Managing Managed Care Contract Renewals

Many hospitals enter their contracts into software packages that claim to feature automated tools for contract lifecycle management (CLM). Many of the tools are patented with a claim that asserts that the software invention “includes a solution and process for managing the life cycle of contracts created and/or administered by or impacting the user.”

So why is the process of renewing contracts still such a challenge for many of them?

• Are they not utilizing the tools properly?
• Are they not adding the contracts into the system properly?
• Do the tools have some necessary features missing?
• Is there some other reason?

As a consultant with more than 4500 clients worldwide who have sought my assistance for contract analysis, negotiation and renegotiation since the 1980s, and with the leading internationally-published Handbook on Managed Care Contracting, I notice the the toughest challenges haven’t changed much over the past 36 years.

They include:

• I ask where the contract is; nobody can lay hands on the entire contract.
• I ask where the rest of the pages are; nobody knows.
• I ask which employers access services through the contract; nobody can hand me an up-to-date list.
• I ask what the paid-to-billed ratio is; nobody knows.
• I ask what the paid-to-Medicare allowable is; nobody knows
• I ask how many claims were wrongfully denied and then overturned; nobody knows.
• I ask what was the dollar value of the wrongfully denied claims that were overturned; nobody knows.
• I ask why they feel the need to keep the contract; I get shoulder shrugs.
• I ask exactly how much revenue they lost on the contract in the past three years; nobody knows.
• I ask when the contract was last renewed and reviewed; nobody has a clue. 
• I ask where the notes of the last contract analysis, the redline that was used, and the impact (operational and financial) as a result of the renegotiation since then; nobody can tell me.
• I ask about trending problems that should be addressed; nobody has a list.
• I ask if an attorney was involved in the review at any time, I get shoulder shrugs.
• I ask if there’s a workflow that has been officially approved and established for contract analysis and renewal and renegotiation; I hear crickets.
• I ask how long until the deadline to renew and make changes; the answer is either I don’t know or less than one month. In many cases the deadline has passed and the contract is already on its way to the “evergreen forest”.
• I ask what the contract approval process is; they say the CFO or CEO signs it.
• I ask if there’s a payer report card; the answer is no – with the explanation that they have been meaning to get around to building one.
• I ask how they’ve been managing contracts; I am told “emails, shared drives and Excel spreadsheets.
• I ask how charges and prices for the use of new technology, drugs, consumable supplies or implants and procedures are handled to align chargemaster, procurement and contract updates; I am told that managed care is always the last to know – usually only after the claim is denied or pended.
• I ask if they fear that using the tools they already have for contract management would save them money; most have no idea or they fear that they’ve lost money using the tools. Many admit that they haven’t been too focused on getting it set up, that it came with EPIC or Cerner but there wasn’t a directive to use it that way, or that not enough people have access so not all contracts are stored in it or loaded in.

The role of a contract analyst and negotiator

Recently, I was asked to draft a contract analyst and negotiator job description to employ a contract analyst and negotiator part time in a small, rural ASC. The “job” of managing managed care contracts is no different in a rural or urban setting, or in the small ASC or a gigantic hospital or health system. What differs from place to place is the talent available to do the job and the amount of assistance that the point person in that role can rely upon to help them to succeed.

Many people approach the task of contract analysis, negotiation and renewal as a sporadic vs ongoing task. Worse, they don’t manage the entire portfolio. Instead, they focus solely on the the top 5-7 contracts that generate what they believe to be the most revenue and therefore, deserve the most attention.  That’s fine, until one of the “sleeper” contracts acquires or is acquired by another payer and the revenue dynamics suddenly change.

This leads to understaffing, under-appreciation of the task at hand, and insufficient support to be successful in the role. As a result, turnover happens and the position is unstaffed for long gaps throughout the year. Work piles up, revenue is lost, busy work is increased as people without adequate training try to pitch in but are largely ineffective and claims get lost in the pile, under-worked, and follow through is all but impossible. Pended claims never get unpended, dollar amounts continue to escalate until there’s more than a million dollars on the line and somebody says something. Denied claims are insufficiently appealed. Offsets, clawbacks and short paid claims are not pursued. 

In fact, the feds issued a report that stated that of the claims that are wrongfully denied to hospitals, only 1% are actually appealed. That’s indicative of a much larger problem than many hospital administrators and revenue cycle managers realize – or don’t they care about collecting the cash they already earned?

Managed care contract analysis and negotiation training is tough to come by

Training on managed care contracting, albeit necessary isn’t well attended. I offer classes, and granted, St George and Denver may not be proximate to the whole country, but registration is low. 

I used to teach for HFMA seminars. I did so from 1994 until 2009. Every year, 4-8 sessions in difference cities. At first, in the 1990s the classes cost $695 and attracted 45-50 registrants per two-day class. When registration tanked in 2009 for the third year in a row, and classes attracted fewer than 15 registrants at $895-$995, I decided I couldn’t continue to contract with HFMA to set aside those dates and incur the expenses to take time from my business to continue teaching those courses. 

Since then, the availability of training has dwindled down to what I offer when I have the time to offer them.  A few other consulting firms offer courses and spend considerable money on Google Adwords to promote them, but from the SEO tools I have to check their success, I can see that they get 4-6 clicks per month on their chosen keywords. 

I do more training onsite than through association-sponsored classes because the associations, while charging more than $1000 to register, often don’t allow enough time for the hands-on, active-learning Master Class I offer (2-4 days)  and refuse or don’t budget to pay the instructor’s fees or travel expenses. For what a hospital can spend flying three people to a course out of town, I can deliver training for a week for as many people as they would like to have in attendance, and they get private and confidential discussions about the problems they are having and customized training that is focused on their unique training needs and using their existing contracts as teaching examples instead of a generic teaching model contract.

“Do the best you can until you know better. Then when you know better, do better.” 

– Maya Angelou

You can improve your contracted reimbursement with training and the right tools. You can save time and money on the process that has been correctly deployed, properly implemented and if all necessary users are allowed to access the contracts management system and workflow are trained to use it correctly. 

Success with managed care contracts management will continue to be critical going forward in order to increase revenues through better business practices, business rules and standardized language, as well as reducing avoidable losses through elimination of contract-related errors and oversights. 

What clients typically spend

The $35,000 or less that hospitals and medical practices spend with me every few years to review their top 5-7 contracts is less than what they would pay to have a full time analyst on staff. I get that perhaps where they are located, the talent is available locally to hire at any price.  As a wise rural hospital CFO once said to me. “I hire for ability and send them to you to train for technique.”  Okay. That works. 

For that $35,000 every few years, I do the the analysis send them a report of my recommendations for clarifications and changes,  and then remain available to support whoever will negotiate locally with the payer on new or replacement agreements.  That means, they invest about 17-18 hours total per contract. But they only get the language analysis and negotiation support (“he said/she said” or “phone the coach”). They don’t get all the day-to-day management, oversight and other work that should done and maintained all year long on all 400 or so contracts they have in the portfolio.

The problem is that while it works in a pinch, this approach is not a substitute for a full time, qualified, fully-trained analyst and negotiator employed by the provider.

According to the desk research I’ve done lately, the wages paid to a contract analyst and negotiator working for the provider as a W2 employee is calculated on a base wage of $78k to about $90K per year, or  between $37.50 and $43 per hour or about $346 per day, plus employee costs and benefits.

Make 2019 the year you decide to do better. More than a third of the year is gone. What are you waiting for?

A note about my managed care Master Classes scheduling.