Payor-Provider Disputes Are on the Rise. Who Will Win?

September 28, 2015
William Balfour

By Troy Brown, Client Services Manager

In May, media stories highlighted the filing of a lawsuit in federal court in Alabama alleging that the 37 Blue Cross and Blue Shield health insurers are functioning as an illegal cartel. The healthcare providers involved in the suit claim that the Blue association’s agreements lead to “decreased competition” and ultimately lower payments. Businesses barking at one another in court isn’t necessarily big news but when you’re talking about an association of insurers which when combined covers more than 1/3 of Americans, the magnitude suddenly changes.

As consolidation of insurers continues to occur, we’re likely going to see an increase in such provider-payor disputes. In fact, there are several market forces driving these disagreements between providers and payors.

As consumers take greater financial responsibility for the cost for care, they are demanding more value from healthcare providers. And in order to assess that value, consumers are wanting more transparency relative to the quality and price of services. When this information is made available to the public, it then follows that there is increased pressure on providers to offer more competitive pricing.

To stay competitive, providers are doing what they can to control costs and squeeze the most revenue out of their contract negotiations with payors.  However, we hear great frustration from providers who are trying to negotiate mutually beneficial contracts with dominant market payors. These payors hold most – if not all – of the cards which creates an uneven playing field.

The good news is that some savvy providers are finding that, with a thorough understanding of how their performance measures up (across internal and market metrics), and a plan for driving higher returns in payor negotiations, that table doesn’t have to be quite so slanted. We’ve found that it’s quite possible to bring the field back to level.

The secret for these hospitals lies in data – specifically hospital reimbursement data and cost data for their peers in the market. These metrics form the backbone of their financial analysis during negotiation. Using the financial analysis, providers can determine where they can afford to give a little, where they are in a strong position, and how to get the contract elements most important to them.

If hospitals are going to make any headway in preserving revenue, they have to start making some noise, gaining confidence with data, and capturing better outcomes at the negotiating table. Rather than leaning on the limited resources of their managed care departments to go up against the payors using traditional tactics, perhaps it’s time to follow the playbook of the payors by leveraging key metrics and sitting down at the table in an advantageous position. I’d like to hear your thoughts on this trend and any strategies you’ve uncovered when negotiating with payors.

No comments

Leave a Reply

Your email address will not be published. Required fields are marked *