Contract Compliance Monitoring: Outmaneuver Payers with This Revenue Recovery Tactic

Healthcare organizations are justifiably concerned about every dollar they sink into automation. Not every technological investment generates a healthy return. 

But contracts have a special place in the provider’s revenue system. The money in those pages or files is right on the surface. It only takes proactive contract compliance monitoring to sweep it in. 

Payers underpay you when they:

• use the wrong fee schedule
• make processing errors (one AMA study put payer processing error rates at 19.3 percent)
• forget to include agreed-upon annual escalators in the payment
• incorrectly bundle services
• leave out the late fees you already called them on
• incorrectly assigned a service to their carve-out class, attributing payments to a secondary payer 
• incorrectly combine accounts

(We cover even more ways payers fall out of compliance with contract terms in our healthcare underpayments guide.) 

Payer underpayments and other errors typically don’t stem from malfeasance. Payers struggle with the same challenges plaguing providers: a staffing shortage, contract complexity, and constantly shifting government regulations. Still, it takes steady pressure from healthcare organizations to keep payers reimbursing at mutually agreed-upon rates.

Providers standing up for their revenue

Underpayments are widespread in the U.S. today. One study published in Becker’s Hospital Review found providers lose one to three percent of their net revenue annually due to commercial payer underpayments. Another study found underpayments at an organization could be as high as 11 percent. 

Still, some healthcare organizations are having success fighting in the courts for the revenue due to them. Last year, a panel of arbitrators agreed with TeamHealth that UnitedHealthcare had underpaid them 10.8 million dollars. Another arbitration team awarded Envision Health 92 million, and currently, 100 Alabama hospitals are suing Blue Cross, claiming a 5 billion loss due to underpayments. That kind of money goes a long way in hiring more staff, buying equipment, and even promoting your organization.

Significant underpayments plague more than huge health systems. One 30-location orthopedics group detected and captured $10 million in underpayments via assistance from contract management software. Many more physician groups and practices bring in millions every year with underpayment detection. 

Contract compliance monitoring can earn a 10X or more return on investment. Review what’s involved in getting your contracts under control and bringing in more of the revenue you’ve earned. 

What is contract compliance monitoring? 

Contract compliance monitoring is the process of overseeing and evaluating the execution of contractual agreements to ensure all parties fulfill their written obligations. Many healthcare organizations also compare which payers meet these rates and terms most closely, ranking payers by their contract performance. Performance measurement helps providers put pressure on poor performers, thereby negotiating better rates.  

Manual vs. automated contract compliance monitoring

While we’ve run into a few multi-location physician groups still keeping their contracts in file drawers, it’s usually the small healthcare organizations managing 10 or fewer payer contracts who handle their contracts manually in-house. With a competent, trained contract manager or staff member at the helm, this strategy can work, given the manager remains current with payer changes and new government regulations and keeps their spreadsheets updated. 

Because manual contract monitoring involves checking every actual visit payment against an (often paper) copy of the contract, however, it falls to the bottom of the priority list at healthcare organizations. Further, manual contract management means the staff member or contract manager must track down all payer rate changes via portals, payer newsletters, Availity, or the mail room. 

In 2019, market research firm Black Book surveyed 522 contract managers to gauge the contracts landscape. 502 revealed they had no reliable contract system, either manual or automated. Those that did were relying on manual contract management. Doug Brown, managing partner, concluded that the manual approach is fragmented, inefficient, and costing the healthcare industry 157 billion annually. 

Given the growth in contract complexity and the wane of staff trained well to handle contracts, interest in automated contract compliance monitoring solutions is growing. Future Insights research puts the global market growth of this technology at 12.9 percent annually until 2034. Similarly, Straights Research says global growth will hit 13.2 percent annually for the next 10 years.  

Take a quick, self-guided tour through a powerful contract compliance monitoring and underpayments recovery tool:

How to conduct manual contract compliance

Manual contract compliance monitoring typically begins with centralizing contracts either in a physical or digital filing system. Time can’t be wasted hunting down contracts across the office or computer database.  

The staff member (or hired contract specialist) reads through contracts to identify and record important details, manually extracting data on pricing, terms, obligations, and key dates. This individual then draws from billing systems and quality reports to track performance. The contract manager makes careful notes of renewal deadlines and the 60 or 90 days before those dates. Physical calendars or basic digital tools can alert the contract specialist to contract renewal, expiration, and key milestone dates.

Contract management involves far more than adhering to dates, however. It uncovers underpayments – revenue owed to you. 

To verify compliance, the staff member or contract specialist compares actual payment against contractual requirements, manually flagging discrepancies or potential compliance issues. The contract specialist generates reports by compiling data from various sources and creating presentations or documents to summarize compliance status. Accurate reports can drill down into which payer, CPT code, group location, or combination of those is triggering the highest denials. Organizations convene meetings to discuss the root causes of underpayments and strategize on recouping this revenue. Teams document their progress in underpayment recovery. 

