Payor Contracting

Contract Management Metrics in Healthcare

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Running a business in or adjacent to the healthcare industry involves working with countless third parties and other stakeholders. Even the most self-contained company is responsible for managing a ton of contracts, which can easily become challenging without metrics like:

  • Payment accuracy, measuring what is paid against the amount that’s supposed to be
  • Current contracts, an accurate accounting of whether they are up to date and correct
  • Calculation accuracy, not to be mistaken for payment accuracy, nor the final metric
  • Error rate, closely related to calculation accuracy, but also involving response time

Below, our team at PayrHealth breaks down each metric and key considerations or best practices for each. First, let’s take a step back and define the general area being measured.

Overview: What is Healthcare Contract Management?

Contract management in healthcare refers to the systematic approach to monitoring your contract performance to ensure accuracy, fidelity, and efficiency across all of them. Healthcare contracts range from provider contracts between your business and its payors and the broader spectrum of managed care consultants that, taken together, constitute the networks that patients rely upon.

In addition to simply navigating all of these contracts you may have at present, the best contract management programs are also future-focused.

They go beyond identifying flaws to correct and instead integrate preventive measures to stop issues before they arise. To that end, PayrHealth offers a suite of healthcare contracting solutions aimed at optimizing all present and future contracts, which we’ll touch on in more detail below. First, let’s look at four metrics for contract management.

Contract Management Metric #1: Payment Accuracy

The first, most immediate, and arguably most important metric involves the payments being made to you by patients and payors, along with payments you’re making to contractors and other third parties. You need to ensure that the amount of money paid is commensurate with services received and corresponds to amounts contractually agreed upon or adjusted.

The biggest irregularities or variances to look out for in healthcare contract management are:

  • Underpayments to or from vendors or payors, relative to your contracts or adjustments
  • Overpayments to or from vendors or payors, including all duplicates or overestimations
  • Denials/rejections of payments by, to, and from third parties like insurers and creditors

Payment accuracy should ideally be monitored at least at monthly intervals, if not more often.

Approaches and Practices for Payment Accuracy Monitoring

Monitoring for payment accuracy can be a relatively straightforward process if your business has a limited amount of payors and contractors. But the more it has, and the more complex your relationships with them become, the more of a challenge accuracy monitoring will be.

One approach to solving this issue involves creating a centralized tracking system, such as a spreadsheet or dashboard, with real-time logging and updates for all contracts, agreements, adjustments, and payments.

The moment a figure is agreed upon, it’s entered. Then, once a balance gets paid, the existing figure is updated and archived. All transactions can be indexed and easily searchable by the date, payor, contract, service(s) provided, and other key factors.

Contract Management Metric #2: Current Contracts

The second most important metric for healthcare contract management is maybe the easiest to monitor. It involves reviewing all contracts and payments to ensure that they are up to date. In many cases, this metric is self-evident, as issues arising from out of date contracts will become apparent as stakeholders begin processes of ending, extending, or renegotiating relationships.

However, one complicating factor for this metric involves how much of a buffer period your organization hopes to provide to its primary decision makers before a contract reaches its termination date. Companies may decide to handle expiring contracts as they happen, or choose to approach the extensions or other renegotiations long before they’re scheduled.

In either case, or for any approach in between, it’s important to account for which of your many contacts are ending, when, and how all stakeholders feel about their present and future status.

Use Case for Current Contracts: Visualization/Optimization

Similar to the visualization method described above for payment accuracy, your company can also implement a dashboard or spreadsheet for current contracts, visible to all stakeholders.

Every existing contract needs to be tabulated, with an organizational system such as color coding that makes their status and timeline immediately apparent. For example, consider:

  • Using green to denote new contracts and those farthest away from termination
  • Using yellow to denote contracts with a termination date in the distant future
  • Using red to denote contracts with a close or impending termination date

Ideally, this method can work with other visibility programs you have established—current contracts may be one tab or page in a larger worksheet, alongside the other three metrics.

Contract Management Metric #3: Calculation Accuracy

The third key metric for healthcare contract management involves the calculation of payments, making sure that the agreed upon numbers are accurate and commensurate to the goods and services being exchanged. This is closely related to, and easy to mistake for, payment accuracy.

However, the key difference is that payment accuracy is a measure of whether the amount that winds up being paid corresponds to what was agreed upon. This is irrespective of whether the agreed upon amount is itself fair and accurate.

Hence the importance of calculation accuracy.

To arrive at sound accuracy, consider two key factors: what the payors have calculated as the correct amount for a given service and what your internal staff has calculated for the same transaction(s). If the coding is right, there should be no discrepancies. But if there are…

How to Approach Any Discrepancies in Calculation Accuracy

Issues with calculation can get tricky if payors who believe they’ve already settled debts will actually need to pay more. Use the following basic approach to dispel all underlying tension:

  • First, pull and analyze all internal records pertaining to communications and contract negotiations with the payor(s) or contractor(s) in question, including all adjustments
  • Then, pull and analyze all internal data related to the actual services provided; including records of all procedures performed, other services administered, and drugs prescribed
  • Finally, pull and analyze all payment-related information, including the coding used to justify balances, and compare these against the other datasets to reach a conclusion

Presenting all this information to the parties with whom you are in conflict over a calculation error will facilitate objective reasoning about who needs to compensate whom, why, and how.

Contract Management Metric #4: Error (Resolution) Rate

Finally, the last metric for an effective contract management process in healthcare involves the error rate, or the rate at which errors are resolved once identified. In a perfect world, effective contract management would lead to zero errors occurring. But even the most effective systems are prone to human error, on the side of the provider, payor, and all other involved parties.

That’s why it’s so important to account for errors and make sure they are resolved in a timely manner. On the one hand, a small, seemingly low-stakes error can become burdensome if left unresolved for too long. On the other hand, resolving a large error immediately or as soon as possible is a key step toward mitigating its effects and reducing the amount of harm it can do.

PayrHealth: How to Optimize Your Ratio of Contract Management Error

This metric is closely related to the other three in that the monitoring you implement for them will also make it much easier to identify, analyze, and respond to errors. The key to a better error rate is thorough visibility and devoting resources to timely, accurate solutions.

The best way to both avoid errors and ensure that they are appropriately resolved in a timely manner is by implementing a strong contract management solution—like PayrHealth.

Here, we offer custom-tailored solutions to signing better contracts, negotiating higher rates, and expanding your team with the best possible personnel (temporary or permanent). But we also handle all matters of your contract management to optimize all four of your key performance metrics. For more information, contact us today!


  1. Cobblestone Software. The 3 Contract Management KPIs for Success.
  2. GatekeeperHQ. Contract Management KPIs – Measuring What Matters.
  3. PMMC. 4 Key Metrics You Should Track In Hospital Contract Management.
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