Is Cost Plus Methodology A Common Feature in PPO Contracts?

 
 Many health plans have contracts with hospital facilities that contain “cost plus” language. For example: A hospital is contracted with a health plan such that for any high cost drug charges greater than $500, the hospital warrants that 60% of billed charges equals the hospital’s invoice cost plus 10% for the drug.This type of language can apply to many high-cost items charged for by hospitals, but it applies most often to high-cost drugs (HCD) and implantable devices.Many health plans that are contracted in this manner do not have the resources to verify that the hospital facility is, in fact, billing each contracted item according to the actual contract terms. Or, they may be under the false impression that the verification of proper billing for these high-cost drugs or implantable devices by hospital facilities falls within the scope of a regular hospital bill audit (HBA). However, this is not the case. Therefore, since the overcharges in these instances can be quite high, it is very important that a health plan perform these audit types if any of their contracts with hospital facilities contain “cost plus” language. National Audit has created an audit program to ensure that health claim payers are not spending excess dollars in this area.

High Cost Drugs: This audit program is designed to be conducted on-site on a claim-specific and/or project-based scope. The targeted facilities are chosen based on their contractual arrangement (cost plus language), claims volume and historical experience. The audit focuses on identifying all HCD billed under certain revenue codes to which the “cost plus” language applies. National Audit identifies a large amount of overcharges by reviewing the pharmacy invoice to validate the actual cost, the medication administration record, nursing notes, infusion notes, UB92, itemized bill, etc. Then, National Audit validates what the hospital billed and what was paid by the client and how this coincides with the contract language. National Audit also identifies savings by identifying those drugs that were not administered to the member.

Implantable Devices: This audit program is designed to be conducted either as a desk review or an on-site audit on a claim-specific basis. Implantable device audits can also be conducted as a facility-based, focused audit. The targeted facility is chosen based on their contractual arrangement (cost plus language), claims volume and historical experience. The audit focuses on identifying all implantable devices billed under certain revenue codes to which the “cost plus” language applies. National Audit identifies savings by reviewing the purchasing invoice, the physicians order, operative report, history and physical, UB92 and itemized bill. Then, National Audit validates what the hospital billed and what was paid by the client and how this coincides with the contract language. National Audit also reviews the medical record to determine if the implantable device was actually implanted and if all implant items were used.

Editor’s Note: www.nationalaudit.com.

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