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Managed Care Contracting: Outdated Contracts Could be Costing Your Organization

A recent Blue & Co. audit of a small hospital’s existing Managed Care contracts yielded an unfortunate surprise: a nearly twenty-year-old contract with a major insurance company with rates that had not been updated since the original effective date. Not so surprisingly, these rates were woefully inadequate – reflecting a commercial rate that was only about sixty percent of their Medicaid rate.

It’s quite easy to let your Managed Care contracts slip “out of sight, out of mind” once they are negotiated and executed. Most are “evergreen” documents that will not expire until one party or the other chooses to terminate the agreement. Seemingly “maintenance-free”, they go into filing cabinets and are often more or less forgotten.

With staff at hospitals across the country stretched thin trying to meet the administrative and operational challenges of each day, it is increasingly difficult to find the resources to devote to conducting what certainly can be a time-consuming contract audit to ensure that the contracts which are in currently place are, in fact, performing at the level the hospital needs them to.

Old Managed Care Contracts Negatively Impact Revenue Potential  

Obsolete reimbursement rates are just the most obvious problem that manifests itself in neglected contract documents. Among the countless other revenue reducers that may be secretly hiding in your forgotten old agreements:

  • Missed opportunities to negotiate rate increases. What if the above-referenced contract had just been increased by a mere 2% per year? How much more revenue would the hospital have realized by now?
  • Forgotten inflators. Many insurance companies require the facility to provide notice if they want to execute an inflator – even if it’s a contractual in the agreement. If you don’t ask – you don’t receive.
  • Professional fee schedules that may have been tied to a benchmark fee schedule. This could be CMS or Medicaid fee schedules of a specific year, resulting in professional reimbursement that rapidly became outdated.

Remember, what was acceptable in a contract twenty, ten, or even five years ago may not be acceptable now. Proprietary fee schedules created by insurers that have been changed by the payor, vague reimbursement language and methodologies, archaic terminology, and outdated administrative policies and procedures may be bleeding revenues away from your bottom line in an ever-increasing “dollar drain.” It’s likely that some of these old agreements need to be renegotiated to bring them up to current standards.

Contact Us

Blue & Co. is proud to offer consulting services for hospitals trying to meet their managed care contracting needs. A contract audit can take some time. But it will likely be time well spent. If you have any questions, please contact a member of our managed care contracting team or your local Blue & Co. Advisor.

Michael R. Montgomery, HIA, Manager
502-992-3481 | mmontgomery@blueandco.com

Michael Koeninger, Manager
614-259-0586 | mkoeninger@blueandco.com

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