From pay for performance initiatives to public grades on outcomes for specific procedures, hospitals and health systems are growing accustomed to having their care evaluated and the results posted, published, or advertised for all to see. In some respects, providers have been turning the tables by creating report cards that measure just how well payers perform. The intention is not to make the reports public but to use the data to improve the payer’s performance.
“We want to encourage providers across the industry to be involved in this kind of activity,” says Richard O’Donnell, director of payer relations for Spectrum Health Hospitals, Inc., Grand Rapids, Mich. “There’s more meaning to the payer if they know that more providers are evaluating their performance, as well.”
Needs vary, but providers may use report cards to:
- Track payer performance against the terms of the contract
- Negotiate more favorable contractual terms
- Reduce administrative costs
- Rank Payers
Objective and Subjective Data
Ideally, a payer report card should include both objective and subjective elements. Objective elements include statistical measures, such as rate of accounts receivable past 60 days. These quantifiable elements may be benchmarked against industry standards. Subjective elements measure essentially how easy it is to do business with a payer and may include something as simple as how quickly a payer returns phone calls.
Because payer report cards can become quite comprehensive, it may be a good idea to begin by including just a few main measures. Healthcare consultant Maria K. Todd suggests approaching report cards, at least initially, from the “30,000-foot level” and then refining the analysis over time by adding metrics that help achieve the overall purpose and even eliminating those that don’t.
Just as providers use report cards for different reasons, there is no standard report card that every provider should follow. There are, however, certain elements that every payer report card should track. Such objective measures may include:
- Days in accounts receivable
- Ratio of actual to expected reimbursement
- Denials rate
- Underpayments rate
“If you’re doing managed care, you need to at least have high level metrics,” says Todd, CEO of HealthPro Consulting, Inc. “Then, you can also do a subjective grade for what I call the hassle metric.”
The “hassle” metric includes data on the cost of doing business with a payer—ie, the cost to process and collect on a claim. The payer report card for Spectrum Health, a non-profit system of seven acute care hospitals throughout Western Michigan, includes several sections that measure how the claim is processed throughout the revenue cycle. “That’s the subjective data,” says O’Donnell. “We may have negotiated a great deal with a payer. We may have a contract that reimburses us fairly well, we think. But then, we’re giving that away in all kinds of administrative expense and inefficiencies.
Examples of subjective measures include:
- How long it takes a payer to respond to questions
- Whether the payer accepts claims electronically
- Whether data needed to research a late paid claim is available online
- Whether the payer requires the provider to perform review/case management
Starting out with a set of four to six data elements that track both quantitative and qualitative measures keeps the process from becoming overwhelming. “A fairly simple report card that contains powerful information can be put together without requiring a full-time actuary or statistician,” says David Livingston, FHFMA, director of managed care for Novi, Mich.-based Trinity Health, the fourth largest Catholic health system in the country based on operating revenue, with 43 owned and managed hospitals.
Delving Deeper
Within both objective and subjective elements of a report card, there are opportunities to include more in-depth data that provides details on exactly where problems exist. Spectrum Health, for example, has a section within its report cards on denials management. The section includes the number of denials from the payer, which is then broken down into several other pieces of data, such as the number of inpatient and outpatient denied claims, and even the percentage of claims appealed successfully and unsuccessfully.
“We try to quantify how many cases and what the denial rate is. When we do appeal a denial, how successful are we at getting it overturned?” O’Donnell says, noting the significance of the metric.
Scrutinizing even the product lines and members of a health plan can provide critical data on why a hospital’s bad debt is increasing or the potential for receiving full reimbursement, says Todd. A health plan with a high percentage of self pay members, or members with a substantial responsibility for their healthcare costs, may mean lower reimbursement rates from that payer.
