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Sep 2015

All About That Base!

The first and arguably most important document needed to effectively evaluate the strength of a hospital claim for reimbursement pursuant to a contract is the “base contract.” This is the contract between the hospital provider and the payor. It is the foundational document which outlines the parties’ agreement at the initial phase of a contractual period. Parties typically agree to this base contract, and then as they realize later during the life of the agreement that slight changes may be necessary, they negotiate amendments to the base contract. Typically this means that provisions not in the amendment or amendments remain enforceable under the base contract. If the parties require a significant overhaul of the relationship terms, instead of agreeing to amendments, they often agree to a new base agreement.

So why is the base contract important? It is usually the document that includes some very important basic information, such as the following:

The Limitations period: Pursuant to statute, parties generally have four years from a breach to file an action for breach of a written contract. However, parties often contract to shorten that period. This means that a hospital might have contractually agreed to much less than four years to file a claim for a breach of contract. Accordingly, it is essential to review a base contract to determine whether the limitations period has been shortened. This allows you to properly set the last day by which you can pursue your right to bring an action on your unpaid claim. Failing to file within that deadline may prevent you from recovering for that claim.

The Appeals process: The appeals process generally outlines the period during which you can attempt to informally resolve your claims with the payor before filing arbitration or litigation. Is one appeal necessary or two? Is meeting and conferring a condition precedent to litigating a claim? These questions are all usually dealt with in the base contract. Again, a failure to abide by the time deadlines for the appeals process may prevent pursuit of the claim.

Definition of Terms: Many terms are usually defined in the base contract. For example, if a claim is denied because the payor deems the services not “medically necessary,” it is important to know how the parties define “medical necessity.” This allows for an evaluation of whether or not, according to the terms of the contract, the care was medically necessary. Similarly, if a payor underpays a claim because, for example, it believes the claim should have been billed as outpatient instead of inpatient, the contract must be evaluated to see whether the definition of inpatient care includes stays that exceed a certain number of hours, like those more than 24 hours or those that go past midnight.

It might seem odd to require a review of base contracts that may date as far back as the 1990s. However, as you can see from the short list above, the base contract may include essential information..

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