Road to Better Payor Outcomes Starts with Knowing Where You Stand

March 20, 2015
iVantage Health

By Randy Bury, Vice President, iVantage Advisory

Whether it’s conducting managed care-themed seminars or speaking one-on-one with executives, I receive a lot of questions about the negotiation process. Everyone wants tips and tidbits they can take to their next payor negotiation. Seeking an edge – any edge – is understandable given how challenging and exhaustive payor negotiations have become.

But winning at the negotiation table isn’t as simple as ‘try this’ or ‘try that.’ You have really got to know where you stand, both as a matter of how your current contracts are performing as well as in comparison to your peers. So anytime I get a question about negotiation strategy I always respond with a question of my own – ‘how’s your contract portfolio performing?’

infact 16As you can imagine, this type of question elicits some interesting answers, which only helps to illustrate the hurdles hospitals face in trying to evaluate their contracts. Namely access to metrics and expertise.

Accurately measuring the performance of a portfolio begins with the basics (i.e. is Payor contract A yielding the same – or less – revenue than last year) to the complex (i.e. is it more advantageous to have orthopedic volume growing for Payor B v. Payor A) to the hypothetical (i.e. what’s the financial impact if the largest employer in town switches their coverage from Payor A to Payor B?).

Questions like this require a starting point, and we’ve developed a checklist of various metrics that helps form the foundation of our portfolio assessment methodology.

  1. Net revenue leakage – gap between expected and actual payments
  2. Contract yield as a percentage of Medicare
  3. Relative payment position compared to:
    1. internal payors
    2. external peers
  4. Utilization volume and payments by product, patient type
  5. Highest volume and payment service lines
  6. Biggest year-over-year trending service lines
  7. Trend analysis for growth attributable to rate versus volume
  8. Detailed service line profitability
  9. Percentage of cases and incremental dollars from stop-loss terms
  10. Implantable device and high-cost drug payments relative to acquisition cost
  11. Quantified impact of lesser of language

With these metrics in-hand you can begin to explore questions such as those I referenced above. Not only the simple and complex but the hypothetical ones as well. In some cases, it’s those hypothetical questions which will really serve as the barometer for how your portfolio is performing (or underperforming).

To learn more join us on Thursday, March 26 at 2 pm ET for a free webinar exploring best practices for assessing contract performance. Click here to register.

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