• April 2008 FEATURE ARTICLES •
Financial Information Systems:
Case History
Their Fair Share
An academic medical group recovers $1.7 million with an automated contract-management solution.
By Herb Stanley
When it comes to physician reimbursement,
payers do not always abide by contract terms. Verifying payment
accuracy for medical services, however, is a complicated
venture, requiring medical groups to analyze the complex payment
policies and countless variables that affect reimbursement.
At University Physicians, the academic
faculty practice plan for the University of Missouri School of
Medicine, we saw this challenge as an opportunity. After several
new executives joined our administration in 2003, we began
exploring new and innovative ways to improve our financial
performance. Tapping one team member's experience in the managed
care field, we began evaluating payment verification as a viable
option for strengthening the bottom line. Even though our group
did its best to uncover payment errors and enforce compliance
with contract terms, we felt we could recover more revenue with
the help of automation. Our clinical departments also wanted
assurance that we were collecting exactly what our contracts
stipulated.
Finding a better way
The manual processes employed for identifying
payment variances were extremely labor-intensive and
time-consuming. In fact, staff had to sort through boxes of
reports sorted by CPT code, and we still did not have the
information needed to effectively monitor each contract. When
exploring possible approaches to improving payer contract
management, we first considered building our own solution, but
limited IT resources made this route impractical. Adding more
staff was another option, but with more than 120,000 payer
transactions per month, it was cost-prohibitive. The next
logical step was to explore what technology applications were on
the market that could help us to address this issue.
We now have the ability to analyze the overall performance of our payer contracts. By looking at payment trends, we can easily discern which contracts to renew and which to renegotiate.
We kicked off the selection process by
forming a committee of representatives from administration,
patient accounts, managed care fee analysis and information
systems. This approach to the selection process helped us to
secure the buy-in needed at all levels of the organization and
also ensured the ultimate solution was one that would meet the
needs of the entire group. From the outset, the committee's main
criteria were ease of use and maintenance, speed of deployment,
compatibility with our practice management (PM) system, proven
success with identifying claim underpayments and the capability
to produce data needed during contract negotiations.
After conducting our due diligence and
reviewing responses to the RFP, we narrowed the search to two
vendors. We invited both to conduct an evaluation of our
underpayment issues. Both confirmed what we had suspected all
along — we were definitely leaving money on the table. While it
would have been easy to go with the application that had a lower
price tag, we knew that our investment would extend well beyond
the initial install. As a result, we took steps to calculate the
total cost of ownership for both solutions and shared them with
our purchasing department. This required us to carefully
evaluate how many internal IT and revenue staffing resources
would be required to utilize the application as well as how much
that would translate to in terms of labor expenses.
While one vendor required us to load our own
contracts into the system, the other had a team of contract
analysts that managed this process. We felt the assistance of
contract analysts would save staff members a significant amount
of time and provide needed support on an ongoing basis. As a
whole, this approach would help eliminate any errors that may
affect claims valuation and would also ensure that claims
pricing remains accurate as payment policies and rules change.
We decided to take advantage of these services and selected the
Phynance contract management solution from Austin, Texas-based
Medical Present Value (MPV).
Implementation
After the agreement was signed, we gathered
copies of all of the contracts we wanted loaded into the system.
We chose which contracts to enter based on those that had
previously resulted in the most underpayments or generated the
highest volume of claims. Over time, we decided to monitor 56 of
our payer contracts this way, representing about 85 percent of
our total claims volume.
Once the analysts began defining contract
terms, we worked with the vendor to establish an implementation
timeline and to build an interface between our PM system and the
new contract management solution. This interface, which
facilitates the extraction of claims data from our PM system on
a nightly basis, required minimal use of our internal IT
resources. After the interface was complete, the transition to
the Web-based system went smoothly. The vendor provided training
both online and onsite, which helped to familiarize everyone
with the system. Our audit and reimbursement team attended the
training sessions along with representatives from the
contracting department, who would use the application to
validate data used during future payer negotiations.
We went live with our new system in March
2004 and immediately began using the application to expand the
efforts of our existing two-person audit and reimbursement team.
The contract management solution extracts claims data from our
PM system each day and transmits it to the vendor's data center
via a secure Internet connection. That data is then compared to
the expected allowed amounts designated in each individual payer
contract. Claims and allowables are verified at the line-item
level using our contract data along with continually updated
public and private sector payer rules, fee schedules and
formulas.
Even though our group did its best to uncover payment errors and enforce compliance with contract terms, we felt we could recover more revenue with the help of automation.
The vendor's contract analysts regularly
update the contract terms and payment policies stored in the
database, minimizing the burden on our internal staff and
helping us better track payer performance. For example, if we
renegotiate a contract and the payer does not load the fee
schedule properly, we can catch and correct the issue more
quickly than we could in the past. When underpayments are
identified, the application provides contract-based explanations
for each variance, resulting in streamlined communications with
payers. Our staff uses this information to guide payers through
the correct interpretation of existing contract language. An
employee may ask the payer to confirm what the multisurgery
reduction schedule is according to our contract, instead of
immediately discussing the reimbursement amount due. Once this
question has been answered and both parties agree on the
underlying contract language, the conversation can move on to
the specific claim in question.
Getting Paid
After three years, our practice has recovered
$1.7 million, which is equivalent to about 0.5 percent to 1
percent of our total revenue. Our recovery rate for underpaid
claims is about 80 percent — a notable improvement over manual
processes. We feel our success is directly tied to the hard data
that we now provide as a part of our appeals process. In
addition to using the application for identifying contractual
underpayments, we take advantage of the data stored in the new
application for contract analysis, rate modeling and fee
setting. We also utilize the application's reporting tools to
determine when charges fall below the contract maximum so that
we can adjust accordingly. The combination of these tools has
resulted in improved revenue cycle management across the
organization.
We now have the ability to analyze the
overall performance of our payer contracts. By looking at
payment trends, we can easily discern which contracts to renew
and which to renegotiate. With this data in hand, we finally
have the peace of mind that we are getting paid what we are owed
— a key benefit for administrators and clinicians alike.
Herb Stanley is associate director of
financial services at University Physicians in Columbia, Mo.
Contact him at StanleyH@health.missouri.edu.