Medical Billing Guidelines: Out-of-Network Contracts


Payers are relentlessly reducing the amounts paid to contracted providers. Frequently fear of the unknown keeps providers in contracts that are in fact losing money. Let's just look at a few things in this expert medical billing training article that your contracts may include that are actually reducing your overall reimbursement.

We'll look at enhanced groupers. As most of you will probably recall, a few years ago, Medicare used groupers to determine payment for facilities. So they would take procedures that they have determined to need the same skill level, needed the same amount of equipment and personnel and time in the OR and they put them all under one grouper and they pay all of the procedures within that grouper the same rate.

What commercial payers did was take the grouper concept but instead of adhering to the groups as confirmed by related Medicare guidelines, they put some of the procedures that should have been in a higher paying grouper into a lower one so that they could cut cost.

And what they did in a lot of those cases was determine based on the facility what type of facility it was and then they would select particular procedures for that facility and put them in lower grouper.

So an ortho facility where a knee arthroscopies may have been in Group 4, the commercial payers are putting those in Group 1 or 2 which would mean a significant reduction in payment as per medical billing rules. They were also not including any implants.

So the grouper rate for, say, a knee arthroscopy or another procedure where an implant might be used and should have been separately payable, will now just be paid at that rate; meaning, there would be no additional reimbursement for the other charges or expenses that were actually applicable to that procedure.

They also introduced implant thresholds; meaning, that for most procedures, they would say, “If implant total cost don't go over $500, we're also not going to pay anything in addition to that.”

So in addition to putting your procedure in a lower grouper, they were taking away the option of billing for implants that were under $500 – generally $500 to $1000 are the thresholds that you'll see.

So an implant threshold is key because for most facilities, the implants end up costing about $300 average which means that most of the procedures had implants used that were not billable to the commercial payer but they ate up all of the profit that would have been realized for that particular case.

So even though you may have a robust case rate or your procedure may be in the correct grouper, it's also important to look at your implant thresholds to determine if the additional cost of those implants which will not be reimbursed by the payer is going to use up any profit margin that you might have had for a particular procedure as per medical billing rules.

Another key issue is procedure rates versus case rates. Many commercial payers in their contracts have a rate that is for the case itself. A case rate means that every procedure done for that patient on that day is included.

So if you have a physician who tends to do multiple procedures on a patient, those physicians are going to be the physicians that would drain your revenue the most because they will be doing more procedures for a flat rate than other physicians who may just do one procedure or two.

Procedure rates will be that every procedure that is performed or received some sort of reimbursement. Case rate, everything that was performed on that patient on that day, is paid. The longer you're in the OR, the more procedures performed on the patient, the more your revenue dwindles for that particular case.

Another issue is silent PPOs. So where you may enter into a contract with a payer and you've agreed on case rates, as you're looking into the fine print of your contract, you may see that they refer to silent PPOs. And they say that whichever rate is lower is the rate that you are honoring when you sign that contract.

And then what the payers have done was entered into contracts with PPOs that have negotiated lower rates with you. And that PPO becomes primary over the contract with the one that you've signed, as suggested by our expert in a healthcare webinar.

And this is a key a lot of times. You'll hear a biller or someone who works with your AR, they say they don't understand why the reimbursement doesn't match the contract.

Generally that's the reason – it's because they've entered into a contract with another PPO and you may have signed a contract with that PPO thinking you don't have many patients who have that coverage and you know it's not going to be a big impact on your AR or a big impact on your reimbursement where in reality, some of your largest payers are going to be feeding the claims into that silent PPO and they're again reducing your reimbursement.

In a lot of the contracts, they also override the state mandated fee schedules and state mandated filing limitations. Most states have at least a year for timely filing of claims or they have clauses in there, statutes that say, “You have to have this long to file a claim as a payer has to retract a payment.”

Healthcare Training Tip: And so if a payer can go back three years to retract payment, they have to have some provision that allow you three years to submit a claim. But when you sign a payer contract, most of those contracts have a reduction of that in there. And when you sign that, you sign away your rights that the state has given to you.

A lot of contracts will even just a 90-day claim submission window while they keep their 3-year retraction window open. These are the things that you can red line in your contract before you make a determination to go out-of-network to see if you can negotiate with that particular payer and achieve healthcare compliance.

If you have hesitation or if you're in a situation where the board makes these decisions and they want to make sure that no stone has been left unturned before they make a decision to go out-of-network, these are the issues that you would want to address with your provider representative in order to be able to determine whether or not you will be able to come to a reasonable agreement on continuing with your contract.

Multiple procedure clause

This is key and this is something we've seen in more and more contracts. We're all used to hearing a multiple procedure rate. Your first procedure is paid at 100%, the next one at 50%.

Even sometimes the third one may be at 25% but several contracts now are saying that there will be no additional payment for other procedures after that third one as per healthcare rules. And there are several cases where three procedures are completely acceptable and normal.

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