Like all contracts, billing agreements include a combination of affirmative duties and responsibilities, prohibitions, conditional or consequential actions (“If this, then …”), terms and conditions that apply mutually or unilaterally, as well as a host of legal and business terms, including fees and charges. This article is not meant to provide a comprehensive discussion of all of those elements, or the dozens of other special language or addenda – such as coding services, HIPAA, compliance, or commencement/termination procedures. Rather, the new, and somewhat special, business changes that are on the horizon for and after 2017 have created the possibility that billing companies may need to modify their contracts with new and current clients.
Billing agreements are never a “once and done” document. They should be reviewed two or three times a year to ensure that they are current, applicable to the way you do business, and cover your clients’ and your responsibilities, risks, and costs. A change could be something as significant as updating your billing software or address, or something as small as adding or removing a “standard” service, even if it’s included in your fees.
What’s New for 2017?
The implementation of MACRA, MIPS, and APMs has been major industry news for most of 2016. Whether these new Medicare programs will have a major, minor, or no effect on your clients is a function of their payor mix, their specialty and service mix, as well as the decisions and elections they make, or have already made. If these changes have little or no impact on a client, then there’s not much reason to make major changes in your contract. But I’m writing this on the expectation that the Medicare program changes will affect most billing companies and at least some portion of your client base. Right now, only traditional Medicare plan payments are affected; whether additional payors emulate Medicare remains to be seen.
The MACRA/MIPS programs are a combination of carrot and stick rewards and penalties associated with certain practice behaviors, many of which are – with the rhetoric removed – disease management activities designed to lower Medicare’s program costs by encouraging and rewarding providers for specific types of care for specific diseases. Or, the programs penalize those providers who chose not to participate in the program, regardless of whether they are, or are not, managing those targeted diagnoses well.
Back when PQRI/PQRS/MU began, astute HBMA members figured out that the costs associated with participating and reporting exceeded the “reward” of bonus payments made to the practice; it was income-negative to participate, and the losses from not participating were less for the practice. Of course, if the billing company bore the costs and the providers got the bonuses, the billing company lost money while the practice made a little – even if the billing company’s percentage fee was increased slightly. Practices doing their own billing figured this out, too, and MGMA echoed HBMA members’ findings.
For 2017 and beyond, are CMS’s new initiatives different? Functionally, they are, and they are much more complex, with many more components and moving parts. Financially, the same issues are back again: Will participating practices make or lose money from MACRA/MIPS/APM net of the cost of participating? As is nearly always the case, it depends. It depends on who bears the costs and who reaps the rewards, or who is financially penalized and how that affects the practice and/or the billing organization. It doesn’t matter much whether it’s a billing company or the practice.
Assumptions
Certain assumptions were necessary to keep this article from becoming a chapter in a book, so I’ve based my analysis and recommendations on the following”
- Billing services are charged on the basis of a percentage of collections, since this is the method employed by the vast majority of all billing companies.
- Add-on fees – such as postage, enrollment, refunds, and other à-la-carte charges – may continue to apply.
- Special fees associated with the new Medicare payment programs will be applied to affected claims and payments, rather than to the practice’s entire income.
- Special contract terms might be unique to all, or certain, Medicare claims. Or, terms might be generally applicable, since some may apply to other insurer’s payment programs, such as bundled payments.
- A billing agreement may consist of listed clauses, as well as companion documents, such as exhibits, addenda, and other documents. Some of the companion documents can be referred to as “subject to change,” “from time-to-time,” “in order to address operational matters,” “policies, procedures, and additions or changes to workflow,” and “other service-related activities.”
Program Changes
Although CMS has published the MACRA/MIPS Final Rules for 2017 and beyond, those regulations are always subject to change, as long as CMS follows normal federal rules. Clarification and interpretation of existing regulations are also common, so your contract may have to be reviewed or modified if there are material changes (having a meaningful impact on costs, operations, compliance, or fees) that affect your relationship. So, even though we think we know what is required and what will happen, abundant history has proven that nothing stays the same for long.
CONTRACT TIP 1: A “Material Change” clause is essential to ensure that either party can propose a modification of the agreement as a result of a regulatory, business, or other meaningful change.
Participation
First and foremost, will the practice participate in the new payment program(s)? If yes, which one(s), and how will that participation affect your company’s work and costs? Some new work could include provider training and support, additional coding, additional data entry, costs associated with contracting with a registry, and additional tracking and reporting, to name a few. Do these add up to meaningful costs that should be separated from your standard fees?
For your existing, long-standing clients, how much of a cost cushion is in your fee, since these programs may not have affected your pricing back when the client first signed up? When you quoted your fees, were they based on non-participation in new payment programs, so additional work and costs should be added? If the practice’s income will be increased, will the increase be material enough to net your additional costs against the increased percentage income? What if you anticipated participation, but the practice has elected to not participate? Your costs may be less, but their income will decline, too, and reduction(s) will escalate over coming years if they remain a client and continue to not participate. It may be obvious, but as client payments decline, your fixed percentage produces less revenue-per-claim and lowers your profit margin.
