help_outline Skip to main content

News / Articles

Physician Advisor: Critical Player in Payer Contracting

Published on 9/27/2017

Physician Advisor:  Critical Player in Payer Contracting

Physician Advisors are regularly involved in multiple aspects of the hospital revenue cycle.  Many aspects of the PA role from ensuring the correct status, which is where many of our careers begin, to denial management have significant impacts on facility revenue.  In discussions with my boss, the CFO, I often opine that I probably have a more significant impact on revenue now as a Physician Advisor, than I had as a practicing OB/GYN admitting patients to the hospital.

Each PA deals regularly with the results of our Managed Care Departments’ decisions whether and how to contract with specific payers.  If our facility chooses to contract with a payer, it is that contract that determines the outcomes of many of the issues PAs are called upon to address each day.  These issues include, but are not limited to: 

  • Is this an inpatient?
  • How we disposition a patient out of our facility?
  • When is it appropriate for a lower level of care?
  • What is the precertification process for procedures?
  • Are there requirements for certain diagnoses to initially begin care as observation?
  • What are the requirements for notification of clinical information for continued hospital care?


As the bridge between the frontline troops and the payers, Physician Advisors must be familiar with the terms of their facilities’ contracts and, preferably, involved in negotiation of their terms.  We understand the impact on providers in a way that administrative professionals often do not.  Directors of Managed Care tend to focus on reimbursement rates and impact on market share, but may not have an appreciation for losses from excess denials.  Managed Care Departments may not understand the practical impact and difficulty of 72 hour observation requirements, validation audits 3 years after discharge, certain notification requirements, or the seemingly “simple” definition of an inpatient.  The Physician Advisor’s unique role of bringing the clinical expertise into the revenue cycle allows us to add that insight into the contracts, thus making the contracts more practical and less subject to denial. 


Be Familiar with Payer Contracts

Physician Advisors must be familiar with insurance contracts and understand the process of negotiating for better terms.  PAs must first get a copy of the entire contract.  The initial review should look for words like “always or never,” which can be likened to a nail in the coffin.  Another one of my favorites is “make your best effort,” which may sound innocuous, but can become difficult in the specifics of a denial appeal.  Would a PA’s best effort to reduce readmission be to provide 24/7 home care with daily house calls from the physician, personal supervision of taking all medications, prescription pickup and delivery to assure the prescriptions are correct, a personal chef to prepare proper meals, etc?   Without specifics, “best effort” is open to interpretation and difficult to defend.  On the other end of the spectrum, specific contract language may require efforts far beyond the practical.  For example, one contract I reviewed actually had language in the readmission policy requiring the facility to do a home visit prior to discharge to ensure a safe environment for the beneficiary.  I am not sure about other facilities, but I know that my facility does not have the staff to accomplish this. Nor do we have alternative housing for our patients, if the home visit were to deem the environment unsafe.


“Always/never” may be appropriate, particularly if they refer to the payer.  The payer will always process claims within 10 days of receipt, never do a validation audit beyond six months from the date of discharge, or anything that facilities can use to hold the payer to specific terms.  On the contrary for the provider they can be problematic and should be carefully reviewed for alternative words such as “make an attempt to” or “usually” which give some leeway in compliance.


It is imperative for PAs to review all materials referenced in the contract.  Documents like Provider Manuals or Payer Policy Manuals frequently have the insidious “got you” details leading to denial justification.  The home visit requirement mentioned earlier was in the policy manual, but never mentioned specifically in the contract.  One easy win for providers is to take out the requirement that the physician notify the plan of admissions.  Hospitals are required to notify payers.  Why should there be double notification when facilities have staff paid to do this job? The physicians should not have to take their time to do this work.


Key Asks in Contracting

Facilities will never get everything they ask for, but if they do not ask they will not get anything.  Using Medicare Advantage Contracts as an example, here are several key areas to which Physicians Advisors bring special insight that should be discussed when contracting.  These topics should be key asks in payer negotiation.


  1. If concurrent review authorizes inpatient care, no further audit for status will be done unless there is documented fraud in the representation of the case.
  2. CMS Inpatient Only List to be followed.
  3. Peer to Peer Process
    1. All denials will be afforded a timely Peer to Peer opportunity.
    2. If the case is overturned by a Medical Director at Peer to Peer, no further appeal is necessary.
    3. If we agree to a lower level of care, then the case can be billed at that level despite no Condition Code 44 since this process is almost always completed after discharge with the beneficiary held to the lesser of the inpatient copay or charges they would be subject to as outpatient.  The observation charges to be billed from the time of initial status order.
  4. Breach of the terms in items 1-3 would automatically make the case eligible for payment at 110% of the inpatient DRG for the case.
  5. DRG or Coding Validation Audits
    1. Cases billed by AHA Coding Clinic Guidelines are paid as billed unless the diagnosis does not meet reasonable current definitions by clinical evidence and the criteria for review will be shared between parties and agreed to in advance of the review. 
    2. Medicare Advantage Plan is responsible for reporting denied diagnoses to CMS to adjust “risk scoring.”
    3. No validation audit will be conducted beyond six months after the date the claim was filed.
  6. Readmission Denials
    1. Cannot be based solely on readmission within 30 days.
    2. Must show due cause that the index discharge was inappropriate or demonstrate that some action or inaction on the part of the facility had a direct impact on the readmission.
    3. Must demonstrate that Medicare Advantage Plan had follow up with the beneficiary to ensure adequate compliance with follow up appointments and medications.
    4. Cannot be a patient with noncompliance with medical care.
  7. Medicare Advantage Plan will follow CMS regulation and guidance as to status including, but not limited to, the “Two Midnights Rule” or the then current CMS regulation in determining appropriate status.
  8. If a continued stay is necessary after the need for acute care for issues related to “placement,” and a bed is not available at the appropriate level of care or the plan does not approve the lower level of care, then an administrative rate will be paid to the facility, in addition to the DRG until such time as placement can be arranged at the rate equivalent to the rate paid for the lower level of care.
  9. No denial is final without following all levels of appeal and timeframes under standard Medicare Appeals, unless agreed to by both parties.  If the Medicare Advantage Plan does not answer an appeal and provide documentation to the agreed upon address in the required timeframe, the appeal will be automatically overturned as an administrative decision without any further appeal.  If the provider, after receiving the appropriate decision from the Plan, does not appeal within the required timeframe the denial remains in effect and the provider relinquishes any further appeal rights.  All costs related to the independent review entity will be paid by the plan.  The independent review entity will be identified by the plan in advance.

I hope I have provided helpful and clear evidence of the need to become involved with the Managed Care Contracting Department.  The clinical expertise a Physician Advisor brings to the table is of utmost importance in the contracting process, and will significantly reduce denials and appeals, decrease losses on the back end, and offset any lowered up front reimbursement rates.


Respectfully submitted,

R. Phillip Baker, MD