Scrutinize Payment Language To Avoid Costly Contracting Pitfalls

June 18, 2003

While all provisions contained in a health plan contract should be read and fully understood by the provider, the payment language, in particular, should be carefully studied so that it is fully understood and that no ambiguities exist, according to the Health Care Contracting Desk Reference, co-published by Ingenix and HFMA.

While both payer and provider can be adversely affected by the failure to clarify payment issues, the provider will usually suffer more long-term financial damage than the payer. Examples of items that may require additional detail include:

• Case Rates: What is included, what is excluded? If multiple procedures are performed, are multiple case rates paid or only the highest case rate? For example, if cardiac catheterization, PTCA, and open coronary artery bypass procedures are performed during the same admission, is each paid separately or are all services bundled into the highest heart case rate?
• Observation: Is there a clear definition of observation care in the contract? How is this handled? How easy is it to administer? If the patient is admitted, is the observation rate paid separately or rolled into the inpatient reimbursement?
• Emergency Room Services: Is there a clear definition of emergency room service in the contract? How is this handled? How easy is it to administer? If the patient is admitted, is the emergency room service paid separately or rolled into the inpatient reimbursement?
• Boarder Babies: Is there a clear definition of a boarder baby? How will these babies be identified on the claim? Is this rate rolled into the mother's room rate or is it a separate payment? Is this rate less than other newborn per diem rates?
• RBRVS: Is the most current RBRVS being used? If not, what year is being used? Whose data was used to develop values for services not included in the Medicare RBRVS? Are rates geographically adjusted? Are rates updated annually? If they are updated annually, what is the effective date of the update? When are new rates loaded into the system? When should you audit those new rates to make sure they were loaded in correctly and claims are paying correctly? Are there different conversion factors for E/M services vs. other services? If so, is there a specific list of codes that the E/M conversion factor applies to? Are any services excluded (laboratory, x-ray, etc.) and paid using a different fee schedule?
• Outpatient Case Rates: Are implantable devices and other high cost items included in the case rate? How will they be reimbursed if not included? If invoice cost plus a percentage is used it can be hard to administer because it requires manual handling of the claim submission and payment. Can rates for these devices and high cost items be developed instead of using the invoice plus percent rate?

In summary, any contract terms that are ambiguous should be clarified and any contract provisions that cannot be administered by the two parties should be changed. In other words, do not sign anything that you do not understand and do not agree to anything that cannot be easily administered. A signed contract always implies that the contracting parties both understand and agree to the terms of the contract. In addition, never sign a new contract unless you have reviewed it in detail with the other party. If the details are not reviewed, incorrect assumptions or misunderstandings are almost guaranteed.