Contract Negotiations with Revenue Cycle Partners: Avoiding Pitfalls

revenue cycle partnerWhen you start contract negotiations with an RCM vendor, the objective should always be making sure the contract is a win-win for both companies. Every contract will vary in terms of detail and level of specificity. At a minimum, you should address the following questions to avoid pitfalls that can cost your practice time, resources, and money:

Which tasks are performed by the RCM partner, which are retained by the practice?

Revenue cycle has become an overused, generic term and service bundles are not created equal - it is important to understand what parts of the revenue cycle a company really takes on before you sign up.

For some companies their RCM service offering stops at the submission of claims to payors. Follow up on denials, taking patient phone calls, submitting appeals, negotiating payment in the instance of nonparticipation, etc. falls back on the practice. You should also ask about the level of account management support your practice will receive. Is there an industry expert available to your practice who can help you evaluate the financial status and health of your practice or simply a support desk where you call a number and open a support ticket?

What is the fee rate percentage? Are there any additional costs?

The standard pricing model in the revenue cycle industry is to charge a percentage of what is collected. This helps align incentives with the practice and also ensures that expenses are variable and tied to collections, not fixed and tied to. This seems simple and often is but there are some groups that keep their advertised percentage artificially low by adding in additional fees for software licenses or upgrades, patient calls, eligibility transactions, recall notices, appointment reminders, etc. Make sure you clearly understand what you are being charged for and what will cost you extra.

Is there a threshold dollar amount for write-offs and patient collection efforts?

Some RCM companies set artificial thresholds on the dollar amount required on a denial before they will do any follow up work. Some companies are known to set this threshold as high as $200!  This means that a denied claim with a potential payment value of less than $200 is kicked back to the practice or - worse - automatically adjusted off. A practice should understand the policies and follow up thresholds so they aren't surprised when denials are not followed up on. Reputable companies will be happy to disclose this information.

What is the term of the contract?

Pay extra attention on this point. Many vendors will include an “auto-renew” or “evergreen” clause as part of their standard terms and conditions. The clause allows the vendor to renew your contract automatically if you do not send written notice of your intent to terminate within a specified period of time. A typical evergreen clause may read something like this:

Each Term shall automatically renew for subsequent periods of the same length as the initial Term unless either party gives the other written notice of termination at least thirty (30) days prior to expiration of the then-current Term.

If you miss the communication deadline for termination you could be stuck in the contract for another year (or longer) or face big financial penalties to opt-out of it.

Also, understand if there is the ability to terminate prior to expiration due to breach of contract  or other forms of non-performance.

What are the obligations of the practice and the RCM partner when the contract is terminated?

Make sure you understand what the obligations and responsibilities are for both parties when the agreement is being terminated. For example, will the vendor continue to handle billing during the termination period? Are you required to use them? Do the terms of the agreement carry through the termination period?

Find out how the vendor will handle the transfer of your data. If you are working with a reliable vendor, your data will always be your data. You should review your contract to ensure that there are adequate provisions for the transfer of data. You should also ask about the process of exporting data, the format(s) it will be available in, and what kind of timetable would be required to receive your data.

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