What 3 Contract Safeguards Will Deliver the Largest Cost Savings to Self-Funded Employers

By Jim Arnold, CPA, CMA, CFE

Founder & CEO @ finHealth, Inc

Negotiating a TPA/ Carrier renewal can be one of the most daunting tasks that a Benefits/ Total Rewards leader will ever undertake. These agreements often run 50-90 pages long and are filled with legal "land mines" that can jeopardize your ability to act properly as a health plan fiduciary. To make matters worse, the large carriers have more attorneys on staff defending their "turf" than people you have in your entire HR organization.

We suggest establishing healthcare disbursement controls on the front-end of the process and authenticating claims prior to the funds leaving your health plan. To achieve that end, many thought-leading HR leaders have adopted a "weekly funding call" to proactively evaluate high-dollar catastrophic claims. To ensure that you adopt and enforce leading edge practices like a "weekly funding call", you must negotiate the proper protections in your ASO agreement as follows:

1) Client reserves the right to deny any claim for payment where the provider refuses to provide an adequate itemized bill or supporting provider contract, even in those situations where Payer has contractually forfeited Client's rights to these critical financial records.

Examples of Inadequate Itemized Bill Responses:

a. Baptist Hospital- According to Payer, they contractually cannot obtain an itemized Bill for any claim under $100K.

b. Memorial Health- $197K claim (that is 535% of Medicare) for which at Itemized Bill could not be obtained, as the Payer met their maximum number of requests for the year. This was not specific to the Client but a contract clause across the Payer's entire book of business (first come, first served, up to 10 claims total).

c. Children's Hospital- Itemized Bill did not contain CPT or HCPCS codes. Without sufficient detail of billed charges, finHealth was unable to analyze the claim.

2. Establish a reasonable markup cap as a percentage and/or dollar threshold on any pass-through items billed by the hospital (i.e. drugs, medical devices, supplies, etc.)

Examples of Unreasonable Markups:

a. Mercy Hospital- Pacemaker Lead (2 leads) allowed amount of $7,954 vs. manufacturers price of $469 (marked up 1,696%).

b. Charity Hospital- Impella 5.5 Heart Pump cost $25,000 (per ScienceDirect.com 2021). Charity Hospital's chargemaster price for the pump is $61,924 and Client paid $165,301 due to DRG plus percent of billed charges contract.

c. Cancer Center- Overcharge for the DRUGS Octogam and Gammagard Liquid as follows:

i. Octogam- Paid $149K vs. manufacturers price of $20K (marked up 750%)

ii. Gammagard Liquid- Paid $128K vs. manufacturers price of $23K (marked up 557%)

3. Establish a maximum cap expressed as a percentage of Medicare (i.e. 250%) that the employer is willing to pay for inpatient & outpatient medical services.

Examples of Excessive Charges:

a. St. Joseph's Medical Center- Out-of-state inpatient claim totaling $292,949 that was 2,436% of Medicare.

b. Regional Medical Center- Outpatient claim (no overnight stay) totaling $68,750 that was 1,293% of Medicare.

c. Pennsylvania Philadelphia Hospital- Inpatient 2 day stay totaling $139,329 that was 1,241% of Medicare.

BONUS- Payer is required to perform a full payment integrity audit back to supporting medical records for any claim exceeding $100K regardless of type (inpatient, outpatient, ASC, drug infusion, etc.). These results must be made available to Client upon request.