Do your hospital contracts require their own dictionary?

Last week, Kerry McDonald, a health plan veteran and CEO at the New York-area consulting firm Strategic Healthcare Alliances LLC, shared the first of two basic steps required to improve contract negotiations between health insurers and hospitals: Go in with the attitude that you need a "win-win" contract. This week, he fills me in on Step 2:

Keep contracts (relatively) simple.

Health plans often negotiate contracts that are "too complex for their claims department to pay the claims correctly," says McDonald. The thinking behind these complex contracts seems to be that health plans "can parse out the different pieces of the contract and get better rates on them," he explains.

But the reality is that "the contract gets so far out of the realm of the system being able to auto-adjudicate the claim, a person needs to look at it. Every person who looks at that contract is going to interpret it slightly differently. So the claims get paid differently all the time, and the hospital can't figure out what is going on: Why did you pay it this way one time, but then pay it differently in another case when it's the same kind of patient, the same diagnosis and the same service? It causes a lot of conflict between hospitals and health plans."

The bottom line is that health plans should simplify their methodology to conform to their claims system, says McDonald. "Depending on the claim system that you have, you can still be very complex, but you want to stay within the boundaries of what that system will allow you to set up in your pricing and your benefits and your authorization configuration." The payer's claim system should be able to auto-adjudicate most claims, he adds. "You may have the claim coming to someone to review, but they shouldn't actually have to get into the detail of looking at that claim and trying to figure out how to pay it." - Caralyn