Pay Attention to Contract Details in Medical Billing

By Karen Smiley from Medical Billing and Coding For Dummies

As a medical billing professional, make sure that you know the contract details and relative value units for each payer, because the differences between payers can be huge. For example, depending upon how the contract is structured, the providers may still find themselves paid per RVU rather than contract allowance.

When multiple procedures are billed on a claim, they are prioritized for payment, and a discount, called the multiple procedure discount, is often applied. The procedure that is obligated at the higher allowance is paid at 100 percent of the allowed amount; the second procedure may be paid at 50 percent; and so on. On contracts that are based on RVUs, the higher the RVU, the higher priority for payment.

Not all contracts are RVU-based, and procedures that are obligated to pay higher according to the contract may have a lower RVU. This sometimes occurs when the contract contains several commonly performed procedures that have been carved out.

With this tactic (strategic contract management), specialty providers identify certain procedures that are routinely performed and ask that one or two (or more) of the related procedural codes be carved out, or especially identified as payable at a flat rate that isn’t linked to RVUs or any other fee schedule.

A surgeon who performs 300 laparoscopic cholecystectomies (gallbladder removals) each year may try to have that specific procedural code carved out of one or two of his network contracts to pay a flat rate.

Procedures are billed by order of expected payment. The procedure that is expected to reimburse the greatest amount needs to be the first one listed on the claim, the procedure that is expected to reimburse the next greatest amount is next on the claim form, and so on down the line.

How this order is established varies. Many offices have the contract pricing programmed into their billing software. If the software is programmed correctly (that is, the contracts are loaded correctly, and the claim is linked to the correct payer contract in the billing software), the claim will be submitted in the correct order. (Note: The program should be updated every year and every time the contract is revised.)

If the software is not programmed, then the responsibility for prioritization of procedures falls to you. That is why you need to know the contractual obligation for each procedure — so that you can identify which procedure is to pay at 100 percent and so on.

Most payers have processing software that recognizes the correct prioritization of the procedures and processes the claim to pay in that order, but some payers pay claims based solely on the prioritization established by the billing provider.

That’s why it’s important to know whether the payer is contracted. If so, the highest reimbursable procedure will likely be listed first on the claim, followed by the next higher, and so on. But if the payer contract is RVU-based rather than procedural based, the procedure with the highest RVU is first.

If an error occurs in claims payment, the problem may be the prioritization. If the provider thinks a certain CPT code should have paid at 100 percent of allowed, but that CPT has a lower RVU and the payer software processes per RVU, a dispute is certain. In such cases, the contract prevails, so you need to know the contract and your priorities — literally!

In the end, the payer is the one who decides whether to make payment. Most contracts contain arbitration clauses that outline the process of dispute resolution. When no contract is in place, the dispute can escalate to a legal issue to be decided by a judge.