Contracting: Understand contract terms

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Wednesday, June 10, 2020

Q. What do I need to know when it comes to my managed care contracts?  

A. Unfortunately, there’s no Rosetta Stone for payer contracting. You need to understand operational and strategic terms that can have a meaningful implication on your organization and financial performance. We’ve outlined five critical contract terms that need to be understood for each of your payer contracts.

Term & termination

You want to maintain your options, as this allows you to get out of unfavorable situations or pursue renegotiations with more conviction. It's critical to understand when the termination date is so that you can initiate renegotiation conversations. Ideally you allow for appropriate coordination (i.e. 3 to 6 months).  

Provider manuals

The provider manual is an extension of your contract. The payer can make changes to this and you are committed to those changes. It's crucial to understand if they are required to give you notice of updates and what your rights are if any “material changes” occur.

Medical necessity 

You will only be reimbursed if the services you deliver are considered medically necessary. Ensure you understand the parameters outlined in the agreement. If you were to submit a bill to a payer that was known to be medically unnecessary, that could be evaluated as potential fraud. 

Claims payment provisions

The details behind what constitutes a clean claim are defined by the contract. From all the components that need to be accurately populated on the claim (e.g. patient information, dates of service, etc.), to additional dependencies that must be met (e.g. substantiating medical necessity, if applicable), to the time frames that must be acknowledged. 

Lesser of provisions 

This language compares the rates that are in your fee schedule to either (i) your billed charges or (ii) usual and customary charges. You will be paid whichever rate is the lesser of the two rates being compared. It’s important you understand the details so that you can avoid “leaving money on the table.”

Armando Cardoso is CEO of Healthcents. Reach him at info@healthcents.com.