How to Hire an Expert for a Third Party Payer Contracting Organizational Review

As the author of the best selling book in the industry on managed care contracting, it's no surprise that I receive several inquiries each month from hospitals, physician and dental clinics, integrated health delivery networks and other healthcare providers to review their operations and contracts.

Most of the callers have never hired someone to do this for them so they aren't sure how the engagement works what to expect, and what it costs to have me opine on strategic improvements, best practices, provide some training and develop an upstream approach to contracted reimbursement through smarter decisions based on longer term strategies and tactics.

A few have worked with other consultants in the past but for whatever reason, they don't want to call them to do additional work. Some tell me the reasons, others don't. It really doesn't matter to me. My task is to meet my clients' objectives regardless of what someone else did (or didn't do) in the past.

While some might argue that in today's article, I am giving away the secrets of "how to structure a consulting proposal" for my competitors, let's face a few realities:

1. There are about 865,000 physicians licensed in the USA. Most of them contract with third party payers or their employer contracts with payers on their behalf. There are plenty of opportunities for me and thousands of other consultants. So do I care if a competitor "steals" this tip sheet? Not at all. Use it in good health and success!
2. There are more than 7000 hospitals commissioned in the USA. Most of them contract with third party payers. Likewise there are thousands of opportunities both in the USA and abroad. No one firm can handle all the opportunities that exist in the marketplace.
3. There are more than 9000 ambulatory surgery centers in the USA. Most of them contract with third party payers. No one firm can handle all the opportunities that exist in the marketplace in this space either.
4. There are dialysis centers, physical therapy clinics, durable medical equipment imaging centers, laboratories, cancer treatment centers and radiation therapy providers, hyperbaric oxygen centers, gamma knife centers, and other types of providers all across the USA and abroad who contract with third-party payers. They need this sort of help as well.

To contract for this kind of consultation, here are the basics you should specify as Terms of Reference (ToRs) or Scope of Work. I've taken these items straight from my consulting agreement.

Consulting Agreement for a Third Party Payer Contracting Organizational Review

I. Identification of the parties / commencement date

II. Recitals

WHEREAS, Client intends to engage and contract with Maria K Todd, MHA PhD (“consultant”) to provide professional advisory and consulting services to Client for a project regarding its managed care and third party payer contract negotiations with insurance companies, self-funded employers and labor unions, health maintenance organizations (“HMOs”), preferred provider organizations (“PPOs”), third party administrators (“TPAs”) and administrative services organizations (“ASOs”), independent practice associations (“IPAs”), Management Services Organizations (“MSOs”), special needs providers (“SNPs”), patient-centered medical homes (“PCMHs”), accountable care organizations (“ACOs”), case management companies, and other third-party payers; and

WHEREAS, The client desires that the Consultant provide professional advice to the Client’s named designees, representatives, and/or senior management as it relates to the implementation of its current and future contracted reimbursement activities, and the development of transformative strategies that support an upstream approach to contracted reimbursement through smarter decisions based on longer term strategies and tactics; and

WHEREAS, the Consultant has the requisite training, experience and availability to provide the requested services in the time frame specified;

NOW THEREFORE, in consideration of the mutual covenants contained herein, the parties agree:

III. Services

The Consultant shall conduct a third party payer contracting organizational review in order to: 

a)     Examine Client’s third-party payer contracts, annotate and highlight concerns and points for improvement, conduct an oral line-by-line debriefing of findings and recommendations. (No written summary or report is included – client should appoint an internal recording secretary or take notes for their own internal uses.)

b)     Examine and review Client’s contracting strategy, targeted payers, contracting policies, procedures, workflows, organizational policies and deal breaker terms, best practices and negotiation tactics, previous outcomes and results of past negotiations with third party payers. (Summary of findings and recommendations report included.)

c)      Assess current contracting department structure against client’s contracting objectives and organizational mission, values, and business strategy.

d)     Identify gaps, and pre-contracting and pre-negotiation due diligence procedures and practices, contracting. (Summary of findings and recommendations report included.)

e)     Review revenue management department roles/structures that provide optimal contracting and negotiation services to the organization. (Summary of findings and recommendations report included.)

f)      Explore how to better service the needs and satisfaction levels of relevant stakeholders, including the Board of Directors, trustees, executives and senior management, and employed physicians within an optimal managed care contracting department/structure (summary of findings and recommendations report included.)

g)     Define / streamline the work processes used to carry out functional work within third party payer contracting (summary of findings and recommendations report included), and 

h)     Determine what needs to be done, how these changes will benefit the client, and how to prioritize problem areas in terms of significance. 

IV. Statement of Intent /Term

Client intends to directly award a contract to the Consultant for a term of three (3) months. Additional contract reviews may be included for an additional fee per contract to be reviewed.

V. Termination

Either party may terminate this agreement with not less than thirty (30) days’ written advance notice or by natural termination at the end of the initial term by non-renewal.

VI. Fees

Rates for larger projects are frequently negotiated in advance, usually on a flat fee basis rather than an hourly rate. Shorter projects for one of the points (a-h) listed above may be hired on an hourly basis but that doesn't protect the client as well. I provided the list of a-h deliverables so you can use it both ways: as a comprehensive model or a piecework project model. Frequently, my clients treat this as an a la carte menu of what they need or what I am able to supply. Pricing is then negotiated on the basis of the specific assignment.

