Contract For Success

June 24, 2011
For executives at California-based San Jose Medical Center, analyzing claims data to ensure payers are living up to their contracts was becoming an
For executives at California-based San Jose Medical Center, analyzing claims data to ensure payers are living up to their contracts was becoming an impossible process to manage.

The 70-physician medical group was doing its best to stay on top of things by using complex spreadsheets and databases, but despite the effort, only 20-25 percent of claims were getting a thorough examination. To Mike Patel, CIO and vice president of business services at San Jose Medical, that just wasn't good enough.

"We needed a tool that could analyze every claim and every line item," he says.

In July of last year, Patel hit the market looking for the right solution. After an informal search, he decided to go with Austin, Texas-based Medical Present Value (MPV) and its Phynance application.

"One of the primary reasons we selected MPV is that payer activity is constantly changing, so we wanted to find a vendor that had a solution for ongoing maintenance of our payer contracts," he says. "With MPV, they assign a contract analyst to each client, and then it's the contract analyst's job to define the terms of each payer contract as they change, including all the ongoing maintenance of fee schedules and payment policies."

To give an idea of just how complicated payer contracts can get, Patel says about 20 payers account for more than 90 percent of the group's payer activity. Each of those 20 payers carries different products and plans — HMOs, PPO, point of service plans — which essentially take the form of subcontracts under the main payer contract. On top of all that, payment terms for each contract are renegotiated every one to two years.

Patel says that Phynance will help San Jose Medical better address those renegotiations by identifying the reasons for denials and underpayments, so those issues can be addressed with the payer. Total return on investment of the software and service, he says, will take place in less than a year.

"On average, the industry standard is that there is about 3 to 4 percent of underpayments to the bottom line. So if I can add 2 to 3 percent to our bottom line, that is a substantial amount," he says. Considering the 250,000 medical procedures the group performs each year, the savings can be significant.

San Jose expects to go live with its first 10 payer contracts on the system in March.

Kent Elliott is CEO of Cupertino, Calif.-based ForeScout Technologies.

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