After releasing new HCC coding guidelines, CMS has published the latest Medicare Advantage Rate announcements, sparking speculation around the impact on providers. These potential impacts include shifts in Medicare Advantage enrollment, questions around the effects of changing economic conditions, and increases in payments to Medicare Advantage plans. All of this is unfolding at a time when government spending is under increased criticism – Medicare Advantage plans are known to cost the
We’ve assembled the latest news for healthcare revenue cycle leaders to help you stay on top of industry challenges and adapt your revenue cycle
Physician practices face mounting financial pressures from rising operational costs, increasing claim denials, and complex reimbursement models. Strategic payor contracting is key to addressing these challenges as a foundation of physician practice revenue cycle management.
Effective payor contract management requires a shift in perspective by revenue cycle leadership – seeing it as more than an administrative task, and instead, a strategic imperative that can enhance financial stability and resolve revenue challenges.
The first step in successful healthcare payor contracting is recognizing the diverse array of payor types [1]. Each commercial payor, UnitedHealthcare, Aetna, and Blue Cross Blue Shield, etc. differs significantly in their network restrictions, patient cost-sharing structures, and reimbursement methodologies. Medicare sets the benchmark for many reimbursement rates through its administrative pricing systems. Medicaid programs vary considerably by state, while workers compensation and Veterans Administration programs operate under their own unique rules and fee schedules. These public programs often influence commercial payor rates, making their structures important to understand even for practices with predominantly private insurance patients.
This complex dynamic creates a need for carefully planned payor contracting, but complexity is increasing in other ways. A growing segment of the market consists of self-funded employer plans governed by the Employee Retirement Income Security Act (ERISA) regulations. These plans frequently contract with Third-Party Administrators (TPAs) to handle claims processing. While these arrangements can offer physicians more negotiation flexibility than traditional insurance products, they require specific understanding of ERISA’s regulatory framework and the employer’s individual goals for their health plan.
Emerging models like Accountable Care Organizations (ACOs) and Clinically Integrated Networks (CINs) represent an emerging future of value-based care contracting. These provider-led entities contract with multiple payors under arrangements that increasingly tie reimbursement to quality metrics and cost efficiency rather than pure service volume. Understanding these evolving models is becoming essential for practices looking to remain competitive in shifting reimbursement landscapes.
Navigating payor contracts requires careful attention to several key provisions that directly impact practice revenue and operations. Practices should pay particular attention to how often rates are updated and whether contracts include provisions for inflationary adjustments.
Claim submission and payment terms dictate the practice’s cash flow cycle, making them critical to financial planning. These sections typically outline timely filing limits (usually 90-180 days from service date), definitions of what constitutes a “clean claim,” required payment timeframes (often 30-45 days from receipt), and any interest penalties for late payments. With increasing emphasis on electronic transactions, contracts may also specify requirements for electronic funds transfer (EFT) and claim submission protocols.
Medical necessity and authorization provisions establish the rules governing coverage determinations and prior approval requirements. These sections detail the process for obtaining pre-authorizations, the payer’s right to retroactively deny claims, and the practice’s appeal rights for disputed determinations. Particularly important are any clauses regarding “clinically unwarranted” services, which some payers use to deny payment even for medically necessary care if they determine it wasn’t warranted for that specific patient.
The transition to value-based care has transformed healthcare payor contracting, introducing new complexities and requiring practices to develop additional capabilities.
Pay-for-performance models, now common in many contracts, typically withhold a percentage of payments (5-20%) contingent on meeting specified quality targets [2]. These arrangements may measure performance using Healthcare Effectiveness Data and Information Set (HEDIS) measures, patient satisfaction scores, or other quality indicators, and increasingly incorporate two-sided risks where practices may face financial penalties for missing targets.
Bundled payment arrangements present different challenges, providing a single payment for all services related to an episode of care. These models require careful coordination among providers and often include retrospective reconciliation processes that can significantly impact final payments. Practices need robust systems to track all services included in bundles and ensure proper attribution.
Implementing strong healthcare payor contract management processes requires moving beyond reactive approaches to develop a proactive, strategic system. A centralized contract repository serves as the foundation. Regular performance reviews transform contracts from static documents into useful resources for financial management. These reviews should analyze each contract’s actual performance compared to expectations. Identifying underperforming contracts early allows time for corrective action before renewal negotiations.
Strategic contract renewals should involve advance preparation, ideally beginning 6-12 months before contract expiration. This process should include benchmarking rates against local market data, identifying specific pain points in current terms, and preparing utilization data to support requests for rate increases. Practices that wait until the last minute can lose significant negotiating leverage.
Investing in staff education ensures all team members understand contract terms and their operational implications. This includes regular training sessions, creation of quick-reference guides for common scenarios, and establishing clear escalation paths for questions. Cross-training staff on multiple payor requirements builds organizational resilience against staff turnover.
