The Big Picture
Why is Contract Management (CM) so critical to Healthcare Providers? Because the majority of Provider income is contingent on the ubiquitous Intermediaries who sell “Insurance Coverage”, and those Intermediaries control not only the complex contractual relationship with Providers, but the transactional “purse-strings” as well. Here’s how it looks:
Employers -> Third Party Commercial Intermediaries -> Healthcare Providers -> Patients
Ultimately, employers (consumers) are the real payers, but they don’t pay hospitals and doctors directly for care provided to their employees. Intermediaries have become deeply entrenched middle-men or brokers between the real payers and healthcare Providers, and they keep about 20% of all healthcare premium dollars for their effort. Intermediaries have an obvious business incentive to boost their bottom-line by minimizing payments they remit to Providers. They have developed a highly proficient operating model, and are among the largest, most sophisticated, politically adept, and successful companies in the US. Their relative size and profitability reflects the distinct competitive advantage they have over their Provider trading partners.
The simple truth is Providers are not on a level playing field with Intermediaries and urgently need operational and systems substructure if they are to see their earned share of healthcare premium dollars. Success requires the ability to Gather-Analyze-Strategize-Operationalize. Here’s the functional expression of that workflow.
- Gather – Provider-Intermediary service contracts are lengthy. Better measured in pounds than number of pages for some providers, these contracts must be digitized to have any hope of deriving financial benefit from them. The “culture/mission” of electronic health record (EHR) systems is worlds apart from that of billing/collection RCM. Yet, hospitals and healthcare professionals must get paid for the countless services they provide each day. A great electronic CM system is as critical to the financial well-being of providers as a great EHR is to the physical, mental, and emotional well-being their patients. Being able to accommodate “most” or the “simple” contracts will not suffice. A great CM must manage them all in one efficient electronic system optimized for financial transactions.
- Analyze – A prodigious CM system must be capable of analyzing and modeling contracts, crafted and proposed by Intermediaries, to know with certainty what their true financial impact will be? For example, if a proposed contract renewal boasts a 7% revenue increase, is that number accurate, or is it a 1% increase or really a decrease? A thumb-in-the-air analysis could result in millions of dollars of lost revenue.
- Strategize – Analyzing millions of “What if” CDM pricing permutations to determine optimal cost strategy/structure vis-à-vis the Provider-Intermediary contract is the holy grail of CM. No RCM product or service will yield more revenue faster than this process, when done right. “Price-Sensitivity” analysis, as coined by Parathon, is now offered by some large consulting firms. However, their methodology is extrinsically dependent on manual processes compared to Parathon’s automated and limitless pricing strategy tool.
- Operationalize: The “rubber meets the road” when it comes time to monitor on-going contract payment compliance related to services/procedures doctors and hospitals provide each day. But Intermediaries control the pools of premium dollars, and Providers must submit claims to them for services rendered. As every Provider knows, this billing dynamic is often frictional and time consuming, resulting in reimbursement shortfalls that favor Intermediaries. Everyday every dollar must be systematically accounted for and pursued rigorously to keep pace with the transaction flow of RCM.
Until the healthcare delivery model changes Providers will have to incorporate these CM products and services as integral components of their RCM workflow. They will help Providers even the competitive playing field, and countervail the forbidding legal, actuarial, and functional juggernaut that have propelled Intermediaries to prominence.
Parathon Contract Management Service Suite
You can’t buy experience, but you can subscribe to Parathon and benefit from its 30 years of Healthcare Contract Management experience. We have seen virtually every contract, from the “old” Health Maintenance Organization (HMO) capitated model to the emerging Accountable Care Organizations (ACOs), and everything in between. If an Intermediary-Provider service reimbursement contract can be reduced to a computer algorithm Parathon can handle it, and probably already has. Other systems may get you 80-90% of the way there, but with millions of dollars in the balance, unlike horseshoes close is not good enough. You must be able to cycle 100% of all contractual services systematically and accurately. Parathon’s Gather-Analyze-Strategize-Operationalize approach is critical to RCM success.
Parathon doesn’t just offer an unparalleled function rich software system. It includes an expert staff of highly experienced specialists that load and maintain RCM contracts. We don’t just park an F-16 on your front lawn, and expect you to fly it. Few providers, of any size, have the depth and continuity of staff necessary to load and maintain the many large and complex contracts that constitute a typical RCM platform.
Parathon’s Contract Management system is simply the best of breed, and with reimbursement dollars under attack, an absolute necessity for every healthcare provider.