You signed a contract with risk adjustment coding companies. They quoted you $45 per chart. Seemed reasonable. You did the math: 10,000 charts annually times $45 equals $450,000.
Eighteen months later, you’ve spent $680,000. You’re not sure how, but you’re way over budget.
The problem isn’t that the vendor lied about pricing. The problem is that per-chart pricing creates perverse incentives that cost you money.
The Per-Chart Model Problem
Per-chart pricing is the most common financial model for risk adjustment coding companies. Vendor codes a chart, you pay a fixed amount. Simple and predictable.
Except it’s not. Because not all charts are equal.
A straightforward wellness visit takes 10 minutes to code. A complex hospital discharge with 30 diagnoses takes an hour. Under per-chart pricing, the vendor gets the same payment for both.
This creates obvious incentives. The vendor prioritizes simple charts that are fast to code. Complex charts get lower priority or get rushed through.
You end up with great service on your easy charts that don’t have much HCC value and mediocre service on your complex charts that have the most value.
The Overage Fees Nobody Mentions
Most contracts with risk adjustment coding companies have a per-chart base rate. But they also have overage fees you didn’t notice.
Query fees: $15 every time the vendor sends a provider query. Revision fees: $25 every time a chart needs recoding. Rush fees: $20 per chart for expedited turnaround. Quality review fees: $10 per chart for enhanced QA.
These fees are buried in contract appendices. During negotiations, everyone focuses on the $45 per chart base rate.
They’re not edge cases. On a typical project, 30% of charts require provider queries. 15% need revisions. 20% get rushed to meet deadlines.
Suddenly your $45 per chart becomes $45 + $15 (query) + $10 (enhanced QA) = $70 per chart for 30% of your volume. Your blended rate is now $52.50 per chart, not $45. That’s 17% higher than budgeted.
The Volume Commitment Trap
Many contracts with risk adjustment coding companies include minimum volume commitments. You commit to send at least 10,000 charts annually. If you send fewer, you pay a penalty or the per-chart rate increases.
This seemed fine when you signed. You have 10,000 charts.
Then your organization implements prospective risk adjustment and starts capturing codes prospectively. Your retrospective chart volume drops to 6,000. Or you lose a large employer group.
Now you’re stuck paying for 10,000 charts even though you only have 6,000. Or your per-chart rate jumps from $45 to $60 because you fell below the volume threshold.
The vendor has no incentive to help you reduce retrospective chart volume. They get paid more when you’re inefficient.
The Hourly Rate Alternative
Some risk adjustment coding companies offer hourly rate models instead of per-chart pricing. You pay for coder hours, not charts completed.
This eliminates the incentive to rush through complex charts. A chart that takes an hour to code properly gets an hour of attention.
It also aligns incentives better. If the vendor helps you improve documentation so charts need less retrospective review, they don’t lose revenue. Under per-chart pricing, vendors lose money when you reduce chart volume.
The downside is less predictability. You don’t know exactly how much you’ll spend until the work is done. But quality tends to be better because incentives are aligned correctly.
The FTE Model
Another alternative is the full-time equivalent (FTE) model. You essentially rent dedicated coders from risk adjustment coding companies. You pay a monthly rate per FTE regardless of how many charts they code.
This gives you maximum control. The coders work on your charts exclusively. You can direct them to prioritize complex cases.
The tradeoff is that you absorb productivity risk. If your charts are complex and coders process fewer charts per day, you pay the same FTE rate.
FTE models work best when you have consistent volume, complex charts requiring specialized attention, and internal management capability to direct the coders’ work.
The Hybrid Approach
Some organizations negotiate hybrid models with risk adjustment coding companies. Per-chart pricing for straightforward charts (wellness visits, routine office visits). Hourly pricing for complex charts (hospital discharges, charts requiring extensive review).
This balances predictability and quality. Your easy charts get processed efficiently at predictable cost. Your complex charts get the attention they need.
The challenge is defining which charts qualify for which pricing model. You need clear criteria upfront.
What Actually Works
Before you sign with risk adjustment coding companies, model different pricing scenarios.
Take your last 12 months of chart data. How many charts needed queries? How many needed revisions? How many were complex versus straightforward?
Run that actual data through each pricing model. Per-chart with typical overages. Hourly at market rates. FTE model with realistic productivity assumptions.
The model that looks cheapest on paper often isn’t cheapest in practice. The model that looks expensive might deliver better value.
And push back on minimum volume commitments. If your business changes and volume drops, you shouldn’t be locked into paying for charts you don’t have. Negotiate flex volume ranges instead of rigid minimums.
The wrong financial model with risk adjustment coding companies costs you money in ways that aren’t obvious until you’re deep into the contract. Figure out the right model before you sign.
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