Healthcare Fee Schedule and Contract Terms: Reinforce Revenue with These 6 Fixes

Whether it’s UnitedHealthcare, Humana, or the VA, the touchpoints of all your payer relationships are fee schedules and contract terms. Inaccuracies in these documents leave you open to payer exploitation. 

Payers have two primary ways of keeping more patient dollars. Underpayments – where they pay less than the contracted rate for the service – are widespread. One study reveals that two to three percent of provider revenue is lost in payer underpayments. Some of our clients have shared that their underpayments reach five to seven percent of net revenue.   

Payers also abuse providers in the contract negotiation process. Where providers’ prime directive is patient care, payers have the freedom and legal staff to focus closely on contracts. Payers know providers are too distracted by maintaining patient outcomes during a staffing shortage to scrutinize contract fees and terms. According to an MGMA StatPoll 58 percent of providers review contracts yearly, 16 percent every two years and 17 percent never review them. While most providers review contracts, many relegate this task to staff who are not experts in this area. Aggressive challenges to payer-proposed contracts are rare. Payers take advantage of these vulnerabilities on the provider side. 

But automation and AI have come to the aid of healthcare organizations. These technologies help streamline administrative processes, including contract management. More organizations access this technology by either outsourcing contract management to specialists who use it or bringing it in-house in the form of contract management software.  

Whichever solution you choose, your revenue will depend on the accuracy of your contracts. Here, you can review just where inaccuracies that threaten to drain your revenue occur. Getting these points addressed now will improve revenue for years to come.

What is payer fee schedule and contract optimization?

A payer fee schedule is a structured list of reimbursement rates set by insurance companies or other payers for specific medical services and procedures provided by healthcare professionals. It details the amount the payer will pay the provider for each service, often based on codes from standardized systems like the Current Procedural Terminology (CPT). These schedules are crucial for healthcare practices as they directly impact revenue and cash flow. Negotiating favorable fee schedules is essential for ensuring that providers receive adequate compensation for their services.

Often considered one of the most important parts of the contract, the fee schedule specifies the reimbursement rates for various medical services and procedures, directly determining the revenue a healthcare provider will receive for their services. However, while the fee schedule is vital, other contract terms—such as timely filing limits, denial management, payment terms, and service inclusions/exclusions—are also critical for ensuring a healthcare practice's overall financial health. All of these terms have the potential to drain provider revenue when written to benefit only payers. 

Optimizing the fee schedule and the contract terms involves knowing which payers are paying contracted rates, and which are falling short. It also means someone either on your staff or outsourced knows the meaning of every contract term as well as the language involved with these terms that protect your interests. 

Payer fee schedule accuracy challenges

The following issues erode your fee schedule accuracy and your revenue.  

Insufficient contract management staff and expertise

• Challenge:  Healthcare organizations have run short, not only of clinicians but revenue cycle management specialists, too. A CWH Advisors survey of hospital and medical group executives released in 2023 reports that 63 percent have staffing shortages in their revenue cycle departments. The lack of staff is further complicated by existing staff’s lack of experience in contract management. These two pressure points lead to contract review and renewal deprioritization. 
• Impact:  Negligent contract review leaves you open to lower rates, eligibility errors (payers regularly change contracts often without provider approval), and compliance issues.
• Solution:  Healthcare contract management best practices stress proactive control of contracts. You have several options. Train a staff member in contract management and modeling, bring in a part-time or full-time contract specialist, partner with a third party, or use payer contract management software to streamline and automate the management of multiple fee schedules. To find a part-time contract specialist, check the consulting arms of HFMA and MGMA. Whatever you do, don’t let payers dictate fees and terms without evaluating and contesting them. Model the terms they propose to determine how their changes will impact your revenue. Review the powerful steps involved in payer contract negotiation so you can push back against payer-favorable rates and terms. 

Take a quick, self-guided tour through a powerful contract management and modeling tool:

Missed fee schedules and contract updates

• Challenge: In the chaos of the COVID pandemic and the staffing shortage that followed, many providers lost track of their contracts. They don’t have a central location to keep them all organized. Moreover, they haven’t put a system into place that catches every communication from payers. 

With contract term and fee changes coming in from payers regularly – and often via snail mail – practices often struggle to scrutinize these changes.  Further, when they fail to add these changes to their fee schedules, contracts become inaccurate. Incorrect billing and reimbursement issues trigger denials. When providers miss updates, payers push through fees and terms designed to keep more revenue on their side. Most include clauses in their contracts stating that if they don’t hear from providers about proposed changes to fees or terms, they have the right to execute them anyway. (Read about the many contract terms payers use to withhold revenue in our healthcare underpayments guide.)

