Five Contract Negotiation “Asks” for Your TPA Contract

finHealth cautions: Negotiating that contract with your third-party administrator (TPA) can be precarious. Self-insured employers typically hire a third-party administrator (TPA) to handle the processing of claims. And while outsourcing your claims to a TPA is advisable, employers must provide a strong level of oversight as the financial risk of your plan is owned by your company and not the TPA. Below are a few suggestions to help safeguard your organization and enable you to properly oversee your self-funded plan unencumbered by complex legal jargon and restrictions.

1. Be clear about who owns the CLAIMS DATA 

First and foremost, you must establish that the healthcare claims data belongs to YOU! As a self-insured plan, you are the fiduciary for your health plan and are ultimately responsible for compliance with all applicable rules and regulations. finHealth has experienced innumerable instances where ownership of the data is in question. You will want to make sure your contract with the TPA is specific enough to confirm that you own the data.  TPA’s should not try to commingle your healthcare data with their “business practices” or “confidential information” to give them ownership rights. These are, after all, your critical financial records. 

2. Protect your AUDIT RIGHTS

Your rights to an independent audit are critical. Audits not only ensure compliance with applicable plan rules and regulations. They also safeguard that the TPA is acting in your best interests and as an effective steward of your money. Always remember you are essentially handing over your healthcare checkbook to the TPA and asking them to be the ultimate decision maker around what healthcare expenses you will and will not pay, what price is considered a “reasonable” one, and exactly how your employees and their families’ medical expenses are going to be reimbursed.  The TPA should not insert language into the audit clause that enables them to “veto” audit requests or prohibit the use of your independent audit firm. finHealth has witnessed such actions by TPA’s.

finHealth has witnessed other restrictions that need to be removed from the TPA contract including:

❖ Requirement that the audit MUST be a statistical sample, and if errors were found, cannot be extrapolated across the population to reclaim dollars.  What is the point in performing an audit if you cannot make it actionable?

❖ Limitations on time frame (i.e. “audit must be completed within 5 days or less”)

❖ Constraints regarding how many claims can be retrieved (i.e. “cannot request more than 250 claims”). If you are finding multiple errors, it stands to reason that you will want to pull additional claims

❖ Clauses forbidding you from hiring an audit firm on a contingent fee basis. This is very disingenuous as all TPA’s use contingent fee auditors to ensure compliance within their fully insured plans via claims audits, subrogation, and negotiation of “out-of-network” claims

❖ TPA Provision forbidding the use of software to audit the claim records (Yes, we have really seen this clause in a contract!)

3. Go for FULL FEE DISCLOSURE! 

We strongly endorse the need for full disclosure of fees. Many Benefits leaders mistakenly believe that the “per head” charge quoted in the contract represents the primary compensation that the TPA is receiving for their services. On the contrary, we have identified at least 10 other revenue streams that your TPA may profit from directly or indirectly through one of their affiliates / subsidiaries.  Be wary of the following in your TPA contract:

❖ “Percentage of savings” fees on the in-network medical provider’s inflated list price. These savings can be illusory, as there is limited oversight as to whether the list price on the provider’s chargemaster has any meaningful correlation with competitive market costs. Think of it as a 30% discount on a $100 pencil.

❖ Negotiation of out-of-network claims. These fees can be substantial, such as a $3,000 commission fee for them reducing a billed claim from $20,000 to $8,000, which often happens just by asking.

❖ TPA Claims audits by the TPA’s captive audit firms

❖ Subrogation audits, where the TPA retains upwards of 25% of the “savings” for themselves

❖ Health & wellness programs delivered by independent vendors or even affiliated companies, where there are fees being earned and retained, unbeknownst to you.  You as the company are often footing the bill, or worse yet, the monies may be deducted directly from plan assets without your awareness

❖ Revenue for selling your data to outside parties without your knowledge or explicit permission

❖ Rebates on pharmaceuticals that are acquired through both medical billing and pharmacy claims

❖ Care coordination fees

❖ Network access fees

❖ Inter-Plan fees for accessing out-of-area providers

finHealth strongly recommends an itemized listing of all compensation streams and the fees associated with each, delivered on a monthly basis.  Additionally, if you are one of those companies who does not pay your broker / consultant directly, we recommend that you reconsider.  While there may be budgetary advantages for you to operate in this manner, we believe it represents a potential conflict of interest.  Remember, the broker / consultant should be working for you and not working for your TPA.

4. Clarify who is on point for measuring and enforcing PERFORMANCE GUARANTEES 

Let us talk about performance guarantees.  They sound like an awesome idea, right?  But question number one is: Who is defining “effective performance?”  Just as importantly, which party is measuring these results to verify that performance?  If the TPA is filling out their own report card, do not be surprised if they get straight A’s! They rarely if ever fall short of the target they set up.  All performance guarantees that you embed within the contract need to be clearly measured and enforced by you and need to have significant “financial teeth.” That is, enough financial teeth to make sure that the TPA will dedicate the needed resources to achieve or surpass the guaranteed performance or have significant negative financial consequences if they miss the mark.

5. Make your TPA treat your company’s money like it is THEIR MONEY! 

At the end of the day, you as a client want the TPA to treat your money as if it is their own.  To create this level of financial alignment, the TPA needs clear guidelines as to responsiveness to client requests.  finHealth provides here a few non-negotiable items we like to see addressed in the TPA contract:

❖ Claims data is your financial data and needs to be delivered commensurate with the funding cycle for the health plan (i.e. daily / weekly)

❖ For exceptions surfaced to the TPA, client is promised a specific resolution within 7 days if 10 claims or less (or 14 days for up to 50 claims)

❖ Medical records to support the expense must be requested within 1 week of client request and delivered to the client’s audit resource within 7 days of receipt by the TPA

❖ Client reserves the right to dispute and deduct claims paid in error by the TPA from their daily / weekly claim billings, or in the event of a questionable payment issued on client’s behalf, to withhold payment until

“adequate supporting documentation” is produced to support the billed charges. Once the money goes out the door, it is more difficult to recover.

❖ If the client is not happy with their pace of progress in retrieving payment support, or if the billing error becomes uncollectible, the client can deduct the monies in question from the next billing.

There you go!  Five recommendations from finHealth for you - and hopefully just in time for your contract renewal. Good luck in negotiating a fair agreement with your TPA, and reach out to finHealth when you are ready for us to verify that your TPA’s internal controls are properly safeguarding these critical health plan assets for your company and your employees!  Email us at sales@ finHealth.com.