Contract testing may originate from a variety of sources.
Termination of contract. A provider could be faced with the termination of a contract and those patients could potentially leave the provider’s payer mix entirely. Or the contract moving out of network creates a shift of patient volume, for example a large employer group, to another payer contract with different payment terms. What will either adjustment mean to the provider’s net revenue?
Changes in legislation. Another foundation for contract testing involves the complications associated with changes in legislation. An example of this can be payment terms adjusting to include a provision to cap contracted payment at federal program methodology, such as the Inpatient Prospective Payment System or Outpatient Prospective Payment System. Providers also ought to be equipped with payment analysis for an adoption or variation of the “Medicare for All” initiative. Can the organization survive under this movement?
Modification to current terms. Most commonly, the source for initiating contract testing and analysis starts from the payer or provider desiring to alter current payment terms. If either party wishes to modify the terms, the relationship has now entered into a level of contract negotiations.
By using skilled resources to test changes, the provider increases the ability to validate any analysis estimated by the payer and develop counter scenarios to meet favorable objectives.
Bottom line, regardless of the cause, providers should ultimately want to prepare for the impact of payment changes. To accomplish full preparation or create a desired outcome, the various approaches to contract testing must be considered.
See related article: How to use contract testing and analysis to prepare for payment changes