The contract specialist also conducts internal audits of the payer’s overall contract compliance. They track identified compliance issues in spreadsheets or logs by CPT code and manually follow up on resolution efforts. This data reveals which payers are top performers and which are shortchanging you most.  

While the manual approach can be a place to start for smaller organizations or those with limited contracts, it is time-consuming and prone to human error. As the volume and complexity of contracts increase, manual processes become increasingly challenging to maintain.

Automated software solution’s heavy lift

The healthcare organization using an automated software solution faces some extra steps in set-up, but once the solution is launched, it carries out many formerly manual tasks independently.  Specifically, it: 

• draws from its templates to create the initial iteration of a contract 
• tracks contract revisions
• routes contracts to appropriate stakeholders for approvals and signatures
• collects electronic signatures
• sets automated alerts and reminders for key dates and milestones
• tracks contract expiration and renewal dates
• generates reports on contract status, performance, and compliance
• searches and retrieves specific contracts or clauses
• extracts and categorizes essential contract data
• conducts automated compliance checks against regulatory requirements
• flags deviations from standard contract language
• automates workflow processes for contract review and negotiation
• runs analytics on contract performance and trends
• manages role-based access controls for contract information

Steps in unleashing contract compliance monitoring software

While a new technology integration can elicit groans from healthcare staff, rest assured that your solution’s customer service will do all they can to make onboarding simple and ease the integration with your PM system. Follow these practical steps – with your customer rep, that is:   

1. Centralize and secure all contracts in a digital repository

Upload all contracts to a secure, centralized location within the contract management software. The best contract compliance monitoring software companies will upload your contracts for you, a valuable, time-saving service. Centralization and digitization ensure easy access and maintain patient privacy in compliance with regulations like HIPAA. Digitization underlies easy analysis, reporting, and metrics comparison. 

2. Set up automated alerts and notifications

Configure the software to send automated alerts for important dates, milestones, and other contractual obligations. Your solution customer rep will help you translate what you need into the commands the system understands. Remember that, with most payer contracts, providers should start reviewing and generating changes 60 to 90 days before the renewal date. Notify the payer of the changes you want in the contract at least 30 days before the renewal date. 

3. Implement role-based access controls:

 Use the software's permission settings to ensure only authorized personnel can access sensitive contract information, maintaining security and compliance.

4. Utilize pre-approved clauses and templates:

Use the software's database of pre-approved clauses and contract templates to ensure new contracts comply with relevant regulations and internal standards.

5. Establish clear approval workflows:

 Set up automated routing of contracts for approval through predefined workflows. This ensures all contracts receive necessary reviews from legal and regulatory staff. Your contract compliance monitoring software company can help you build new workflows for your staff. They’ve helped many providers switch from manual to automated systems. 

6. Conduct regular audits:

Use the software's reporting and search capabilities to regularly review contracts and associated activities. These features catch compliance issues before they become widespread problems. 

7. Track key performance indicators (KPIs):

A good system has the software's analytics tools to verify adherence to contractual obligations and identify which payers and CPT codes and combinations of those are behind your underpayments. We typically find that where a handful of underpayments are occurring, many more exist to make a trend. Most of your revenue recovery will come from these common underpayments. 

8. Stay updated on regulatory and payer changes:

The software cannot go to Availity, your payer’s provider portal, or your mail room to find proposed changes from the payer. That means your staff must be on top of these. Writing up a protocol for staff to visit payer portals and watch the mail for payer letters and adding it to staff workflow. Have them regularly update contract terms and clauses in your digitized contracts to reflect changes.

9. Generate compliance reports:

 Use the software's reporting features to create regular compliance reports, demonstrating adherence to regulatory standards and internal policies.

10. Leverage data analytics:

A robust contract monitoring solution will have analytics features that analyze contract data. Use it to identify payer underpayment trends, potential risks, and opportunities for improving compliance across the organization.

Benefits of assertive contract compliance monitoring

Both manual and automated contract compliance monitoring are a vast improvement over what many organizations use today – nothing. A documented, reliable system has these benefits: 

• Financial protection: Contract compliance monitoring helps identify and prevent underpayments from payers, ensuring providers receive the full reimbursement they are entitled to under their contracts.  Full revenue reimbursement not only brings in more revenue, it demonstrates your precision financial handling to potential buyers and investors. 

• Risk mitigation: By closely monitoring contract terms and performance, providers can identify potential compliance issues or breaches early on, allowing them to address problems before they escalate into more serious legal or financial risks.

•  Improved efficiency: Automated contract monitoring systems reduce administrative burden, freeing staff to focus on direct patient tasks rather than paperwork. 

• Enhanced payer relationships: Regular monitoring and communication about contract performance can build better relationships with payers. Solid relationships lead to productive negotiations and collaborations in the future.   

• Data-driven decision-making:  Clear data supports your arguments for better rates and terms. Internally, it shows others on your team that you base your decision on fact rather than bias or whim.   

•  Regulatory compliance: When your contracts keep you compliant with federal and state regulations, you avoid penalties and hassle.

