Our client is a large hospital system that employs more than 500 physicians and maintains payer agreements through both the hospital and physician service lines. Commercial net revenue exceeds $700 million annually.
Baker Tilly was engaged by senior management to conduct an extensive analysis of their top five commercial and top two Medicaid managed care agreements.
The primary analysis included benchmarking reimbursements across both hospital (i.e., inpatient and outpatient) and physician service lines, and comparing those rates to market reimbursement ranges. Baker Tilly also performed a detailed review of current contract language. The timeframe of the engagement was very tight due to several pending payer renegotiations.
Baker Tilly initially met with client stakeholders to gather information as to the challenges they were facing with contracted payers. The benchmarking analysis of the seven payer contracts indicated the hospital’s agreements were under-valued compared to similar institutions.
The analysis revealed that the client’s inpatient and emergency room rates were well below market rates as well as several physician service lines. Our recommendations and modeling brought these service lines to or above market rates. Conservative three-year revenue pick-up was approximately $150 million. Baker Tilly also provided detailed recommendations for improving contract language to further protect the organization from revenue leakage (worth another $25 million).
The contract benchmarking analysis allowed our client to have more leverage at the negotiating table with contracted payers. Specific knowledge of market rates across both inpatient and professional service lines provided a more meaningful discussion with the commercial payer decision makers.
The engagement also addressed payer contractual language changes with the focus on cost savings and revenue improvement opportunities such as pre-authorization waivers and claim denial caps, as well as the elimination of certain trailer billing requirements.
Baker Tilly also provided the client with a more predictable revenue forecast contributing to their ability to invest in current or new patient care services as well as technology that was not feasible before Baker Tilly’s involvement.