Managed Care Contract Optimization

The problem
Managed care contract modeling and negotiation is a point of great revenue leverage for hospitals, and it complements Strategic Pricing. In fact, contract negotiation may be thought of as Tactical Pricing. If either function is not properly managed, the hospital will not earn to its potential. A hospital can negotiate excellent contracts, but if Chargemaster rates are not correct, the hospital loses revenue. Likewise, when Chargemaster prices are correct, but contracts are not structured properly, the hospital loses revenue.

Almost all hospitals have a portfolio of contracts that may range from just a few contracts to hundreds of contracts that have widely varying revenues. The revenue contribution from managed care contracts usually runs between 50-70% of net revenues. With so much revenue on the line, contract structuring and negotiation is a critical responsibility. Successful contract negotiations yields revenues that allow the hospital to continue to provide top quality service implement new technology and treat the uninsured.

Contracts with managed care companies are often complex documents and may include combinations of the following common payment arrangements: percent of charges (POC), per diems, DRG, case rate and capitation. In addition, many times these arrangements are further qualified by carve-out, carve-in, stop-loss, and a multitude of other special provisions.

The bottom line for hospitals is that some of the risk that once fell on the managed care companies now falls on the hospital through their contracts. Managed care companies use sophisticated actuarial services to help them negotiate contracts. Hospitals need to apply the same or better advanced analytics when negotiating contracts in order to minimize their risk and ensure adequate revenue.

The solution
DAXPY Contract Modeling Service provides rigorous scientific optimization using statistical and analytical methods which provides the crucial information needed by the hospital to help them negotiate sound contracts. DAXPY service is provided by experienced staff with proven track record of success. Provided as a service, there is no need to install expensive and complex software systems saving the hospital in both staff and support.

Why do we need DAXPY Contract Modeling Services? We already have a contract modeling tool.
All other contract modeling tools are really just big calculators; you tell them the contract terms and rates and the tool will calculate the expected net revenue. Unlike these other tools, the technology used in DAXPY Contract Modeling Services, calculates what the terms and rates should be to maximize your net revenues whilst simultaneously minimizing your risk.

The DAXPY Contract Modeling Service provides a complete package to aid in contract negotiations. It provides forecast of future usage of all patient populations including outpatients by first doing a rigorous data-mining of all your billing, diagnosis and procedure data. It allows the hospital to benchmark against previous year data and gives the hospital the opportunity to investigate different scenarios, payment terms and special provisions during negotiations. With each optimization run expected revenue and risk are presented to the hospital in order to evaluate the effectiveness of the contract model.

The anticipated financial benefit of Contract Optimization is net revenue improvement of up to 10 to 25% over contracts created by simply increasing all the fixed rates (per-diems, case-rates etc) by an across-the-board increase.

Call us today to significantly improve your managed care net revenues.