As healthcare payor contracting grows increasingly complex, physician practices must elevate their approach from basic administration to strategic financial management. For many practices, developing this level of expertise internally presents significant challenges. Partnering with vendors experienced in payor contracting can connect you with critical knowledge and resources. To discuss how 3Gen Consulting can serve your needs as a partner in payor contracting, contact us today.
References
[1] AMA, “Payor Contracting 101,” 2021. Available: https://www.ama-assn.org/system/files/payor-contracting-toolkit.pdf.
[2] L. Strazewski, “How value-based care is making payor contracts even more complex,” American Medical Association, 21 March 2022. Available: https://www.ama-assn.org/practice-management/private-practices/how-value-based-care-making-payor-contracts-even-more-complex.
FQHC revenue cycle management can be complex and resource-intensive. Outsourcing revenue cycle management in FQHCs (federally qualified health centers) holds potential benefits like streamlining operations, improving cash flow, and reducing administrative burdens. For revenue cycle leaders considering outsourcing, evaluating key areas such as billing and collections, timely filing, denial management, and revenue cycle KPIs is an effective way to assess the potential benefits. This process should start with evaluating best practices in these areas—reviewing them can help FQHC leadership make informed decisions about outsourcing.
Outsourcing FQHC revenue cycle management can offer numerous advantages, including access to specialized expertise, improved efficiency, and enhanced financial performance [1]. By partnering with a skilled vendor, FQHCs can focus on their core mission of delivering quality care while ensuring their revenue cycle operates smoothly.
Effective FQHC billing and collections processes are essential to maintaining cash flow and robust financial stability. Leadership should consider best practices including:
Other areas of focus include staff education, covering payer contract requirements, coverage verification, appeals processes, timely filing rules, fee schedules, and special billing requirements.
Billing is critical as the initial billing drives over 80% of cash flow in an average FQHC facility, making it critical to the overall health of the organization. Outsourcing with the right partner can significantly improve efficiency and accuracy by mitigating common errors that might have been an ongoing problem for the revenue cycle department. For example, if a department has a history of rejected claims or high rates of denials, an outsourcing partner can help mitigate these issues. Rejections delay revenue and complicate timely filing, while denials require significant resources to appeal. Coders, billers and other revenue cycle staff must work these claims promptly and address the root causes to prevent future rejections.
Secondary billing is another core function of FQHC billing services. While Medicare automatically crosses over secondary claims to the correct payer, most commercial payers require manually generated claims with proof of primary payment and adjustment amounts. Ensuring follow-up on claim status and developing a formal collections policy can further enhance cash flow and reduce outstanding accounts receivable (A/R).
Timely filing is critical to positive FQHC revenue cycle management outcomes. Missing filing deadlines can result in significant revenue loss. Best practices include monitoring claims filing to ensure compliance with payer requirements, tracking write-offs due to missed deadlines, and implementing clear policies and procedures for billing staff.
Medicare allows one year for initial claims submission, but many commercial payers require claims within 90 days. Additionally, Medicare allows 120 days to respond to claim denials, while commercial payers may have varying deadlines. FQHC revenue cycle leaders should put a process in place to monitor claims that are on hold and ensure deadlines are met. Outsourcing partners can help mitigate issues with the percentage of claims not filed on time and the dollar amount of write-offs while providing senior leadership with insights into how these improvements are impacting financial results.
Effective FQHC denial management is essential for maximizing revenue and minimizing loss. Best practice includes tracking and reporting denials (by payer, type, reason, and department), designating a denial management team to appeal denials and implementing prevention processes such as prior authorization and registration quality assurance.
Common denial reasons for FQHCs include:
By addressing these issues with the help of an outsourced vendor, FQHCs can reduce denials and improve cash flow. A robust denial management program should include standardized appeal processes, interdisciplinary team collaboration, and ongoing staff education used in conjunction with third-party revenue cycle management options.
Monitoring RCM key performance indicators (KPIs) is essential for effective FQHC revenue cycle management. Best practice includes holding weekly meetings to review KPIs, using dashboards to present KPI data, and setting goals to track progress toward objectives such as reducing days in A/R. KPIs such as clean claim rates, and denial rates should be prioritized when evaluating the value of outsourcing in a revenue cycle strategy. By leveraging dashboards, FQHCs can identify trends, address issues proactively, and drive continuous improvement. Ongoing issues with certain metrics can be an indication that leadership should consider outsourcing in their revenue cycle strategy.
Outsourcing FQHC revenue cycle management can be transformative for organizations struggling with billing inefficiencies, denial management, and timely filing. By reviewing best practices, FQHC revenue cycle leaders can identify areas where outsourcing can add value.
To learn more about how outsourcing can benefit your organization, contact 3Gen Consulting today. Let us help you unlock the full potential of your FQHC revenue cycle management.
Switching out legacy IT systems can be a time of change and disruption for healthcare revenue cycle leaders – but it can also be a time of opportunity. While many leaders will look for ways to identify high-performing replacement solutions or even consolidate technologies, dropping a legacy system is also an excellent time to consider
