Where to start
For example, providers must ensure they’ve reviewed their contracts and create a habit of doing so often. Unfortunately, only 58% of providers review their contracts yearly, and 17% report never reviewing them. Providers need to know their contracts and know what is and is not working for their organization.
How often do providers review their payer contracts?
SOURCE: MGMA (Medical Group Management Association). “Is it time to review your medical group’s payer contracts?” (August 2023). https://www.mgma.com/mgma-stat/is-it-time-to-review-your-groups-payer-contracts
Let Data Drive the Discussion
Both payers and providers should know their target statistics, both financial and strategic, and how they need to be adjusted. If each party comes amply prepared with data, it makes it easier to see where the numbers, like KPIs, protocols, and evidence-based medicine data sets need to fall. Each should ensure that they understand their data, the key issues for their organization, and the solutions that will be viable for both parties.
The Provider
For providers, there’s a few ways for leaders to secure the data they need to come prepared.
“I think providers are going to have to do more diligent data mining and use predictive analytics more so than they have ever done before,” said Dr. Britt Berrett PhD, FACHE, the managing director and teaching professor at Brigham Young University. Berrett has also served as CEO of several health systems.
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TAKEAWAYS
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Regularly review contracts and ensure both parties are up to date on accurate information throughout the negotiation process.
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Let data drive the discussion by presenting accurate data that reflects cost utilization, expenses, and future market trends to create a successful negotiation.
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Prove that you can help the other party with reducing expenses through digitization, AI implementation, integrated delivery systems, or efficient claims management.
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Have a plan to address administrative burdens on both sides by simplifying the process and utilizing KPIs.
“Providers are going to have to do more diligent data mining and use predictive analytics more so than they have ever done before.”
—Dr. Britt Berrett PhD, FACHE, the managing director and teaching professor at Brigham Young University.
“Big platforms like Epic, Cerner, and the rest are going to have to step up to the plate and provide that information. They're going to have to have up-to-date real time information on utilization, cost, and expense,” Berrett says.
Presenting accurate data that backs up your position creates a better pathway to a successful negotiation and adds to your credibility at the negotiation table. Understand your costs, examine and confirm fee schedules, closely monitor reimbursement updates, take into consideration future M&As, understand how inflation might impact your organization, and understand your market and competition; all these focus areas will help build out your business case.
“There's a lot of added pressure on contract negotiation and making sure that the rates that providers are getting in our contracts are things that are sustainable for the next one to 10 years,” said Bradley Olson, vice president of managed care for MercyHealth Wisconsin and Illinois. Olson has also previously served as Humana’s director of contracting, and Centura Health’s director of payer relations.
“Improving the yield of your agreements is very important,” said Olson. “It’s important that the data used reflects all the operational burden and/or denials too. What this won’t include is the added inflationary components,” said Olson.
“It's always felt, at least on the providers’ side, that the payers just had the upper hand. They had more data. So, price transparency is one of the pieces where it's arming the providers with more and more information,” said Mark Bethke, managing director at Deloitte Consulting and a healthcare consultant for Deloitte for 24 years. Bethke is also Deloitte’s value based care leader and population health innovation team leader.
The Payer
When it comes to the payer’s role in data, Piyush Khanna, vice president of clinical services at CareFirst Blue Cross Blue Shield, says payers can help provide accurate data for providers so they can look at information in the same way payers do.
“When we go into the negotiation we can put that data in front of [the providers], but we need to also make sure they have access to it throughout the contracting process, so they have more real-time intervention capabilities to influence patient outcomes,” Khanna said.
With higher use of EHRs and more clinical data repositories available to both the payer and the provider, Khanna said that the data is there, but it can be unorganized and slow to make an appearance.
“We can certainly leverage the power of the data, and we have to remember data has been traditionally fragmented in healthcare,” Khanna said.
Britt Berrett, PhD, FACHE
Managing Director & Teaching Professor
Brigham Young University
“I think clinical data access in more real time will become more relevant. Because whether it's progression or regression on outcomes, you want to have more leading indicators that are available through the clinical data set. That is something I see as more leveraging and making it into contractual aspects as well, especially on readmissions.”
While data that reflects the needs and goals of each organization is highly important, data that reflects cost utilization and expense can truly drive the discussion home. At the end of the day each health care leader involved knows that sustainable profitability is crucial to keep an organization in business.
Stepping into the negotiation room with an open mind, hard numbers, and flexibility will be vital, no matter which side of the table you are on. The more data, the better. If you are approaching the negotiation table with exact numbers, you’ll be able to articulate exactly where your organization can be flexible, and where it cannot.
17%
of providers
admit to never reviewing their payer contracts.
Show That You Can Reduce Expenses
Another way that payers and providers can successfully negotiate is if they can prove they can stabilize finances. Although most healthcare leaders on both sides are optimistic about heading into 2024 and expect financial performance to improve, a few key areas will push them to do so.
“Rising labor costs in healthcare and a substantial increase to the regulatory and legislative mandates are driving increased costs for both providers and health plans,” said Krishna Ramachandran, Blue Shield of California’s senior vice president of health transformation and provider adoption.