Todd surmises that health insurers should be held accountable for the quality of the business that they’re underwriting. For example, a payer with a larger market share may request a discounted reimbursement rate in proportion to that market share. However, if that health plan includes a high percentage of members in low-paying jobs that have high-deductable plans, that lessens the value of the payer’s market share. So, Todd says, a provider may want to rethink the size of discount.
“It might be more prudent to say, `Time out. I think I want to negotiate a separate deal, a separate rate structure and a separate discount model for this line of business,” Todd says. “Or, you know what? I don’t want that product at all. Those people are going to be out of network if they come here because I’m not participating in that.”
A more detailed report card may include such metrics as:
- Total value of denied charges in dollar figures
- Percent of members with high deductible health plans
- Percent of claims paid after initial claims submission
- Overall profitability by payer product line, ie, PPO, HMO, Workers Compensation
Using the Report Card
Of course gathering data and using it effectively are two different things. The general goal is to use the data in the report card to improve the provider’s business relationship with the payer—ultimately either by cutting costs or achieving greater reimbursement.
David Livingston says ranking the payers by comparing how well they perform for a specific measure allows a provider to gather its own internal benchmarking data, and thereby address a situation where a payer may not be performing at the expected contractual level or as well as other payers. “A payer report card can be used to identify opportunities for collaboration with payers,” he says. If a payer’s bad debt is increasing, for example, this may indicate increasing patient liability. In this case, the hospital may want to meet with the payer to identify the employer groups and develop solutions for reducing the bad debt, such as increased member education or alternative benefit designs, Livingston says.
Richard O’Donnell meets at least annually with payers for whom he has created report cards. Generally, the payer representative is someone at the vice president level who has responsibility over claims. Over a casual lunch, provider and payer go over each section of the report card, and the payer may raise questions or even challenge the data, O’Donnell says. Likewise, the meeting gives Spectrum an opportunity to provide feedback on the payer’s performance for each segment of the revenue cycle.
“We have seen the health plans be very responsive to these meetings—taking our suggestions back and working actively on recommendations for how they can improve,” he says.
The overall goal is to reduce administrative costs, which can be accomplished for both sides, O’Donnell says. For example, if a payer rejects 100 claims for various reasons, but upon appeal 85 are overturned, the payer can review its practices to see why it is rejecting valid claims and implement changes in an effort to eliminate re-processing claims and the associated costs. “So, as we go through [the report card process], we find that it really reduces costs for both parties,” he says.
Looking beyond cost-cutting, Marie Todd says that payer report cards can be used as tools for measuring a payer’s performance against the terms of the contract and, if necessary, negotiating better terms. For example, after creating a report card, a provider may find that a payer’s A/R performance is below industry standards. A payer can use that data, which essentially shows that a payer’s performance is subpar in comparison to other payers, to set a lower rate for A/R days as a term in the contract, Todd says.
Essentially, the provider is telling the payer: “If you do this, you get to live another day. Your contract is to continue. If you don’t, if you fail, and I put you on notice of a problem, and if you don’t repair it within ‘x’ number of days or if it’s a problem that’s untenable, then the contract goes away,” Todd says.
Todd says for many providers, especially small and independent hospitals, gathering the necessary data is often a barrier to creating a payer report card.
Healthcare information is often kept in silos and managed by department heads who are more focused on their own day-to-day concerns, rather than gathering data for another purpose. Providers may also lack both financial resources to purchase specific and sometimes expensive software applications designed to cull such data and/or appropriate staffing to not only find, but analyze the data. But Todd says providers would do well to find a way to overcome such barriers, such as starting out with a few high-level measures, because report cards are essential tools.
“I’ve been working in this space for a long time,” says Todd, who began using report cards in the 1980s when she managed a 47-physicain practice. “I know the necessity of it. It’s not just proselytizing as a consultant. I’ve been there. I’ve done that. I know what a difference it makes in this business. And, I know how much of a difference it makes to stand firm in the courage of your convictions and not waiver when you’re doing a negotiation, because you know that to do anything different is going to be bad for the business.”