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Journal of Emergency Medicine

EMS Insider. MONEY MATTER: Negotiating Winning Contracts. January 2002

As EMS Administrators across the country struggle to gain financial and operational efficiencies with out sacrificing quality of care, many are considering whether to contract with third-party payers. Managed care organizations (health maintenance organizations, preferred provides organizations and independent physician groups) have vested interest in contracting with EMS providers that deliver high-quality service at competitive prices. Contracts with MCOs can also benefit both municipalities and EMS providers by:

  • Increasing patient referrals
  • Increasing EMS reimbursement
  • Decreasing or eliminating the need for taxpayer subsidy
  • Improving EMS care
  • Allowing EMS providers to control non-emergency transports
  • Providing incentives to EMS systems to offer one-stop shopping for all transportation services, and;
  • Allowing the EMS agency to keep services in-house vs. outsourcing.

Before entering into contract negotiations, analyze your current system as well as the risks and benefits of such a contract, consider the following:

What percentage of the region’s population belongs to MCOs and to his MCO?

For what emergency medical services does the payer currently reimburse? (Because HMOs must pay 100% of billed charges for all emergency services, why contract for services for which the system is already being paid in full? Can you negotiate discounts for prompt payment or referrals for non emergency business?)

What do you hope to accomplish by contracting with an MCO?

Does your organization have the excess capacity to provide additional services?

Does your agency receive a subside? If so, how would the contract impact it?

You should also examine the services you offer to determine if private payers will find them desirable. Typically, MCOs prefer to work with agencies that provide a full array of medical transport services. Such organizations have a much better bargaining position than those offering limited services. They will also find it easier to obtain an exclusive or first-call contract than an organization that provides normal services.

However an organization offering only limited services can still bargain effectively with MCOs. A payer can gain significant economies of scale by contracting with large ambulance systems even at 100% of billed charges (Example: reduced data entry costs from fewer claims requiring manual processing and prompt payment discounts offered by the providers.)

Finally, contrary to popular opinion, HMOs consider much more than price when making contracting decisions. They also evaluate response times, quality of care and the providers relationships with local hospitals and physicians.

Before negotiating a contract with an MCO, you should know exactly what state and federal laws and regulations require third-party payers to provide and how they must act. This knowledge can level the playing field and eliminate unnecessary discussions during contractual negotiations.

Some Basics
Each state requires and MCO be licensed before it can conduct business in a particular geographic area. Before obtaining this license, the payer must demonstrate it has an adequate provider network in place to provide a predetermined menu of services - including EMS in that area. Every state requires MCOs to either contract with EMS providers to provide those services or pay 100% of billed charges to providers without contracts.

State and federal laws require most MCOs to reimburse providers within 30 to 45 days after receipt of claims. If the MCO does not adjudicate a claim within that time period, the MCO must pay late fees to the EMS provider - even to a provider not under contract.

The Emergency Medical Treatment and Active Labor Act requires hospitals to contract with local EMS providers to ensure adequate access and transport for emergency services.

MCOs and their subcontracting providers may not balance bill patients for rendered services, other than for copayments and deductibles. However, EMS providers currently aren’t subject to these requirements unless they operate under contract with the MCO.

Recent changes in Medicare laws have created confusion among payers and providers. Many MCOs now misinterpret Medicare Part C rules to mean they need pay only the Medicare allowable charges and not 100% of billed charges for Medicare HMO patients. A provider that contracts now with an MCO will still get those contracted rates when the new Medicare fee schedule takes effect - even if those rates are higher than the fee schedule rates. Conversely, and EMS provider without a contract will be required to accept Medicare rates by default.

The benefits of a good contract can be impressive, including increased revenue, improved patient care and long-term viability of the EMS system.

 

Healthcents is a full-service consulting group that specializes in provider contracting and reimbursement analysis. Susan Charkin can be reached at Healthcents, (800) 497-4970; fax (831) 455-2695; email: charkin@healthcents.com