When it came to managing payer physician practice contracts, the approach used to be "hit or miss." Not any more: shrinking reimbursements and the increasing complexity of insurance plans are mandating a more practical approach. Contract modeling software solutions available today can minimize denials and optimize reimbursement by enabling medical groups to evaluate overall contract performance, verify reimbursement and assess the financial implications of new and proposed contracts.

This new IT solution has worked for two very different practices. One, Lake Charles Medical and Surgical Clinic, a 26-physician group practice in Lake Charles, La., recently signed up for Austin, Texas-based MPV's (Medical Present Value) Phynance contract management solution. The healthcare provider went live with the product in August. UT Medical Group (Memphis, Tenn.), with 185 FTE physicians and a major hospital presence, has been using it since 2005.

Lisa Connor, business office manager of Lake Charles talked about the bad old days: "Everything was manual," she says. "In order to know that a payer paid us incorrectly, the person entering the payment had to recognize it as an incorrect payment. It could take months." The organization's appeals process was manual too. Copies of the EOB were sent back to the payer via a runner. "We worked them one by one," says Connor. "I was floored. The need (for software) was a no-brainer."

Most providers agree that some contracts are better written than others. For Lake Charles, with 15 payers, the MPV Phynance contract modeler got down to the nitty gritty to clarify the actual contract terms: What rate should be paid with an AD modifier (medically supervised by a physician for more than four concurrent procedures)? How many multiple procedures should be paid? And what about carve outs? "These are things that should have been defined in the contract," says Connor. "But you're often left trying to figure it out."

Contract Management Solution Providers

Vendor	Location	Users	Approach
Concuity	Vernon Hills, Ill.	Provider systems including Sutter Health, St. Joseph's Health System, University of Utah Hospitals & Clinics, Covenant Health System, Henry Ford Health System	Web-based application suite; track and enforce contract compliance; calculation engine ClearContracts application entirely HTML-based
Kreg Information Systems	Atlanta	Enterprise-wide hospital decision support 200 healthcare organizations including hospitals, rehabilitation facilities, physician offices	Payment compliance; contract simulation; contract management that calculates accurate expected payments for patient claims
Quadramed	Reston, Va.	Single-site and enterprise-wide organizations	Solution for contract management. Modules for contract administration, re-pricing, modeling and reporting. All types of contractual arrangements
PMMC (Preferred Medical Marketing Company)	Charlotte, N.C.	Hospitals, health systems, physician practices	Microsoft solutions provider. Applications implemented under Web-based ASP and/ or locally installed LAN scenarios. More than 100 built-in audit, fi nancial and other reports

Connor gave MPV a copy of every single contract. Jeff Milburn, an active member of MGMA and senior vice president of Colorado Springs Health Partners, a 90-physican multi-specialty practice based in Englewood, Colo., agrees that's the place to start.

"What I tell practices is that the first step is to get all your paper in one pile, get all your updated contracts," he says. "You'd be surprised how many practices don't know where all their contracts are." In Connor's case, once they had the contracts, MPV went back to each carrier and got additional information.

UT Medical Group (UTMG), the not-for-profit private practice arm of the University of Tennessee Health Science Center, shares a similar experience, though UTMG is quite different. UTMG is a 300-physician multi-specialty practice with 185 FTE physicians in clinical practice. Because of its geographic location, the organization provides indigent and Medicaid care to several surrounding states, and deals with four or five Medicaid payers in addition to various commercials. Also, the group staffs the county hospital (a Level I trauma center) and bills the physician portion of the hospital visits. That means dealing with many payers from out of state—including a lot of small mom and pops.

UTMG, though larger and more diversified than Lake Charles, had a similar need. "This is a part of the revenue cycle," says Shannon Tacker, vice president of revenue services and decision support. "Verifying payment to the contract is what closes that loop." Tacker tried to verify manually and found a problem faced by many physician practices. "We could really only focus on our large dollar claims because of staffing issues," she says.

Before going live with Phynance in March 2005, UTMG shopped around for several vendors. Tacker says she felt the other products under review were weak. "I was looking for something that could manage the contract modeling piece—go through the contracts and, with our help, try and model that in the system," she says. "With the other products we looked at it was more up to us to get it in the system. I really didn't have the staff or expertise to do that."

The real value of contract management products? They value the claim as soon as it hits the system, tell the provider what it will likely be paid, and compare the claim to the EOB. Providers know immediately if they have to follow up.

Underpayments come in two types—denials where nothing is paid, and payments that are not what they're supposed to be. "We track those monthly," says Tacker. "What has been appealed, been denied, been successful and what is still pending—and we can look it by specialty and provider. We've seen about a 1.5 percent increase in net payments for about $1.5 million extra dollars."

Tacker uses the contract analysis module of Phynance to perform "what if" scenarios when getting ready to renegotiate a contract. Connor, who is just going live at Lake Charles, is looking forward to using that feature soon. "For a new contract, I can plug in what it's proposing, and model it side by side with existing contracts."

Her plan is to go back to the table with payers for contract negotiation—“You promised X and you're delivering Y, what do you plan to do about it?" Connor adds the only way to do that is with the data.

Tacker is already tracking success in her appeals. "Your gut instinct tells you there's a particular payer you're always having problems with, but you need more than a gut instinct to go to the table. If I see lack of success, that may be a payer I don't want to do business with in the future."

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