Contract reimbursement review

When deciding whether to sign a contract with a payer, reimbursement is one of the most important considerations. Adequate reimbursement is critical to the viability of your practice. Therefore, be sure to review contract language on reimbursement carefully.

Aspects of reimbursement are often negotiable, though the extent to which they are negotiable varies by payer and product type. Before agreeing to proposed reimbursement, review your practice expenses and model the reimbursement terms with your practice data. This way, you can understand the impact of the proposed reimbursement on your practice revenue before signing a contract.

Our payer contracting best practices webinar covers the payer contracting process and outlines keys to success. There are also accompanying resources, including a spreadsheet for tracking reimbursement rates, that may help with the contracting process.

Reimbursement methodologies

Reimbursement methodology refers to the way your reimbursement is structured, which can be either fee-for-service or an alternative payment model (APM). For example, reimbursement may be structured as a percentage of the Medicare Physician Fee Schedule (MPFS), or a proprietary fee schedule (fee-for-service), or as a bundled payment (APM). The payer may not be willing to change the reimbursement methodology, but you must understand the methodology to predict your reimbursement.

It is imperative to confirm the fee schedule, and when and how rates will be updated. If reimbursement is based on the MPFS, be sure the contract clearly states that rates are based on current Medicare rates; that rates will be updated in accordance with MPFS updates; and the timeframe for making those updates. Note that the payer’s timeframe for updating rates in accordance with the MPFS may be different for commercial products than for Medicare Advantage products.

Another consideration for reimbursement methodology is electronic funds transfer (EFT). Physicians should have the right to receive electronic payments via the Automated Clearing House EFT standard without being forced to pay fees. Ensure that contract provisions for payment by paper check or EFT do not impose fees or require the physician to accept EFTs or virtual credit cards (VCCs) without having a choice in how the practice prefers to be paid.

Reimbursement rates

The payer contract should clearly state reimbursement rates for all product types in which you’ll participate. Although some aspects of reimbursement may not be negotiable, the rates themselves can often be negotiated.

Before engaging in negotiations, there are a few steps you can take to prepare:

• Develop a value proposition.

• Complete market/payer assessment.

• Complete top code analysis and establish modeling mechanism.

These steps are covered in more detail in our payer contracting best practices webinar.

Based on these steps, develop a proposal with both a quantitative and qualitative component. The quantitative component includes the rates you are requesting. The qualitative component includes the justification for those rates. Be sure the rates will cover your overhead expenses and that they are competitive in the market. See the DermWorld feature “Negotiating fee schedules” for additional information and tips on negotiating reimbursement rates with payers.

After you’ve sent a proposal, the payer may send a counterproposal. You may need to repeat some steps, such as modeling, to review and understand the impact of the new proposed rates.

Multiple procedure/surgical reduction

Contracts should state the terms for multiple procedure payment reduction (MPPR). While some payers may follow Medicare, others do not. Some payers may pay for only a limited number of procedures, such as 100% of the allowed amount for the primary procedure, 75% for the secondary procedure, and 25% for the tertiary procedure. Others may pay at a lower rate than Medicare for subsequent procedures, paying 100% of the allowed amount for the primary procedure and 25% for all subsequent procedures, for example.

You should review your billing patterns for procedures to determine the MPPR that best supports the care you deliver. Identify your proposed MPPR on your proposal to the payer. Note that payers may or may not be willing to negotiate the MPPR; for reference, some payers publish their MPPR as a reimbursement policy, which may be found online. If a payer is unwilling to change the MPPR, you may need to send a revised proposal that accounts for how their desired MPPR will impact your revenue.

Sequestration

Sequestration refers to across-the-board reductions in Medicare payments, which are 2% as of July 1, 2022. CMS applies these 2% reductions to their payments to MA plans. Often, MA plans pass these reductions on to physicians, applying the 2% reduction to physician reimbursement.

However, federal law specifically prohibits CMS from dictating payment arrangements between MA plans and contracted physicians. In a memorandum on sequestration (PDF), CMS states, “whether and how sequestration might affect an MAO’s payments to its contracted providers are governed by the terms of the contract between the MAO and the provider.” In other words, CMS does not require MA plans to apply the 2% reduction to contracted rates for physicians.

Contracts are often silent on sequestration. Even when MA plans apply sequestration to physician reimbursement, there may be no contract language stating that the 2% reduction applies to rates. If there is no contract language on sequestration, ask the payer in writing whether sequestration reductions will be applied to the MA rates. This could be a factor to raise during the negotiation process for MA rates.

* This information is provided for educational purposes only; individual physicians must make independent judgments about payer contracts. The AAD cannot provide legal advice to its members. For specific questions or individual cases, we encourage members to speak with their legal counsel.

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