Historically, healthcare organizations establish chargemaster prices for new services at some multiple of the Medicare fee schedule or ambulatory payment classification (APC) amount. This practice, combined with the realignment of charges to become more rational, has caused hospitals to lose hundreds of thousands of dollars in payments—often unknowingly. Therefore, it is important to identify or estimate the financial opportunity or risk that the current and new chargemaster prices trigger under lesser-of-charge (or fixed-fee) and stop-loss clauses in payer contracts.

Those responsible for the chargemaster pricing or contract management should perform annual analyses using sophisticated financial models. These annual analyses aim to ensure net revenue is not lost due to payer contract clauses that stipulate the payer has the option of paying the lesser amount between the identified charge and its own fixed fee for a given service or that higher reimbursement based on a percentage of charges will be paid to outliers based on stop-loss provisions. Often, healthcare organizations will uncover new incremental revenue opportunities the first time this analysis is performed.

To learn how your organization can enhance its financial performance with payer contracts, download our whitepaper: Eight Steps to Reveal Incremental Revenue and Reduce Risk Related to “Lesser-Of” and “Stop-Loss” Contract Clauses.