• Improved contract performance: Regular monitoring allows providers to track key performance indicators (KPIs) and ensure that all parties meet their contractual obligations, leading to better overall contract outcomes[2].

By implementing robust contract compliance monitoring practices, healthcare providers can protect their financial interests, improve operational efficiency, and maintain strong relationships with payers in an increasingly complex healthcare landscape.

Compliance with government agencies

Contract compliance monitoring involves more than payer activities. Healthcare providers must comply with a number of key federal and state regulations, too. The ones that impact healthcare organizations the most are: 

• HIPAA, which protects patient privacy
• HITECH, which protects patient health information existing in electronic health records
• Patient Protection and Affordable Care Act (ACA), which creates the standards for healthcare compliance and ethics programs
• Social Security Act, which orchestrates and adjudicates Medicare, Medicaid, and other governmental healthcare programs

Healthcare organizations must also comply with workplace regulations established by OSHA, the EEOC, and legislation like the False Claims Act, which protects government entities against fraudulent medical claims.

 Measuring the success of your contract compliance monitoring

Nothing impresses the C-suite more than specific metrics that reveal the performance and efficiency of your new contract management processes. This data also gives you more sway with your payers during contract negotiations. 

Set up, monitor, and track these crucial KPIs:

1. Underpayment recovery rate measures the percentage of identified underpayments that are successfully recovered from payers. Watch it as it changes over time after you call the payer on its underpayments. 

Insight: A high recovery rate indicates effective contract compliance monitoring and follow-up processes. Track this metric monthly or quarterly to identify trends and areas for improvement.

Benchmark:  aim for a recovery rate of 90 percent or higher, and investigate any significant drops in this rate.

2. Average time to resolve underpayments measures the average time it takes from identifying an underpayment to receiving the correct payment from the payer. 

Insight: A shorter resolution time indicates efficient processes and effective communication with payers. 

Benchmark: consider an underpayment resolution period of 30 days or less. Monitor this KPI monthly to identify bottlenecks in the resolution process.

3. Impact on overall revenue cycle performance assesses how contract compliance monitoring affects your organization's overall revenue cycle. Measure improvements in metrics such as:

• Days in A/R (Accounts Receivable): Look for a reduction as compliance improves.
• Clean claim rate: Expect an increase as contract terms are better understood and applied.
• Net collection rate: This should improve as underpayments are identified and recovered more efficiently.

4. Contract compliance rate tracks the percentage of claims that are paid correctly according to contract terms. 

Insight: A high compliance rate indicates effective contract management and clear communication with payers. 

Benchmark: 95 percent or higher.

5. Denial rate due to contract-related issues monitors the percentage of claims denied due to contract-related issues, such as incorrect rates or non-covered services. 

Insight: A decrease in this rate suggests improved contract management and staff education.

Benchmark: Varies by organization. Watch for trends.

6. Time spent on manual contract review:  Measure the amount of time staff spends manually reviewing contracts and resolving discrepancies. 

Insight: As automation and efficiency improve, this time should decrease, allowing staff to focus on more complex issues.

Benchmark: Varies by organization. Watch for trends.

7. Turnaround time for contract updates measures the time it takes to implement contract changes in your systems after receiving updates from payers. 

Insight: Faster turnaround times reduce the risk of underpayments and denials.

Benchmark: Varies by organization. Watch for trends.

8. Financial impact of identified contract discrepancies tracks the total dollar amount of underpayments and overpayments identified through contract compliance monitoring. 

Insight: This metric helps quantify the value of your compliance efforts.

9. Payer performance comparison sets contract compliance rates across different payers against each other to identify those with consistently high or low compliance. This information can be valuable for contract negotiations and prioritizing follow-up efforts.

By consistently tracking these KPIs, healthcare organizations can gain valuable insights into the effectiveness of their contract compliance monitoring efforts. Regular review and analysis of these metrics can help identify areas for improvement, guide resource allocation, and ultimately lead to better financial performance and more efficient operations.

Use contract compliance monitoring purpose-built to uncover revenue from underpayments

Use the data and analytics that come from proactive contract management to win better deals with your payers and find the underpayments eroding your net revenue. Tame the guilt that comes from ignoring your contracts. 

MD Clarity's RevFind solution centralizes, digitizes, and analyzes provider contracts. It uncovers underpayments, identifies payment trends, makes terms and fees searchable, identifies your best and worst payers, triggers deadline alerts and so much more for physician groups and MSOs. In addition, RevFind’s contract modeling features show providers the revenue they’ll win or lose if proposed payer changes are accepted. RevFind users enjoy the capability to input their own potential rates and terms, modeling unlimited scenarios, to see how those changes impact the bottom line. This level of accurate insight and automation is unmatched in today's complex healthcare reimbursement environment.

Schedule a demo to see how RevFind can uncover your underpayments and reveal which payers you need to put on notice.    

“Love it to keep payers honest!!

I work primarily with the contract management and payer auditing functions. I love how easy it is to review payments from our contracted payers to make sure claims are paid based on our contract rates.”

– Verified user in hospital and healthcare on G2

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