Healthcare Reform: Dramatic Changes to Hospital Contract Administration

The ultimate challenge has arrived for hospital administrators with the epic legislation that will substantially alter the nation’s health care system.  News headlines from March announced that the extended debates had given way to Congressional action. The massive overhaul is beginning to reshape America’s approach to insurance coverage and health care delivery.

 

Two bills – the Reconciliation Act of 2010 and the Patient Protection and Affordable Care Act – became law. They were heralded in on September 23, along with the consumer-oriented Patient Bill of Rights.  It adds up to more than 2,000 pages of legislation that alters the cornerstones of health treatment and coverage. For hospitals and their administrators, that means dramatic changes in contracts with insurers, doctors and the federal government.

 

The executive director of the Kansas Hospital Association told of the uncertainties in a media interview. He summed up the sentiments of administrators in a single word: “anxious.”

 

The plan is anticipated to add health insurance coverage for an estimated 31 million more residents under the age of 65. However, the opposition has hardly been hushed. Legal challenges have been filed by officials in 21 states, and the outcome of the November elections could shift the balance of Congressional votes on crucial funding for the plans.

 

Those continuing uncertainties are further complicated by the varying dates for the phase-in of the plans themselves.  The September enactment does not apply to employer-based coverage in existence before then. Those plans will not have to comply until January 1, 2014, unless they change certain terms of their policies, such as increasing co-pays and deductibles of employees. The Mercer national consulting firm surveyed 1,100 employers and found that slightly more than half are likely to retain their current plans in 2011.

 

The Patient Bill of Rights becomes effective at the start of the new plan year. For many people with coverage, that will begin on January 1, 2011.

 

Hospital administrators will need to renegotiate or amend existing contracts for the terms that began in September, as well as for several provisions that take effect in future plan years. For some, this will be a fairly straight-forward process. For others, particular those who do not have an automated contract system, it will be a nightmare. 

 

 

Children’s coverage is one of the key areas of transition. Those under 19 years old can no longer be excluded for pre-existing conditions. Parents and guardians will also be able to use their health plans to get insurance for children or other dependents up to 26 years of age.  Insurers also cannot require patients to have prior authorization before they seek care from pediatricians or OB/GYNs.

 

More changes target those of all ages with insurance coverage.

 

Cost-sharing, such as co-payments or deductibles, will be forbidden for routine preventative care.  There will no longer be annual or lifetime caps on coverage payments for essential benefits. A new high-risk pool program may provide coverage for consumers with health issues who have been uninsured for six months or more.

 

Another standard of some current insurance plans – higher co-payments for out-of-network Emergency Room services – will be banned under the new regulations. Illnesses or unintentional errors on paperwork are no longer valid reasons for retroactive cancellations of coverage.  In fact, policies can’t be cancelled unless those insured are first given the opportunity for an independent appeal. During that appeal process, insurers must continue to honor claims for treatment until the appeals are resolved.

 

Hospitals themselves may be subject to fines or barred from using collection agencies if they do not advise patients of free or discounted care options.  More penalties are possible if Medicare patients are re-admitted for care that could have been prevented or avoided in previous admissions.

 

Eventually, medical institutions can expect economic benefits from the increase in patients. However, short-term fiscal health and survival will be difficult because hospitals themselves will be absorbing many basic costs in the transition. Administrators already know the acute problems associated with serving patients who have medical plan coverage that doesn’t fully compensate for the costs of care. Having more of these patients will further squeeze operating margins.

 

Over the long term, the federal government believes that the costs from millions of newly insured Americans can be covered through increased efficiencies by hospitals. That will increase the challenges for administrators already confronting a patchwork maze of public and private insurers, and complicated mechanisms for paying the costs of teaching and conducting patient care research.

 

To stay solvent, hospitals will need to explore new methods to cut even more costs and maximize efficiency. Emerging solutions that enable greater collaboration among employees, suppliers, partners and the patient community offer such opportunities to achieve greater efficiencies. This can be particularly true in establishing an effective contract lifecycle management system that provides the transparency and reliable data to make the best decisions when negotiating new or renegotiating existing agreements with suppliers that drive the majority of a hospital’s operating expenses. 

 

 

Workflow-driven contract lifecycle management systems can provide what is typically missing in most public and private hospitals – an accurate view of the big picture in end-to-end processes involving contractual dealings. That is essential in preserving and strengthening fragile operating margins. Managing contracts on a daily basis can mean everything in controlling expenses in all working relationships. That goes for doctors, medical schools, imaging systems, pharmaceuticals, medical supplies and equipment, as well as food services, maintenance and other support functions.

 

Establishing automated alert notifications for contract expirations and renewals can enable administrators to avoid being locked into unfavorable terms and conditions and higher prices that can cripple the best efforts at improving operating efficiency during this crucial time.

 

A rules-based contract system also reduces the financial and legal exposure associated with the newly established regulatory policies. Administrators will be able to ensure compliance with policies to advise patients of free or discounted care options by automating these rules into the workflow process for admitting patients and establishing coverage levels. Billing and administration already account for one-quarter of the entire budgets for typical U.S. hospitals. Thomson Reuters released a report last year that the average American physician needs eight hours every week to deal with the demands of paperwork. That is in addition to the 1.66 clerical workers now required per doctor.

 

Administrators can reduce those labor costs and simplify complex issues through an automated process driven by defined policies and procedures. Contact management systems that capture key contract metadata offer a single, searchable, management contract repository to store, monitor, and manage legal agreements. Solutions that provide enterprise-wide visibility into the entire history of a contract can make all the difference in enabling administrators to negotiate from a position of strength and set sustainable rates. 

 

These systems can be invaluable in providing hospitals with intelligence to forge favorable agreements and ensure solid compliance with the resulting terms.  Audits and related performance monitoring can mean that hospitals get the most out of their contractual relationships. 

 

The massive changes in America’s approach to health care are arriving. Hospital Administrators should investigate collaborative workflow contract management solutions to better prepare for the vast challenges and uncertainties ahead.

 

 

 

CLM Matrix is the market leader in Contract Lifecycle Management (CLM) software solutions on Microsoft Office and SharePoint technology platforms. Our solution extends the functionality of traditional contract management software by adding features such as:

 

 

To learn more about CLM Matrix and our award winning software solutions, please visit clmmatrix.com or contact us directly at 1.800.961.6534.

 

©2010 CLM Matrix. All rights reserved.