• Impact: Diminishment of revenue and cash flow. Loss of control over contracts. 
• Solution: Establish strong payer relationships and use technology to stay informed about changes. Alert your mail room to payer letters. Make RCM staff aware of them, too, so they can respond promptly and avoid having payers ram through changes due to your failure to respond. 

Complexity and variability across payers lead to inaccuracies

• Challenge: Different payers have different fee schedules, rules, and terms, creating complexity that staff may not have the specific expertise to manage. Non-standardized formats make managing multiple contracts simultaneously almost impossible, leading to inaccuracies.

Payers do not take pains to make workflows simple for providers. The worst of them have a high “hassle factor.”  They deny claims more than competitors, delay paying, and demand extensive prior authorization details and records. They keep staff on the phone for a long time. (We discuss how you can use the hassle factor as a negotiation point in a recent payer contracting post.) When you have several payers with complex contracts and esoteric language, interpreting their terms weighs down staff. 

• Impact: Increased administrative burden and revenue leakage. Misinterpretation of contract terms can result in incorrect billing practices and lost revenue.
• Solution:  Contract management software standardizes and simplifies contract terms. You can also lean on your contract management software’s customer service team for additional guidance. Robust contract management and modeling software can speed interactions with payers by telling you: some text
  • what the payer is actually asking for
  • impact of payer-proposed changes on your revenue before you agree
  • impact of the changes you prefer on your revenue
  • relevant data that backs up your cases for different fees and terms
  •  underpayments from highest to lowest by CPT code and payer, revealing contract performance across your payer mix
  • potential contract areas for improvement and negotiation
  • which facilities in your portfolios get the most underpayments
  • monthly underpayment trends

You can also use outside legal and financial experts to review and interpret contract language. Of course, the custom work these third parties provide comes at a higher cost than using software. 

Manual tracking and updates lead to inaccuracies

• Challenge: Healthcare organizations often have the best intentions of tracking and updating contracts. Still, manual execution can be fraught with human error, stemming from a high workload but also insufficient training and knowledge. 
• Impact: When outdated information is used for billing, claim denials and payment delays result.
• Solution: Establish a dedicated contract specialist, use an outside contractor, and /or automate the contract management process with software that tracks, updates, and verifies contract terms in real time. A contract specialist can execute tasks quickly and may even have staff to check their work. Contract management software has its own self-checks. Should an issue arise, it notifies staff. 

Lack of visibility into contract performance triggers inaccuracies

• Challenge: Not only do most providers miss contract renewal dates and updates, but they don’t have the time, staff, or bandwidth to measure contract performance. Viewing your contracts through the lens of how they perform helps you keep contracts accurate. Which of your payers pay the most for which CPT code? Which pay on time and which lag? Will a proposed term change cause a net benefit or net detriment to your bottom line?  
• Impact: When you don’t know which of your payers meet their contract terms, which are trying to push past a term unfavorable to you, and which are paying the least in your payer mix, you don’t have the data you need to negotiate with confidence. You are vulnerable to payer revenue-grabbing machinations. 
• Solution: Assign your contract specialists and contract management software to use analytics and reporting tools to monitor contract performance and identify areas for improvement.

Payer disputes and appeals  

• Challenge: where payers have the time and legal staff to fashion and nit-pick contracts, providers are busy caring for patients. Juggling many responsibilities, providers often de-prioritize disputes over contract terms and denied claims. They’ve learned that these require significant time and resources to resolve. Without both payers and providers reviewing contracts carefully, inaccuracies can arise. 
• Impact: Disputes can strain payer-provider relationships and delay revenue. Still providers must do their due diligence to ensure contract fees and terms are accurate. 
• Solution: Develop a robust dispute resolution process, including detailed documentation and a dedicated team to handle appeals and negotiations.

Start your contract management efforts with accurate healthcare fee schedules 

By closely monitoring these critical areas within payer fee schedules and contracts, MSOs can significantly reduce inaccuracies and optimize their revenue. Regular updates, thorough reviews, staff training, and the use of advanced contract management systems are essential strategies for achieving greater accuracy and financial stability.

You don’t have to clean up your contracts alone. MD Clarity's RevFind automates contract management so that practices, physician groups, and MSOs can model proposed payer changes, understand how these impact revenue, and propose alternative, more favorable terms. RevFind also empowers healthcare organizations by revealing their best and worst payers, identifying payment trends, and uncover payer underpayments. It digitizes and centralizes all agreements in a single location and automates alerts about contract expiration, renewal, and exit dates, so you meet all deadlines. You can even configure it to notify you 90 days ahead of these important dates in order to start negotiation processes early. It automatically populates reports comparing reimbursements by CPT code and provider location. 

Schedule a demo to see how RevFind provides insights about payer contract performance and the contract improvements that help you boost net revenue.