Payers and providers will need to collaborate and examine specific avenues that health systems can take to reduce expenses to have a portion of the funds returned to their organization.
Both parties can bring up digitization, which can play a large role in the negotiation: from utilizing AI to reduce administration workload, to implementing EHRs to reduce paperwork and streamline operations, leaders must examine options that work for their system. Payers can cut costs and pass savings onto their organization; this is beneficial to both parties.
The Payer
For payers this is important because the less the administrative cost, the better for everyone, Khanna explained, agreeing that AI has the potential to help, but must be done responsibly.
Part of that responsibility goes back to ensuring accurate data sets; technology will only be as good as the data. “The data backbone is extremely critical for these statistical models of the future to be able to leverage this information,” Khanna said. “These tools need good, curated data sets [in order to] to be meaningful.”
But health leaders should not only look to the newest digital solution to fix their problems. Digital tools and programs must be integrated in a way that best paves the road to success for that specific organization.
Ramachandran stated that to drive tangible change, industry leaders must provide solutions that are proactive and integrative, giving an example of how Blue Shield is investing in tools and partnerships to bring healthcare into the digital age: “This includes tools to streamline data exchange between providers and health plans so that we can reduce the burden of administrative transactions and focus efforts on member health.”
Bradley Olson
Vice President of Managed Care
MercyHealth
Mark Bethke
Managing Director
Deloitte Consulting
“Integrated delivery systems are a viable option that can help streamline the operations of a health system and prove to a payer that you can effectively manage care costs.”
—Bradley Olson, vice president of managed care for MercyHealth Wisconsin and Illinois
The Provider
For providers, Bethke highlighted that although there are expense solutions available, the key is finding a mix of them that fit your organization, can improve your bottom line, and be useful at the negotiation table.
Adding to this is Olson who stated that the reduction of unneeded procedures and activities in healthcare is what is going to help reduce or level out health care expenses and prove your case during negotiations.
He explained how his workplace, Mercyhealth, is an integrated delivery system. This means that most of the services needed to care for an individual are integrated in the system, ultimately providing value for consumers, reducing cost and improving quality.
Olson explained that examining how health systems and providers can be more clinically integrated and ensure a sense of accountability as an avenue to help drive down long term cost.
Integrated delivery systems are a viable option that can help streamline the operations of a health system and prove to a payer that you can effectively manage care costs.
Come With A Plan To Minimize Burdens
The Provider
For providers, Bethke explained that one of the biggest pain points, particularly around Medicare Advantage, is denials and prior authorization.
Although these are changing little by little through congressional policies, he says it’s not coming fast enough.
50%
of providers
say they saw an overall increase in their denials in 2023 compared to the year before.
Piyush Khanna
Vice President of Clinical Services
CareFirst, Blue Cross Blue Shield
Krishna Ramachandran
Senior Vice President, Health Transformation and Provider Adoption, Blue Shield of California
“That has become a huge, huge pain point with providers who are assessing their payers on not just how good their rate is, but how easy they are to do business with. Are they causing issues with their patients? Because it's not an issue with just the provider, it's a customer experience issue, a member experience issue, and that's a real problem because that affects your star ratings, your quality ratings,” Bethke said.
Bethke continued that providers are experiencing a longer list of items they must track each year to see where they are in the market, what they offer to the payer. “Honestly, I think that is why we're seeing more and more people saying, ‘We're going to go out of network,’” Bethke said.
When it comes to denials, Olson agreed that they will continue to be a prevalent topic in contract negotiations, but also pointed out that payers need to be in tune with the operational burden they impose on health systems and providers.
“One element to this is reducing the denials, but also getting upstream on the operational burden that it takes related to denials, it’s a challenge not knowing what the next payer operational burden may even be.”
If providers come to the table with data proving the administrative burden of the payer, they are more likely to gain the upper hand in negotiations, especially if the only solution is to increase reimbursement rates from the payer or go out of network.
The Payer
On the other hand, with more items to keep track of, payers will have to work with providers to determine how they can stay on top of their data and simplify prior authorization and denials processes.
In 2023 payers faced much scrutiny over their claims management practices, with over 50% of providers stating they had seen an overall increase in their denials compared to the year before. If payers want to reduce expensive and unnecessary treatment, eliminate fraud, and lower financial risk, they’ll need to take a closer look at claims and denials. Hospitals are going to want more assurance that their agreed upon products won’t later be denied.
KPIs can enter the frame here, and with them payers can start to paint a definitive picture of success for their organization.
Khanna emphasized the importance of KPIs: they can help ensure payers are on the same page and have accountability around their benchmarks to think about what success looks like on their end as they approach negotiations.
Payers can also make use of AI to manage claims, but must ensure the process is overseen and accurate to avoid malpractice. Healthcare witnessed how this can happen when Humana faced this issue.
Managing denials will be a top priority for revenue cycle leaders in 2024. To help with this, both parties can also utilize contract management software to track underpayments, automate fee schedules, and generally improve contracts.
Every organization must find a strategic avenue that works for their goals and their bottom line. Whether it’s implementing basic AI, or reexamining your care model, taking some of these focus areas into consideration will be a key part in working through successful contract negotiations this year.
Marie DeFreitas, Associate Content Editor, HealthLeaders