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 Payers

Manage contracts through best practices

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   By Murali Karamchedu, March 2010

Integrated provider management is more than simply managing contractual language. A best-practices approach reaches beyond adherence to preferred legal arrangements.

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Traditionally, best practices have meant the examination and enforcement of preferred legal arrangements. Health plans, however, have begun to identify the need for a new strategic framework of best practices in provider contracting that reaches beyond adherence to preferred legal arrangements. This is due to the realization that sole focus on the language of a contract and contract obligations limits a plan's ability to analyze a contract for effectiveness.

Analytics should include the ability to manage a contract dynamically, as the business of network contracting changes. In the absence of a considered framework that accounts for such change, codified best practices rapidly become stale, hindering a plan's ability to respond to the changing marketplace.

A framework for effective best practices in provider contracting acknowledges such change and coordinates several dependent business activities. This integrated and coordinated effort drives effective governance of provider relationships and an establishment of consistent operating practices. As health plans embark on establishing effective governance criteria as the operating framework for best practices, a contract maturity model (CMM) offers them a structured paradigm to sequence and stage potentially competing objectives.

A comprehensive CMM addresses several business objectives: contractual risk management; contract change management; contract quality assurance; provider milestone monitoring; contract benchmarking; contract and payment integrity assurance; provider performance management; and contract authoring and dissemination.

Many health plans currently approach these objectives in an uncoordinated and ad hoc manner, without a systemic integration of information flow. Encountering the following scenario is not uncommon:

  1. In the early stages of negotiation, contractors maintain a record of provider and contract information; they may also use copies of prior contracts as guidance.
  2. Upon successful negotiation, the contractors verbally communicate critical aspects of the negotiation to contract-authoring teams.
  3. Next, the authoring teams bring forward additional details of payment, provider information and credentialing status before finalizing the contract, inclusive of rate exhibits and rate sheets.

A last implementation step involves a contract-implementation team that interprets these contracts to enable configuration in legacy claim payment and/or pricing systems. Finally, compliance personnel audit these systems for accuracy and completeness in contract setup and implementation.

In the example above, each team/department strives to enforce distinct best practices and systems to track and monitor activity levels and information development. As health plans grow and see an increase in the complexity of their provider relations, they soon discover the natural limitations of such practices. The persistent repetitiveness of entering the same information in different contexts, and monitoring the progress distinctly across these departments, increases the scope of information leakage, introduces operational delays, and creates conflicting records and audit challenges. As such, business objectives, such as contract benchmarking or contract quality assurance, are susceptible to the risk that these manual, duplicate transactions create.

A CMM is a structured collection of processes that describes the maturity of a health plan's provider contracting operations. It provides a framework to assess current operations and targets. With a CMM in place, health plans are better able to determine the benefit of preserving pre-existing best practices, define a common language and shared goals, and provide a framework for prioritizing actions and improvements.

The CMM consists of four process levels: organize and centralize; standardize and automate; integrate and empower; and analyze and advance.

After an assessment of current contractual processes, managers in a health plan face the challenge of forging a way forward in light of the discoveries. What typically becomes obvious is a lack of organization and centralization of the contractual documents and provider information. While this seems like a simple problem to solve, health plan managers recognize the complexity of disturbing established information flows or internalized best practices. This realization for contract-process organization and centralization is the place to start.

Health plans can take the first step in this maturity model by assessing the current state of their provider contracts, organizing provider contracts based on existing criteria (such as type of provider, geography and line of business) and centralizing access to provider information and contract information.

At this stage, the objective is to introduce consistent access to the contractual documents/information. Consequently, new system capabilities may be necessary. The goal is to explicitly allow for consistent access so that managers may organize and centralize contracts and provider information.

Once the organize-and-centralization phase has been satisfied, managers have sufficient information to establish standards and facilitate automation. The objectives of this stage are to standardize and automate within each critical contractual business function, without worrying about extending these across to other provider business functions, such as credentialing.

Through the use of rules-driven work flows, contractual processes and tasks can be automated. This enables more agile and effective coordination of contractual processes and the sharing of information between contractual business functions. At this stage, contract language is standardized into consistent templates and provider information is managed with standards for network representation and/or contract coverage information.

Rules-driven automation is also used to facilitate compliance with business process, such as credentialing status on contract finalization, rather than relying on desktop procedure adherence. A critical objective of this stage is to define the contract and provider in structured data terms.

This is usually a drastic change in the way a plan manages its contracts. Given the contingent nature of negotiations, such information tends to be hidden within the text of the contract or "memo notes." Once identified, such information is often amenable to standardization, and even when it is not, it offers a clear identification of variances. Such standardization prepares the organization for effective analytics and provider contracting becomes an intelligent process.

The standardization of provider, contract and payment information as structured data creates a common ground for identifying how information can be integrated across the health plan's provider life cycle. This integration can now be efficiently deployed by the health plan, because through the standardization phase, the contractual processes and information dependencies were identified.

A CMM is a structured collection of processes that describes the maturity of a health plan's provider contracting operations. It provides a framework to assess current operations and targets.

At this point, a systems-oriented integration of data, process and business rules delivers cost savings and organizational empowerment. By providing personnel a complete data set, managed through a streamlined process into a robust system, the plan empowers associates with action-oriented intelligence for improved decision support.

Analytics facilitate decision-making based on value and risk. As health plans implement information standardization, capturing critical information as meaningful and useful data, there is usually some realization that a centralized data repository is required. This system supports value assignment and risk assessment that is based on data analytics, as opposed to subjective and/or inconsistent measurement tools and criteria.

Any expectations regarding the successful implementation of best-practice management is dependent on recognition of the far-reaching consequences of provider contract management. These expectations call for a coordinated and integrated approach to provider management, where the contract is simply the final artifact, supported by a foundation of highly developed practices and systems — an approach called integrated provider management.

Murali Karamchedu is the vice president for healthcare architecture at Portico Systems.


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