Managed Care Contract Language and ICD-10: Top 6 ICD-10 Contract Readiness Questions

Do your managed care contract agreements protect your organization from poor quality claims processing and appeal review? The answer to this question will grow in importance with this year’s ICD-10 coding implementation.

In fact, good contract language can be a key element to ICD-10 survival.

Healthcare billing personnel often view the provider-carrier relationship as an adversarial, often dysfunctional partnership. Unfortunately, improving that relationship is a daunting task. However, ICD-10 implementation presents the opportunity to renew efforts to communicate with payers and seek improvement to the terms that define the partnership.

Now is the time to think about your contract in new terms: as a patient-focused partnership agreement. Under the next era of healthcare innovation, the development of a mutually beneficial working relationship that fosters problem-solving, formalizes respective duties through clear, mutually beneficial contract terms, and encourages open, ongoing communication is critical to the success of every healthcare organization. Further, for doctors and other providers operating in tougher managed care markets where insurers hold all the negotiation cards, it is all the more important to consider how to approach negotiations, what to ask for and what downstream effect unfavorable terms have on patient care.

Most contract negotiators live in a world of difficult trade-offs. The majority of doctors operate under what is often called a take-it-or-leave-it managed care contractual opportunity. Without a doubt, facing up to the insurance carrier’s size, bureaucracy, legal acumen and hidebound routine can be daunting. Yet, many providers have, with persistence, won important concessions. So here are our top six questions to consider when preparing for contract negotiations and the potential ICD-10 impact:

  1. Does your contract language address ICD-10 revenue neutrality? Deborah Grider, of Blue and Company, states that some contracts now state that they agree to “raise rates if necessary, to reach a financially neutral position.” However, financial neutrality may not be defined and payers may be more diligent about neutralizing overpayments than adjusting underpayments. Further, even if financial neutrality is assigned a specific measurement – such as one percent above or below previous reimbursement – enforcing the terms in your favor may be difficult. Grider recommends negotiating for language which states that reimbursement will remain the same post-implementation and variances by either party will be refunded or reimbursed as they are determined. See for more information. On the hospital revenue neutrality side, the MedAssets ICD-10 playbook further recommends modeling contract fee structures with different data elements for ICD-10 impact. Examples given include: regrouping claims under a different DRG grouper type or version, manipulating the anchor date and simulating a price increase. Download the ICD-10 Playbook at for MedAssets contract negotiation tips.
  2. Do your contracts penalize the payer for late payments? Prompt payment contract amendments can be an uphill negotiation battle. However, a good starting point for negotiation is to seek prompt payment wording which mimics state prompt payment legal protections. Most states now have consumer protection laws related to prompt payment and many specify a penalty for late payments. Even more helpful, state law also may regulate insurance verification, prior authorization processes and appeal/grievance rights, all increasingly important as payers struggle with ICD-10 implementation. As you know if you try to cite these protections, group health plans, including ERISA-sponsored group health plans, are exempt from state insurance mandates which leaves healthcare organizations unable to take full advantage of these laws. Therefore, negotiate these same protections into the contract to insure across-the-board applicability of these protections on all commercial payer claims.
  3. Do your contracts define “medical necessity” in provider-friendly terms. ICD-10 impact on medical necessity review is largely unknown. However, contract language can help mitigate rampant deployment of new medical necessity edits. Because the clinical rationale for medical necessity decisions vary greatly from carrier to carrier, it is important that contracts reference an agreed upon clinical authority. Seek to negotiate a specific medical necessity definition and to specify that the clinical rationale your organization will accept as a clinical authority for quality healthcare. If possible, specifically reference your preferred source for clinical information such as InterQual, Milliman & Robertson, or specialty-specific guidelines for physicians, such as the American College of Cardiology Foundation and American Heart Association Diagnosis and Management of Chronic Heart Failure in Adults, or the American Psychiatric Association Guidelines for the treatment of patients with substance abuse disorders. This can give you leverage in medical necessity appeals involving new edits.
  4. Do your contracts restrict changes to the fee schedule to a specific time frame (ie,, yearly) and require prior notification of changes? ICD-10 may trigger downstream fee schedule adjustments so make sure the contract addresses both frequency and notification of fee schedule changes.
  5. Do your contracts recognize the provider’s right to appeal and specify standards for appeal review. For example, appeal protections should include timely decision and review by qualified reviewers. Further, ICD-10 denials may be ambiguous due to the fact that they involve recently deployed software edits. Seek to amend contracts to clarify that coding appeals will be reviewed by a certified coder upon request and that coding decisions will be based on written and/or searchable industry coding standards.
  6. Do your contracts protect the provider from timely filing and lack of prior authorization denials that can be traced back to patient error? Patients are in a state of transition as well. Many may be providing out-of-date insurance cards and may not have the most up-to-date information regarding newly updated precertification requirements. Therefore, it is important that contracts reflect the risk providers incur when seeing newly insured patients.

Finally, if your contracts have no such protections or your managed care partners are simply unwilling to talk about mutually beneficial language, consult a managed care negotiation to work with you on both market assessment and developing your value proposition to the managed care payers.

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