How Providers Can Protect Their Contractual Rights and Revenue From Payor Policy Changes

Commercial payors increasingly are using provider manuals, clinical and reimbursement policies, and claims administration protocols to modify negotiated contract terms. Because many provider participation agreements incorporate these materials by reference, payors can try to impose these modifications on providers without having to execute a formal contract amendment. This dynamic makes it critical that providers closely evaluate the impact these changes may have on the provider, and when the impact may be material, to object to the proposed modifications.

The financial impact of payors' changes to manuals and other policies can be significant. In a recent survey[1], healthcare providers identified payor policy changes that are not otherwise reflected in contract amendments as the leading source of revenue leakage.

As detailed further below, payors issue modifications to their manuals and policies using a variety of methods, including direct notices to providers, "provider update" newsletters that are emailed to providers periodically, and postings to payor-operated websites. Providers must develop effective monitoring procedures to ensure that their organizations identify significant policy revisions early, assess operational and reimbursement impact, and preserve potential contractual or statutory objections before new policies are operationalized.

The Changes Payors Are Making

New payor policies, protocols, and manual revisions are impacting providers' contract rights in a wide variety of ways, including by tightening medical necessity criteria, implementing undisclosed coding edits, and creating penalties for facilities utilizing noncontracted providers. Recently, payors have announced and/or implemented policy and manual revisions to:

• Implement New Medical Necessity Criteria: by requiring that admissions satisfy new, often undisclosed extracontractual clinical criteria that the provider did not agree to, including where the application of said criteria may run afoul of industry benchmarks.
• Create Barriers to Formal Dispute Resolution: by requiring providers to satisfy new appeals or pre-dispute processes before they can exercise their contractual dispute resolution rights and remedies.
• Enforce Undisclosed Coding Criteria: by subjecting providers to claims-editing processes that often utilize undisclosed methodologies to render unilateral determinations regarding coding and billing accuracy.
• Penalize Facilities Using Noncontracted Professionals: by implementing reimbursement reduction penalties for participating facilities using nonparticipating providers.

How Payors Are Implementing Changes

Provider agreements typically require specific notice of any material revisions that will impact material contractual rights. Some state laws, such as California's Health Care Provider Bill of Rights (Cal. Health and Safety Code section 1375.7) also impose a requirement on payors to provide notice and objection rights to providers. Despite these requirements, payor compliance with notice obligations is spotty. This complicates providers' efforts to monitor revisions and protect their rights. Contractual and statutory requirements aside, plans often announce changes using:

• Electronic Bulletins: detailing the annual or monthly policy changes.
• Email Announcements: highlighting new policy changes, with differing levels of detail.
• Provider Newsletters: announcing key clinical, reimbursement and administrative changes.
• Annual Manual Revisions: publishing an entire provider manual with limited information regarding the scope of changes.

Timing considerations further complicate providers' efforts to monitor these revisions. Payors stack annual changes to provider manuals and guides on top of monthly policy change announcements. A payor's monthly announcement may identify several modifications, and may be released concurrently with a wholesale provider manual amendment spanning hundreds of pages. When multiple payors simultaneously issue changes, it compounds the challenge to providers, creating heavy administrative burdens to identify, analyze, and act.

How Providers Can Forecast and Monitor Financial Impact

The financial impacts of a policy change or manual revision may not become apparent until well after implementation. Impacted claims take months or years to accrue and revenue leakage trends take time to identify. Providers should develop procedures within their contracting and revenue cycle teams to:

• Forecast. Review proposed revisions, determine which claim characteristics may trigger the new or revised policy, such as specific codes, admission types, or services, and identify the universe of potentially impacted claims.
• Monitor. It may take months or years for enough claims to accrue and for a provider to fully measure the financial impact of a policy change. Develop tracking and reporting processes to identify impacted claims as they begin to accrue. Investigate both individual remittances and reimbursement data trends to identify patterns showing a material impact.
• Dispute. Provider agreements often contain appeals processes and pre-dispute resolution procedures to contest claims. Payors are increasingly arguing these processes are mandatory; failure to comply may prevent a provider from seeking future remedies. Know the appeals processes and pre-dispute resolution procedures that may apply and ensure timely compliance to preserve all future remedies.

How Providers Can Protect Their Rights

Payors typically announce policy revisions shortly before implementation (e.g. 60 to 90 days prior to implementation), leaving providers little time to preserve their contractual or statutory objections. Because the actual financial impact of these revisions may not be known for months or longer, providers can only estimate expected impacts. To preserve their ability to challenge revisions once actual impacts surface and claims accrue, providers should:

• Monitor Policy Announcements. Providers should review their contractual notice provisions, confirm whether payors' announcement methods comply with their contractual obligations, and ensure all announcements are timely circulated for review.
• Know Your Provider Agreement. The provider contract can be the most effective tool in challenging payors' unilateral revisions. Amendment provisions may prohibit material policy and manual changes without prior written notice and the opportunity to object to and negotiate the proposed change.
• Know the Law. State statutes and regulatory schemes may provide additional protection against unilateral material changes, supplementing any contractual gaps. Changes that fail to comply with the applicable scheme, or contractual provisions that fail to provide the statutorily required protections, may be void and unenforceable.

How DWT Can Help

DWT's managed care team represents hospitals and health systems in legal challenges to health plan policy and provider manual changes. We partner with provider contracting and revenue cycle teams on all phases of the dispute process, from evaluating proposed policy changes to advocating on behalf of clients in formal dispute resolution proceedings.

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Leslie Murphy and John Barnes are partners, and Mark Anishchenko is an associate in DWT's Sacramento office. For any questions, please reach out to the authors or another member of our healthcare team. To stay informed, sign up for our alerts.