Contract Tip 2: Add a section or clause that addresses the client’s participation election(S), and require that it be formalized in a written notice to you for each applicable program and/or payor. If the election(S) are changeable or subject to renewal/opt-out, require that the practice provide timely, reasonable notice to you.
CONTRACT TIP 3: If the practice’s initial or subsequent election(S) will affect your costs and/or fees, provide for time and a method for you to establish changes (positive or negative) in your fees. The client can be given time to accept or negotiate your changes, or refuse and leave.
CONTRACT TIP 4: Your current and new clients may or may not have participated in PQRI/PQRS and the many other participation-driven payment programs in the past. Will those decisions impact the practice’s income (positive or negative) in the coming years? Address this impact as applicable, and whether/how it will affect your work, costs, fees, and/or services.
Documentation
These programs require actual work by the provider, even if the amount of work is relatively minor, since faking the work takes things down a dark road we need not address here. Only the provider can create and provide access to the documentation of their fulfillment of applicable program requirements. Your contract could provide you with one of these: (a) a right to; (b) a duty to; or (c) a restriction from reviewing the provider’s records to ensure compliance. In most billing relationships there is an explicit or implicit warranty by the provider that data provided for billing is supported by the required documentation in the provider’s records. Since some of the new payment program payments are predicated on specific management activities or treatments, documentation will, predictably, be subject to post-payment audit in the future. In the event that the documentation does not exist, or fails to meet program requirements, how would that failure affect already-paid and/or future bonus payments?
For billing companies that include coding services with billing – whether charged separately or combined – these responsibilities fall more heavily on the billing company, making a review of the coding language in your contract extremely important. This will be particularly important if your coders assign special codes, special modifiers, anything that is “hard-wired” in the practice’s fee schedule, or other work that impacts how the practices is paid within the special payment programs.
If any of the payment programs require a form of attestation, such as for EMR implementation and utilization, who will be responsible for submitting that attestation? What if the deadline is missed and there are financial consequences? What if the attestation is false (it may not matter whether it was deliberate or innocent) and there are financial consequences?
CONTRACT TIP 5: Review the contract language related to coding and compliance to ensure that your liability is in line with your services. If your agreement incorporates exhibits that enumerate client and company duties and responsibilities, make sure those exhibits match what you will do going forward.
CONTRACT TIP 6: Consider a hold-harmless exception that addresses the provider’s duty or your ability to monitor compliance, and whether a provider’s non-compliance will affect your fees retrospectively (recoupments, offsets, etc.) and/or prospectively.
CONTRACT TIP 7: Review all of the various payment program requirements that apply now, or will be implemented in 2017-2018, and try to anticipate how those changes will affect your services, work, costs, and fees.
CONTRACT Tip 8: List any tracking or monitoring reports you or your client will produce during the term of the contract, with frequencies, data content, and samples, if possible. Make sure you produce the reports on time. The list belongs in the exhibits, the samples, or a similar document.
CONTRACT TIP 9: Require a written statement in your contract or a companion document that spells out, “Data upon which biller relied in designing the services offered and the pricing thereof.” If any of the provider’s representations are materially inaccurate, you should have the right to requote your fees – up or down. This clause should be reciprocal; if changes are favorable to the practice and overall income increases, the practice should have the right to request a recalculation, if you don’t offer one.
CONTRACT Tip 10: If current or new clients participate in new payment schemes that will create new or increased costs, and those costs will be outliers from your other specialties/customers, it is entirely reasonable to factor those extra costs into your pricing. Be sure to be fair about how you apply those costs, and recognize that you should amortize one-time or front-loaded costs over two or three years. Add-on costs could be charged as an additional fraction of a percent or as a per-claim or per-provider flat rate.
CONTRACT TIP 11: Amend your standard agreement to include an “escalator clause” that covers “specific costs associated with new regulations, payment programs and schemes, or other imposed or elected changes that have specific, additional costs associated with the billing or reporting services covered in this agreement.” You could indicate whether there are triggering thresholds (costs greater than $.25 per claim, for example) or other determinants that would activate this clause. Also, be sure to include a periodic review (within 90 days of December 31 of each year, for example) to provide both parties with a ratification step.
CONTRACT TIP 12: Consider any changes in fees as a threshold decision. If the amounts that will be added to your fees exceed an internal threshold, such as, more than 3 percent or 5 percent of the average monthly invoice for the prior six (or 12) months, that would trigger assessment of additional fees.
Conclusion
MACRA/MIPS/APM programs and others like them are likely to be part of our near-term business life. Whether they remain so is unclear, politically or as part of the never-ending evolution of our industry. Twenty years ago many industry “experts” proclaimed that “capitation will become the way all healthcare is paid for within a few years.” We now know how that prediction turned out. Nevertheless, while it is with us it will affect how we contract for our services until it is gone or becomes the way we contract for all of our services longer into an uncertain future.
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