Common Challenges in Provider Contract Management
For healthcare providers, ensuring that they’re receiving accurate and timely payments for their services each time a claim is submitted can be a monumental challenge for the entire healthcare organization. Their success or failure largely depends on the quality of their provider contracts and the management process.
When handled correctly, provider contracts (also known as payor contracts) ensure that providers are fully compensated on time and that patients receive the healthcare service they require. But healthcare contract management is difficult. There are several challenges you must manage to maximize reimbursements.
Knowing this, we’ll discuss some of the significant challenges in provider contract management and best practices for overcoming these challenges within the healthcare industry.
What Are the Most Common Challenges in Provider Contract Management?
Managing the various contracts with disparate healthcare payors can feel overwhelming, especially for smaller providers. Controlling and overseeing the process can be extremely difficult for several reasons, the largest being:
#1 Understanding the Variety of Provider Contracts
For any provider, there’s an array of provider contracts you’ll have to juggle—each with different payors and its terms. This can make the process time-consuming since one payor may have one type of contract, whereas another has an entirely different arrangement.
To better manage this, providers need to be well versed in the types of healthcare provider contracts a payor may wish to negotiate, including:
- Fixed-term contracts – These contracts exist for a limited time period. Once the term has ended, there are no obligations for renewal. This ensures that neither party is locked into a long-term deal.
- Evergreen contracts – These are contracts between healthcare payors and providers that automatically renew at the end of a term period. They are legally binding and operate on a recurrent basis. The terms will continue as is unless one party begins the process of making modifications or requesting termination.
- Fixed-price contracts – These contracts are based on an agreed price, where the payor provides a lump sum upon signing. That payment will then cover the entirety of the contract term period and the services therein.
- Fee-for-service contracts – The payor agrees to pay varying amounts depending on the services needed.
Even within these contracts, one evergreen contract with a particular payor will likely vary greatly from an evergreen contract with another payor. To properly manage your contracts, you must familiarize yourself with the specific details of each one.
Generally speaking, RevCycle Intelligence suggests that providers be aware of the following core elements within any provider contract, including:
- The number of days a provider has to submit a claim after a service or visit
- The number of days a healthcare payor has to reimburse the provider for covered services
- Comprehensive list of services covered by the payor
- Rates of reimbursement for all covered services
- Claim denial dispute procedures
- Term and length of the contract
- Notice periods for renegotiation and termination
#2 Standardizing the Healthcare Contract Negotiation Process
Similarly, many providers make the mistake of not having a standardized contracting process in place. Instead of having clearly defined processes in place for every agreement and contract type, they instead perform it off-the-cuff. The result? Inefficiencies across the board, issues with compliance, and lower reimbursement rates.
Ideally, the contracting process should follow a clearly defined, five-phase process:
- The initial request
- The agreement review
- Final document storage
There are dozens of people involved with the submission, correction, approval, and signing of a single contract. And this process doesn’t get any easier for contract renewals. To prevent this from becoming a problem, you need a standardized procedure that minimizes mistakes, delays, and errors, making it much simpler to manage (and then renew) the contracts going forward.
Typically, the negotiation processes can take weeks, if not months, to conclude. To speed it up (and add more clarity) Becker’s Hospital Review suggests you take the following actions:
- Review any existing provider contracts for renewal limitations
- Bring historical payor data that supports any changes to pricing or payment terms
- Negotiate contract language and initiate credentialing while rate negotiations are ongoing
#3 Poor Communication
The contract negotiation process has dozens of moving pieces—each needing to be addressed individually. During the early stages, there can be internal and external communication issues:
- Internally – Different departments or team members all have their hand in building out a contract. As a draft gets circulated, the lack of accountability makes it all too easy for problems to occur. Because of this, the final product may bear scant resemblance to the early drafts or be missing key provisions.
- Externally – During the negotiation, it’s easy for the dialogue to become muddied between the two parties, both angling for their own goals. This lack of clarity can create disparities between what both parties think they agree to.
Once negotiations are settled, communication with payors doesn’t cease. Many providers make the mistake of not having regular contact with their payor representatives. You should be meeting with the payor representatives on an on-going basis (quarterly, at the minimum). That way, you address any issues immediately—before they get out of hand. In doing so, you can create a healthy and open working relationship that lasts longer.
Tip: To facilitate better communication, store all of the contract’s essential information in a digital portal accessible by both parties.
#4 Confusing Terms and Lack of Clarity
Provider contracts are a legal minefield, filled with confusing language, fine print, and contract jargon. All of this makes it difficult for providers to understand the terms of the deal fully.
Common issues include:
- Legalese – Often, payor negotiators stuff contracts with legal language to purposefully obfuscate. Phrases like “except as otherwise indicated herein,” “industry-accepted,” and “hold harmless patient members” only add more confusion to the mix. At the very least, you should be aware of contract jargon such as:
- Allowed amount – Maximum amount payors will reimburse for cover in-network healthcare services.
- Fee schedule – A list of payments and fees for any given service or supply.
- Clean claim – Claims that can be processed without needing further information.
- Network requirements – Which networks the provider organization participates in.
- Terms – By fully understanding the contract terms, you can prevent payment delays or errors from occurring. The contract should clearly stipulate:
- The days the provider has to submit a claim
- The days the payor has to reimburse the provider for the service
- The rates for services provided
- The dispute resolution process
- The notice period for negotiating new terms or ending the contract
#5 Renegotiating Contracts
One of the most critical aspects of contract management for a healthcare organization is negotiating current contracts. For many providers, this poses a significant obstacle. Major hurdles they face include:
- They don’t know what they want – A provider must know what they hope to accomplish from the negotiation process before ever sitting down at the bargaining table; otherwise, they’ll likely leave the negotiations with a worse deal than the original one. A provider should have clear objectives they hope to achieve from the process, such as:
- Increasing net revenue
- Setting harsher penalties for late payments
- Fixing errors or reducing inaccurate payments
- They don’t know who to target – Knowing who to renegotiate with is half of the battle. One way you can achieve this is by frequently reviewing your current contracts and identifying those with the least favorable terms. As mentioned previously, you should follow these steps to determine the ideal candidates for renegotiation:
- Analyze fee schedules and payments, ranking them by favorability
- Determine revenue levels by payor by service offering
- Consider the contract value
- Ask members of your team about their experiences with payors
By taking these steps, you can better determine which contracts should be renegotiated, renewed, or terminated.
PayrHealth: A Modern Solution for Provider Contract Management
When it comes to provider contract management, there are several hurdles you likely have encountered or will encounter. These include:
- A variety of different contracts
- Ill-defined contract processes
- Poor communication
- Lack of clarity
- The contract negotiation process
Fortunately, you don’t have to manage payor agreements on your own. This is where PayrHealth comes in. As a contract management company specializing in the healthcare industry, we leverage our expertise and robust technology to help providers:
- Sign better contracts that fit your unique offerings, service, area, and strategy
- Negotiate higher rates, putting you in the best position for increased reimbursement
- Supplement or expand your team by outsourcing our experts
On your own, provider contract management is challenging. With us on your team, it becomes a whole lot easier. Let us focus on contract management, so you can focus on providing the very best healthcare services possible.
RevCycle Intelligence. Maximizing Provider Revenue with payor Contract Management.
Beckers Hospital Review. Six Payor Contracting Challenges for Private Equity-Backed Health Care Providers and How to Solve Them.
Health Cents. A Guide to Payor Contracting for Providers. https://payrhealth.com/resources/blog/a-guide-to-payor-contracting-for-providers/