Negotiating in 2018? Here’s what you can expect.
There can be little argument that negotiations with payors have grown increasingly challenging over the last couple of years. Even single-digit rate increases are being met with obstinate resistance, requiring a level of resilience rarely needed just five years ago.
In February 2017, we first brought your attention to the emergence of a phenomenon we dubbed “terminate to negotiate.” If a provider wanted to negotiate an outdated contract, the payor required the provider to terminate the contract. We saw several of these cases a couple of years ago, and at the time it was too soon to tell if this would become a widely adopted strategy. But taking stock of 2017, there can be no question: This is no longer a phenomenon. “Terminate to negotiate” is now a widely embraced negotiation strategy.
Becker’s reported that 92 payor-provider disputes or agreements took place last year. A full 30 percent of those negotiations were impacted by payors activating the terminate to negotiate strategy. More and more health plans won’t even begin discussing new rates or amended contract language until they receive notice of the intent to terminate the existing contract. What follows is often something that resembles more of a contentious divorce than a business negotiation.
The strategy is designed to force providers into a state of duress. The Anthems, Blues, and UnitedHealthcares of the world know it’s becoming impossible to support a sustainable financial future on the rates and terms of antiquated contracts. And to lose thousands of patients to out-of-network status with one of the major plans—it’s out of the question. So, you see, payors have found a way to get hospitals to trade one raw deal for another out of desperation.
While so much of the year ahead is uncertain from a policy and regulatory perspective, one thing is for certain: securing the right rates from payors, especially the heavy hitters, will be harder than ever.
Here’s what providers can expect when
taking on payors in 2018:
Terminate to Negotiate
Payors have learned that kicking the can down the road works. Whether or not it’s in the terms of the contract, expect to terminate even if a single-digit rate increase is the goal. However, even after termination has been issued, payors won’t necessarily be ready to come to the table. Four rural Oklahoma hospitals filed a suit against Blue Cross Blue Shield of Oklahoma after the payor went radio silent, refusing to engage in contract negotiations.
And as that can gets kicked farther down the road, public negotiations will become nearly impossible to avoid. Payors hope providers will buckle under the public scrutiny of looming out-of-network status. Without a doubt, payors will lean on the myth that they are fighting to keep healthcare costs low and that “higher rates for the hospitals equal higher premiums for members.” If not careful, providers can find themselves on the losing end of a public dialogue. Time is of the essence when a provider or health plan issues the notice to renegotiate the contract, or when the actual contract is terminated. The first organization to communicate will set the narrative. Successful negotiations will require providers to educate key stakeholders early and often.
Out of Network
Of the contracts we saw terminated last year, nearly half resulted in the hospital going out of network with the payor in question—some for as little as a few days, some for as long as months before an agreement was reached. To the payor, it’s a game of chicken, and they expect the providers to blink first. There’s no denying out of network is a difficult valley to traverse; for some it’s unchartered territory. However, for hospitals committed to getting the right rates that help secure a more financially sustainable future, this is very real possibility for which they must prepare.
We saw strategies and intelligence shared across state lines in an unprecedented manner last year. There is no doubt these tactics will continue to be pervasive in contract negotiations in 2018 as payors share their playbooks even across company lines.
It’s critical that providers do their homework, and they must start early. Gone are the days when successful contracts can be achieved in a matter of a few months. Internal stakeholders must be properly educated and aligned, and external stakeholders must be educated, engaged, and activated. A full-scale communication strategy and activation plan must be developed and effectively executed in order to win. And that takes time. Lots of it. At least 180 days. Remember, time is the one thing you can’t get back. So, once terminations are issued, time is of the essence, and only those who have fully prepared for what’s coming will be on the right side of the negotiations.
ReviveHealth is full-service agency here to help. We know the business of healthcare inside and out and are ready to help you identify and solve complex problems so that you can own the moments that matter.