Consultants with less experience are often reluctant to give firm fixed cost project quotes because they have no idea how long the project might take. That is both normal and expected. It's nothing to be ashamed of because everyone starts knowing little about the business of consulting - especially if they have only worked as an employee for someone else in the past. Prowess and accuracy in estimating and job quoting takes years to master. In reality that happens to every consultant, it is unavoidable and it is a rite of passage. We all go through it. More seasoned experts have a better grasp of how long these projects take. As such, they are willing to quote a fee for the project and take a little risk. Usually the more seasoned consultant can sustain the nominal risk of a little scope creep or underestimates a little easier than the newbie because there's already cash flow in the pipeline. In the beginning, for most consultants, every hour and every dollar is critical.

Newbies are often eager to get the work but afraid to quote a price that's too low leaving them exposed for uncompensated work. They often charge less per hour but make up for the lower price in stretched out time frames. A seasoned expert with a developed client list will charge more per hour, especially if they maintain an office outside their home with higher overheads. They will rarely stretch out the hours because they have other work pending and don't want to turn good opportunities away due to lack of availability.

Fees are usually paid according to the following schedule:

• Invoice #1: Due at the time contract is executed
• Invoice #2: Due at the time the first contract review and debriefing is scheduled
• Invoice #3: Due prior to the delivery of the review of findings and recommendations
• International projects usually require a larger percentage in advance as a deposit on account with the contract execution and the remaining intermediate or final tranche payment at set milestones or sometime before the departure of the expert.

VII. Travel costs

Travel costs to client site for direct observation and/or meetings and training sessions are usually advanced and paid directly by the client at direct cost for the consultant's specified itinerary preference or else they are negotiated in advance as part of the project total fee.

As a former travel agent, I know where to find the best discounts and itineraries but sometimes the same ticket is priced lower when paid by the client in another country and another currency. I see that often with fares for travel between the USA and Europe. Also, sometimes, if the client is a foreign government entity (a public hospital or health system, for example) the government prefers that I use the flag carrier which is often owned by the government and as such, the client may be entitled to highly reduced fares for experts traveling on official business. In these cases, I will give my preference for the itinerary and the client handles the ticket purchase and sends me the e-ticket and prearranged visa.

Always expect your expert to book business class airfare on international flights. If you don't want to pay the international fare, your expert may decline your project or charge you portal to portal for the downtime and inconvenience of sitting in an economy seat and unable to work for the duration of the flight. Also, expect the expert to book the most direct, shortest itinerary which usually costs more than an indirect route and itinerary. To a consultant, time is money and our most precious commodity. Sitting in an economy airline seat like a sardine in a tin, unable to work on client work while in transit, subject to blood clots that can move and become deadly, and the physical exhaustion of travel and jet lag is not sustainable over the long term for a business adviser that works internationally.

VIII. Miscellaneous Provisions

Beyond this, you'll see the boilerplate sections of the contract that include, among other things:

• Interpretation, venue and governing law
• Amendments, procedures to make changes in scope of work
• Notices between the parties (termination, material breach, etc.)
• Dispute resolution
• Confidentiality provisions and non-disclosure to outside parties other than by lawful subpoena by government authorities (Consultant-client privilege does not exist as it does with an attorney of accountant)
• Independent contractor, professional liability and health insurance - Expect that the expert will have their own health insurance and annual executive travel accident and illness policy. It is a cost of doing business and it is an incremental direct cost embedded into your quote. Don't expect this to be itemized out in your proposal. Expect the cost of any professional liability insurance you might request as a contracting requirement to be embedded in your proposal. In reality, for this kind of a project, a professional liability requirement is overkill and adds cost without real benefit as such a case is rare and would be difficult to prevail and prove damages. It is different when you are hiring an attorney or an accountant or architect or engineer for their professional services.
• Non-solicitation of client's or consultant's employees
• Assignment of the contract to another party (addresses mergers and acquisitions)
• Privity

Well, there you have it in a nutshell. I hope that this model contract article helps you to hire your next consultant with more confidence in what to expect and what to specify. I know how intimidating it can feel when you have a need, know where the solution is, who can provide it but aren't sure how to word the scope of work or what little nuances you should know to strike the best deal for all concerned. If you have any questions, I am open to most.

The one thing I will not answer in an article in a public forum is about how I price my services and my fees. I will tell you that each quote is custom tailored to the clients' needs and specifications.

About Maria Todd

Chief Executive Officer at Mercury Healthcare International, Inc.

Clients dramatically improve their healthcare operations, business growth, and profitability after working with Maria Todd. They realize benefit to reimbursements, volumes of new patients, and health plan brand value resulting in higher reimbursements and patient steerage.

Maria is the author of the best selling handbook on managed care contracting, now in second edition. Her unique skill set comes from over 35 years of experience at all six seats at the table, clinical, administrative, insurance contracting, healthcare marketing and branding, and health law paralegal work. She intertwines these skills in a way that no other consultant can offer because most usually only offer one of these expertise and have to call upon others - each with their own fees and expenses to comprise the other five. She solves problems for clients and shortens time and reduces expenses associated with hiring a consultant. This is an additional value added benefit of working with her.

Maria adds value to every project she accepts. If she doesn't believe she can add value, she turns the project down. She loves watching her clients' successes and watching them grow and thrive. She is also brutally honest with clients which they tend to appreciate when working with her. She is direct. She pulls no punches and doesn't sugar coat bad news or constructive criticisms.

Reach out to her to at +1 (303) 823.4662 (office international land line) or by email. Maria accepts most invitations to connect with her on LinkedIn. You can also follow her professional Facebook page. Initially, Maria prefers direct email to her @mercuryadvisorygroup.com address or through LinkedIn for all contacts via email.