Managing medical billing accounts receivable is a critical aspect of any healthcare practice. Effective management ensures that the practice maintains a steady cash flow, which is essential for its smooth operation. However, managing these accounts can be challenging due to the complexities involved in healthcare billing. This is where 3Gen Consulting comes
At more than 90 million people, Medicaid sits near the top of the list of the United States’ largest insurers. It covers not just low-income families, but also pregnant women, disabled people, children with complex health situations, and older adults. It delivers services through both fee-for-service and capitated managed care systems. Most states use the capitation model in the delivery of some level of their Medicaid benefits – as of 2021, around 72% of Medicaid members were enrolled in comprehensive managed care.
The details of this delivery are covered in payer contract negotiations and a contract between the Medicaid agency and the managed care organization (MCO) [1]. While these contracts last at least three to five years, changes should be tracked carefully to ensure revenue cycle health. Here are some of the most important things to be aware of in managed care contracting and payer provider contract management today [2].
Of the $804 billion in federal spending on Medicaid services, around 52% was made to comprehensive MCOs. Proportions vary by state, but three out of four MCO states have been found to funnel at least 40% of their total Medicaid funding to MCO payments. State variation is a result of factors including:
It’s likely that the share of funds going to MCOs could increase, especially as states expand Medicaid to cover higher-cost and higher need beneficiaries, as well as long-term services and adults who fall under ACA coverage.
Many MCOs are working to address social determinants of health (SDoH) in an effort to reduce health disparities and improve health equity. To start 2023, CMS launched guidance on “in lieu of” services (ILOS) under the Medicaid program to address unmet health-related social needs and reduce health disparities. Health leaders responsible for payor contracting should keep up with this evolving trend.
Federal law requires that the payments made to Medicaid MCOs must be actually sound – meaning that the capitation rates “are projected to provide for all reasonable, appropriate, and attainable costs that are required under the terms of the contract and for the operation of the managed care plan for the time period and the population covered under the terms of the contract.”
The COVID-19 pandemic opened the door to increased enrollment along with drops in utilization. Because of this, CMS gave states the option to modify their managed care contracting agreements. Many states implemented risk corridors that allowed for recoupment of funds. Over three out of every four of the states that implemented a risk corridor reported recoupments for payments that were made between 2020 and 2022 or that they expected future recoupments. Since the unwinding of Medicaid, these plans and states face the chance of more fiscal uncertainty, increasing the likelihood they’ll engage in further risk mitigation behaviors around payor contracting.
While MCOs largely feature comprehensive services for their beneficiaries, they also sometimes carve out specific services from MCO contracts to limited benefit plans or fee-for-service systems. These often include services like:
But these carve outs vary. Most states that engage in managed care contracting with an MCO report that pharmacy benefits are carved into managed care, while eight report they are carved out of MCO contracts (reported as of July 2023).
In total, states contract with 287 Medicaid MCOs. These are a mix of government, private for-profit and private non-profit plans. Of these firms, five made up 50% of all enrollment to Medicaid MCOs. They are:
These are all publicly traded organizations that fall under the Fortune 500 and four of the companies are ranked as Fortune 100. Even through the unwinding, the three firms, UnitedHealth, Molina, and Centene have reported growth in Medicaid revenue.
In early 2024, CMS finalized rules with the goal of strengthening access standards along with state enforcement and monitoring. Prior to this release, states had significant flexibility in their ability to define network adequacy standards, as well as in their determination of how MCO compliance and access was monitored and enforced. This new rule contained a few provisions worth highlighting.
States across the country use quality metrics in monitoring their programs. This includes capitation withholds, value-based state-directed payments to quality measures, and performance bonuses and penalties. More than three out of every four MCO states have reported that they use at least one incentive to promote improved quality of care. As things stand, performance information at the plan-level hasn’t often been publicly available, a blow to transparency.
The coming years in healthcare payer contract negotiations promise to be full of changes in managed care contracting. To get support from an experienced vendor that can help you navigate the growing complexities of healthcare payer contract negotiation, start here.
References
[1] H. Maniates, “Why did they do it that way? Understanding managed care,” NAMD, 22 January 2024. Available: https://medicaiddirectors.org/resource/understanding-managed-care/.
[2] E. Hinton and J. Raphael, “10 Things to Know About Medicaid Managed Care,” KFF, 1 May 2024. Available: https://www.kff.org/medicaid/issue-brief/10-things-to-know-about-medicaid-managed-care/.
Understanding Hierarchical Condition Category (HCC) coding should be a priority for any revenue cycle leader. This is because risk adjustment coding is critical to estimating costs
Healthcare providers across America burned almost $20 billion dollars in 2022 on medical billing accounts receivable – and it all went to chasing down denials and delays with payers [1]. The numbers look even more disheartening with a focus on private plans.
What’s worse is over half of that spend was wasted on claims that should have been paid when the claim was submitted – payers are burning provider resources as a stall tactic. A survey of 516 acute care hospitals found that almost 15% of all claims submitted to private payers are denied from the beginning.
This is money, time, and effort that can be better spent. Healthcare providers face the most complex revenue cycle environment in history, with advancements like AI being used against them – which is why now is the time providers should consider taking a new kind of action.
So, I was glad to see the news in July that The Health Equality Network stepped up to send a letter to CMS about the problem of medical billing denials, also including a range of congress members. Here are some of my favorite points [2]:
The main takeaway is that providers should focus now on tracking denials in medical billing and understanding the impact of how much money and staff time is being wasted. As more providers push back on this disturbing trend, everyone should be able to make a case for how they, their staff, and their patients are being impacted.
For many providers, doing this in an accessible and accurate way will mean outsourcing medical billing by working with a third-party vendor who has perspective on whether their investment is normal or whether they’re being taken advantage of. I am proud that 3Gen can offer this kind of support during times like these.
References
[1] D. Muoio, “Providers ‘wasted’ $10.6B in 2022 overturning claims denials, survey finds,” Fierce Healthcare, 22 March 2024. Available: https://www.fiercehealthcare.com/providers/providers-wasted-106b-2022-overturning-claims-denials-survey-finds.
[2] Healthcare Equality Network, “HEN Sends Letter to HHS Secretary Becerra and CMS Administrator Brooks-LaSure On Coverage Denials,” 3 July 2024. Available: https://www.healthcareequalitynetwork.com/hen-writes-letter-to-hhs-cms.
Hemant Apte, Chief Executive Officer in
Hemant Apte, Founder & Chief Executive Officer of 3Gen Consulting, is a seasoned executive leader with deep domain expertise in US healthcare management practices. He founded 3Gen Consulting in 2006 and has been instrumental in offering thought leadership to his clients and providing services and solutions that are unique in the market.
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