hard enough getting past the intimidation and getting through to the right person at the health plan, but then after you get through to them, they ghost you, or...worse. They arrive unprepared or only as a gesture to get you to quit calling; not to fix stuff or improve anything.

Would it help to change negotiators and deal at a higher level?

Business rules maintenance is a distinct task of contract housekeeping

Having these business rules established and communicated to the negotiator (internal or outsourced) is part of the contract housekeeping and maintenance as the business rules are part of the internal hospital contract policies, strategies and tactics updated to reflect current industry trends, risks, norms, regulations, and standards of conduct and practice. Established business rules guide the negotiator and contract analyst on what to look for and how to decide if the offer is acceptable to the provider.

Over my years in managed care contract negotiations, I've developed a list of close to 40 business rules as a sample that I provide to clients. This sample gives them ideas to adopt for their own set of business rules. The value in seeing my rules on paper is that they don't have to start from scratch, the rules have been developed over 30+ years of experience in what goes wrong in contracts, and it saves my clients precious time they don't have to spare.

I've segmented my list of rules to align with relevant issues in contracting with Medicare Advantage, Managed Medicaid, Commercial HMOs, ASOs, TPAs, PPOs, Auto insurance, Work Comp, Subrogated claims, Coordination of benefits, medical records copy fees, timely payment rules, ERISA and more.

I also ranked them in three groups: Need to have (deal breakers), Nice to have (options), and Desireable, but not worth a fight to get it into the contract (possible concessions).

Established business rules guide the negotiator and contract analyst on what to look for and how to decide if the offer is acceptable to the provider.

For my clients that don't have the time, the staff or feel prepared to do what's necessary in terms of contract housekeeping, I offer a service where I come to the hospital like a "home organization" consultant who comes to your house and puts things into an order, and resets the home to a neutral state, without the clutter and mess. A place for everything and everything in place. But I don't come in like a fairy godmother and do everything for them. Instead, the client assigns a staffer to do the work and I guide and mentor the staffer.

Here's how it works:

Over approximately three months' time, I act as project manager for the housekeeping and work with their internal designee will do:

A. Your staffer gathers up all the contracts that can be accessed in house (the ones you can find easily). They then hunt for the rest or order replacement copies from the plans.

B. I perform a quick "spot review" for completeness (not a detailed contract analysis).

C. I create a work plan for the staffer to obtain missing documents, addendums, attachments, amendments, exhibits, provider manuals, and notices and get data entered into an AirTable database. I prefer using Airtable because it takes a radically different approach by giving me the building blocks to create a managed care contracts database the way it should be done at a very low cost. By creating my own contracts database and adapting it to your specific needs, you'll be able to keep track of contracts, employers, rules, documents, rates, business rules, payer report cards, more efficiently and with better control. The client can then use their new Airtable to manage projects, organize payer relationships, catalog your inventory, and make reusable checklists. All this with a fast, flexible, spreadsheet-like interface that staffers probably already know how to use.

D. I create the AirTable Contracts Database file structure for you so your designee can enter the required information, documents and other items from the contracts into the database. This can even be handled by a student intern or new administrative hire, if you desire. I train them to do what's necessary. I check their progress.

E. From this point forward, my client has a way to keep the managed care and contracted reimbursement portfolio tidy and organized. A place for everything and everything in its place.

The scope of work is generally that I coach the hospital's designee over 3 months of scheduled, remote guidance, advice and instruction without travel costs. During the 3-month project, I distill assignments and tasks into manageable chunks of work until the project is complete. Each week, the staffer works consistently at least 1 hour per day day to the project and participates in a weekly project "scrum" meeting to update me on their progress, any assistance they need from me, advice to overcome hurdles or payer stalemates, or any other training or coaching required. 

No more "Where do we stand on...." calls

Each action is documented in a work log, which in turn creates an internal "how-to manual" and costing tool designed to be an essential part of the project.

The work log documentation allows anyone in the system who has been granted access to know the status of each contract, to look at the work record, documents, and information gathered and know what's been done or not done. 

When it is time for re-negotiation planning or negotiating a new similar contract, the database becomes your proprietary planning and decision support tool and an essential resource for the team and executives in charge of contracts and relationships with payers.

What's in the database?

