Contract Management, Chargemaster Analysis, and Case Costing: A Conversation with Scott Allen on Managed Care Contracting
Get more of Scott Allen’s strategies in our on-demand webinar Unlocking Implant Reimbursements.
Scott Allen, nimble’s Senior Vice President of Managed Care Contracting – along with our managed care contracting team – utilizes three key strategies to drive higher reimbursement and faster revenue capture for surgical organizations: contract management, chargemaster analysis, and case costing.
These three areas can improve profitability, financial performance, and even offset industry challenges such as rising costs and changes to payer reimbursements.
In this blog post, Scott answers our most pressing questions about these three steps, plus provides examples of how surgery centers can apply these best practices to the revenue cycle.
Step One: Contract Management
Q1: In your experience, what do surgery centers need to know about contract management?
Scott Allen (answer)
I find contract management as a whole is often overlooked. Many outpatient facilities don’t have a complete copy of each payer contract on file. When the coding and billing team doesn’t have access to the full contract, it’s extremely difficult for them to know how to bill and what the correct reimbursement should be.
That’s why I recommend tracking down your managed care contracts and making sure you have complete contracts on file.
Next, you should review your contract terms and ensure both you and your revenue cycle team have a clear understanding of the contract language to avoid claim issues.
Otherwise, you could be leaving significant reimbursement opportunities on the table by underbilling your services, or you could run into compliance issues with overbilling.
Q2: What should surgery centers do to confirm contracts are current and complete?
(Scott Allen, answer)
You may need to contact your payer representative to obtain the complete contract and ensure you have the most up-to-date version moving forward.
Once you review the contract, dissect all amendments and all relevant data, and be sure to get clarification from your payer rep if the terminology is unclear.
Next, you’ll want to apply those key points to your revenue cycle by organizing the information in a format that is accessible and easy to understand. This will help your administrative team interpret and apply the contract terms correctly.
When you add new specialties to your surgery center, you should review your contracts again to determine if existing rates address your new services or if your contracts need to be updated.
Q3: How complex is navigating payer contract language? Do you have any tips for applying this language to coding and billing?
(Scott Allen, answer)
The contracts for ambulatory surgery centers (ASCs) and outpatient surgery centers can be incredibly complex. The terms can also be unique to each facility.
Aside from billing rules, contracts also contain information on administrative obligations and legal guidelines.
As you explore each contract, you’ll encounter similar elements, but they may be organized differently due to the payer’s methodology and formatting.
Look for detailed language around coding edits to determine:
- How the payer handles implant markup
- If the payer uses NCCI edits
- If the payer utilizes a proprietary edit system
After gathering and preparing the information for your staff, confirm that everyone has the same understanding of the payer contract.
Utilize a methodology to ensure your team is coding and billing the same way every time. This avoids errors that could lead to payer denials and delayed reimbursement.
Step 2: Chargemaster Analysis
Q4: What does the term chargemaster mean? What role does a chargemaster analysis play in the revenue cycle?
(Scott Allen, answer)
The term chargemaster refers to the value set for services performed at your surgery center. Completing a chargemaster analysis is crucial to ensure the charges you set maximize your facility’s revenue potential, and I recommend completing this process annually to ensure the charges reflect payer updates.
One of the key contractual elements that is the main driver for reviewing your chargemaster is the “lesser of” language. For example, if the bill charged going to the payer is less than the allowed amount, then you’ll typically be paid less than your maximum reimbursement.
By reviewing the fee for each procedure and comparing those fees to the allowed amount, you’ll ensure that you’re not missing out on any revenue.
Q5: What’s the best way to calculate chargemaster fees? How do you know if you’re setting a reasonable rate in your chargemaster?
(Scott Allen, answer)
In addition to allowed amounts and overhead costs, surgery centers can employ several tools to set their chargemaster including private label, state, and federal fee schedules.
Since payer reimbursement methodologies are not standard in the ambulatory surgery industry, we must go back to contract management and understand each carrier’s reimbursement methodology.
Data collection companies also offer usual and customary information, which may be helpful to determine if your rate is reasonable based on your facility’s location.
Step 3: Case Costing
Q6: You mentioned the final essential step is case costing. What makes this level of analysis so important?
(Scott Allen, answer)
Case costing analysis is an accounting method that compares the total cost of a procedure to the amount a payer will reimburse for the whole case.
Through effective case costing, surgery centers can pinpoint the exact expenses for each procedure performed. An in-depth comparison can determine if combined overhead costs and supplies exceed the allowed payer rates for a particular procedure. If overall costs are too high, that case should remain in the hospital setting.
Q7: How do surgical organizations ensure the case costing analysis is as accurate as possible?
(Scott Allen, answer)
Every detail counts. The more data you have, the easier it will be to determine where adjustments need to be made.
Track your inventory and indirect costs, such as OR time, to account for costs associated with each case. You can also determine the costs of your overhead per case based on how often the operating room is in use.
Medical records should give an accurate reflection of how long each procedure takes, and from there you can drill down the operating room’s cost per minute.
You can also share this data with your staff, so they have a full understanding of what each surgery costs based on time and resources.
Q8: What role do these three steps play in renegotiating payer contract rates?
(Scott Allen, answer)
Outpatient surgery centers can be a cost-effective solution for payers and for patients, especially on high acuity procedures, such as spine and total joints. However, due to shifts in payer reimbursement policies and rising costs of implants, the cost-to-profit ratio for these procedures can vary drastically by payer.
Contract management, chargemaster analysis, and case costing provide a foundation for surgery centers to determine if they are accepting the right cases based on their payer mix and payer terms.
These three steps also provide data comparisons between payer reimbursement rates and overall costs per procedure.
When you know which cases are profitable and which cases are losing money by payer, you put yourself in a stronger position to drive better reimbursement rates during contract negotiations.