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Tuesday September 26, 2023

From Red to Black: Optimizing Healthcare Contract Management

Nearly 50 percent of rural hospitals in our country are operating in the red, with over 450 at risk of closure. As hospitals face regulatory and market pressures, they are focusing on areas that can have an immediate positive impact on cash flow, such as revenue cycle management (RCM).

In this blog, we explore some of the pain points in RCM related to contract management, and how to resolve them.

What is Contract Management?

Hospital contract management is the process of overseeing and optimizing agreements between a healthcare organization and various stakeholders. It often involves negotiations with insurance payors, labor representatives, vendors, Group Purchasing Organizations (GPOs), and contractors.

The process of contract management includes negotiations, creation, implementation, monitoring, and maintenance of these contracts to ensure financial viability, efficiency, and compliance.

Managing this process can be complex and time-consuming. When organizations are experiencing staffing shortages, or operate with a smaller team, it can be easy to let contracts re-up without review, put maintenance on the back burner, and neglect other important aspects of the contract management process.

How Does Contract Management Impact the Bottom Line?

Effective contract management is essential for healthcare organizations to establish financially beneficial relationships with their stakeholders. Well-maintained and expertly negotiated agreements help ensure that organizations receive appropriate reimbursement for services, helps maintains good relationships with partner organizations, prevents unnecessary legal risks, and supports overall financial stability. Unfortunately, providers spend approximately $157 billion annually on less-than-optimal contract management.

Maximizing reimbursement should be a well-governed, ongoing pursuit. Established steps, including workflow automation, a centralized document repository with audit tracking, linking to regulatory and policy documents, and proper representation in the development team can help to cut down on these costs while simultaneously ensuring more revenue is flowing back into the facility.

What Can Hospitals Do to Optimize Contract Management?

Conventional wisdom states that “a contract will perform as well as you let it.”

A hospital may believe they have negotiated a fine contract, but without an effective means of payor and contract monitoring, it can be a challenge to know if that’s really the case. A contract may be performing particularly well for a period and then start realizing occurrences of specific types of denials, down-coding, or underpayments. At an average cost of $118 per appeal, this can be a significant drain on resources.

Effective analytics and performance monitoring can provide critical insight to prevent denials, including:

  • What is the source of the denial?
  • Is it an issue with a specific provider?
  • Is this a new occurrence?
  • How deeply is it impacting revenues?

A transparent approach should also allow you to see underpayment variance trends, understand insurance payor agreements, and anticipate where issues may arise in the future.

MEDTEAM Contract Management

MEDTEAM supports healthcare organizations in negotiating, building, updating, and maintaining contracts that include favorable rates and terms. Moreover, they provide payment variance analysis and recovery services, meticulously identifying reimbursement variations and collaborating with clients to pinpoint underlying causes. This strategic approach ensures that no revenue opportunities are left untapped.

To learn more about how MEDTEAM supports effective contract management, please reach out to us at or call 1.800.383.6278.

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