My most basic contracting database usually includes, but is not limited to the following:

• Relationships / contacts
• Important Dates and a tickler calendar
• Contract documents
• Contract checklists for the contract(s) from that payer
• Business Rules for that contract
• Notes from the contract negotiation discussions and contract analysis
• Requests for clarifications
• Change requests
• Post termination responsibilities checklists (anything that survives the termination of the agreement)
• Payer Report Card Metrics
• Due diligence findings and reports
• Publicly-sourced clips and articles from news and other sources (a great hint at what lies ahead, market trends, payer trends, reports to shareholders, public relations, prosecutorial actions against them, etc.)

I create one for each contract.

Typically, this takes about 50 hours of my time over the course of 3 months, plus the time of the staffer (20-40 hours per month, 60-120 hours for the project) and two seat licenses for Airtable collaboration (under $400). After I sign off the project, that seat license I had is transferable to another person in the organization for the remaining time on the license.

This project typically allows for coaching and loading the hospital's 5 top-priority contracts from which the majority of revenues are derived. The actual pace and number of contracts fully-loaded depends on the client's team and how consistently they work on their assigned tasks. But all is out the window and lost if they don't maintain it going forward.

At the conclusion of the three months, most staffers can continue with very minimal (if any) assistance from me to follow the same workflows and tasks, data entry and loading of any remaining contracts until all contracts in you portfolio are entered into the system. (A good goal is one per month). 

The database creation is your "Mise en place"; not the actual analysis

But this is just the organization and preparation to do the contract reviews. The contracts must still be analyzed and strategies and business rules applied. The thing is, you can't analyze anything until you have all your tools and set up - kind of like cooking. One must first do the mise en place (French pronunciation: [mi zɑ? ?plas]) is a French culinary phrase which means "putting in place" or "everything in its place." Then you know you have all the ingredients to make the recipe and complete the task.

From there, either the designated staffer or a trained and experienced analyst and negotiator performs the contract review, analysis and prepares for the discussion and negotiation. The preceding mise en place can be done by an administrative assistant or an intern. They'll learn by doing, talking, and asking questions, but none of this housekeeping preparation and maintenance need be done by a higher paid, more skilled internal analyst and negotiator- who in a rural or Critical Access Hospital is often the CFO, COO or CEO. In some cases, they engage me to do this and report back to the executive in charge. Then they carry out the negotiation so that the payer doesn't view me as the "hired gun".

The contract housekeeping is a mission critical task that many rural hospitals find challenging to make time for, but I hope that this article persuades you just how important it is in reducing the intimidation that drives the procrastination and that a system and a tool such as the AirTable database enables easier preparation to do what needs to be done on a routine, scheduled basis.

How can I help you?

I am available to assist you with your contract housekeeping project or with contract analysis, but I can't do my best work to analyze contracts and make recommendations if I don't have all the tools, data and information necessary to do a good job for you. I also want to caution you that anyone who offers to do contract analysis and negotiation from outside your organization who doesn't first have the mise en place is probably not going to do a thorough job and may miss many risks and operational problems and leave you less than prepared to negotiate your deal.

I don't offer a service to do the contract housekeeping work instead of the designated staffer because a) I don't have the time, and b) it isn't the best use of precious funds at my bill rate. To do the contract housekeeping work requires someone on site. Once the project is underway, as project manager, I rarely need to travel back in the 3 months after the initial time onsite.

Nor do I offer to create the Airtable database for you without having the contracts and other materials in hand because each database is custom designed for your actual needs and workflows. Besides, having the database infrastructure and using it are two separate things. If I sold the database as a "product" it would more than likely never be populated with that which makes it useful. Hospitals and clinics would buy it and it would languish in the cloud, all alone, lonely and ignored and devoid of value. What's the point? That's like having a car and its routine maintenance and insurance overheads and never driving it.

I can also help with other scopes of work, like:

1. developing bundled case rates (most new contracts already (or will soon) require them no matter how much you kick and scream and pitch a fit on the floor like a two year old! When the two year old does that, the mom usually ignores the tantrum, right? The plans will too!). Once you have the bundled case rates developed with target pricing for high volume group health buyers, you can also create a cash pay price that carves out all the cost to bill and collect from insurers for accelerated cash at the time of service.
2. strategic planning and business rules creation and contract targeting (what you want and why; what you don't want and why)
3. IPA, PHO, MSO or ACO formation
4. preparation for marketing to and contracting with self-funded employers and unions
5. troubleshooting denied claims appeals and root cause analyses (is a bad contract provision the reason why so many dollars are denied? are they being denied in error? is something internal the root cause enabling the plan to deny payment?)