Negotiating with payers is already stressful even before you consider changing regulations and payment models. We looked at some recent articles about payer contract negotiation to uncover trends and helpful tactics. The Advisory Board, a research and consulting firm for healthcare organizations, sums up their advice on negotiating like this:  “Payers know exactly what they want when they sit down for their next negotiation. Do you? ”  This from their recent report they published which we will review below.

Healthcare providers prepare for a payer contract negotiation

Are you prepared for your next payer contract negotiation?

Noting that contract negotiations are often “ugly”, Healthcare Finance News has some ideas about how to make them less stressful. The writers note that “payer and provider contracts generally hinge on three factors: the financial terms including reimbursement rates; the operational components of working together around such areas as case management and accounts receivables; and strategic initiatives such as value-based agreements.” In the article, Mark Carley, vice president of managed care and payer relations at Centura Health, Colorado’s largest health system, prefers to call the negotiations ‘conversations that are collaborative’. We consider payers our partners.”

Regulatory affairs are always changing and so how they affect the revenue cycle changes too. Becker’s Hospital Review has an article detailing the thoughts of National Medical Billing Services VP of clinical and regulatory affairs, Kylie Kaczor, RN, MSN, on “Regulatory Affairs and the Revenue Cycle”. She recently gave a webinar that focused on how regulatory affairs were affecting Ambulatory Surgery Centers (ASCs), but some of the actions being prepared by legislators will affect hospitals and other providers.

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Sometimes the legislation is national, sometimes it is generated by a state.  For example, in Oregon, “new state legislation will prevent healthcare providers from sending patients to collections in the event that a healthcare insurer will not pay on a claim where they are out-of-network providers.” Based on this state legislation, providers could see a loss of patient volume and additional administrative costs. Ms. Kaczor touched on six key legislative trends during her webinar. Here are three that pertain to most providers including both hospitals and ASCs:

  1. With the proliferation of self-funded plans, managed care companies are tightening the language of their contracts with regards to their narrow networks.
  2. Specialty product language gives a payer the right to exclude your participation in a specialty program, which could result in the loss of patient volume to their plan’s preferred providers.
  3. Almost all — 97 percent — of health plans and hospitals are using a complex mix of fee-for-service and value-based reimbursement, and bundled payments are expected to account for 17 percent of reimbursement in the next five years.

Evolving care models continue to affect payer contract negotiations as detailed in an article at Healthcare Dive. “Value-based care initiatives and growth in the individual insurance market are changing contract negotiations between payers and providers,” the writers observe.  In the article, Steve Selbst, CEO of Healthcents, a contracting and consulting firm, says that “value-based contracts have evolved as an adjunct to fee-for-service contracts. Through the value-based component of a contract, payers will typically offer a bonus payment, usually around 5%, for meeting certain quality measurements. Providers can and should negotiate the terms of value-based bonus payments.”

In a related article, Healthcare Finance News reports that “according to a new study in Health Affairs, providers in the U.S. could stand to look at some overseas models for tips on how to get the most out of ACOs. This report also brings to light some creative ways to negotiate financial arrangements for providers. “One example given is that of Gesundes Kinzigtal, a private health management company operating in Germany.  This model “includes provider performance measures codesigned by physicians and patients, an internal dashboard that allows physicians to see their comparative performance, and a long-term shared savings contract between providers and insurers.”

Gesundes Kinzigtal keeps surplus revenue, determined by the difference between actual healthcare costs and a regional benchmark defined as the average risk-adjusted cost of care. This financial arrangement enables Gesundes Kinzigtal to manage care across providers and facilitate patient self-management programs and other initiatives that prevent the progression of chronic diseases. Nine years after the start of the intervention, the model generated a 7 percent reduction in per enrollee cost compared to costs in the general population.”

What does the Payer want? Healthcare Payer Intelligence has a long article on exactly that, detailing “Health Payer Tips for Negotiating Managed Care Contracts”.  One takeaway is that “a very important part of negotiating managed care contracts is to ensure that the agreement covers more than merely the hospital setting but the entire continuum of care from primary physician offices and specialists to hospitals, emergency rooms, and rehabilitation centers. Different rates may even be set in the various healthcare settings that a managed care contract covers.”

Still another suggestion we found for successful payer contract negotiation is the recommendation that your team creates a “functioning contract modeling system” to prepare for a payer contract negotiation.  This from an article in PMMC Online which points out that with such a modeling system,  “when the time comes to negotiating contracts with the payer, the Managed Care department doesn’t feel like they’re being left alone in the dark.”

Finally, the Advisory Board has put together a Payer Negotiations Toolkit (PDF).  You can use it to prepare for your next payer contract negotiation.  Key steps include:

  • Organize a Committee of Stakeholders:  Stakeholders should meet monthly or quarterly to understand payer performance.
  • Use Data to Formalize the Negotiation Process:  every contract has vulnerabilities, so you should know the vulnerabilities and market conditions that impact each contract.
  • A Clear Plan Is the Best Plan:  Establish clear objectives of what you want to achieve out of a negotiation.