Overcoming Payors’ Short Memory with Your COVID-19 Financial Story
Here we are, trudging into the final months of 2020. Yes, there is an end in sight to this overall no good, very bad year. But providers facing year-end terminations and public negotiations are encountering a particularly difficult journey between now and then. As we’ve discussed with several industry experts on our Operation Recovery podcast, if providers expected more collaborative behaviors from payors in 2020, think again.
If anything, we’ve seen payors become more aggressive, unfazed by taking providers down to the wire and even out of network. Providers must take a strong position on negotiations because they may be the only opportunity for providers to fight for what they need—both to get out of a COVID-19-induced financial hole and secure future sustainability post-pandemic.
By now, it’s common knowledge that providers took a significant financial hit due to paused elective procedures. But as more time passes since stimulus funds were distributed and providers begin to recapture volume, it’s easy for patients, employers, and other stakeholders to forget about that hit — even though providers are still dealing with the very real shock waves caused by months of halted revenue. Your COVID-19 financial story needs to be part of the rationale behind your asks in a negotiation, especially as payors become more aggressive in calling out providers for their vulnerabilities.
Here are some details you’ll want to know and incorporate into your position:
- First, quantify the estimated negative financial impact of COVID-19. Look at the impacts to EBITDA caused by lost revenue, PPE purchasing, and other categories of impact — including opportunity costs. What is that number, and what percent of your normal operating revenue does it comprise? Make sure you define the problem in the appropriate context so that the magnitude of the issue is clear.
- Then, look at how those impacts have been offset. What were the financial offset of furloughs and workforce reductions? How much did you receive in stimulus dollars? Did leadership take pay cuts? Providers need to show they have done what they can to stem financial losses, and still face shortfalls that must be filled by payor partners—who, by the way, have reported record profits in 2020.
- Describe how you continued to serve the community despite your revenue challenges. Create a narrative around the essential healthcare services that could not be paused, such as emergency, cancer, maternity, and other care that proceeded despite the crisis. Make sure you include references to public health services, such as holding drive-through testing for COVID-19 or other activities needed to care for patients with COVID-19 while minimizing the virus’s spread. Don’t forget about community engagement activities, like health fairs, community care packages, or volunteer efforts. Providers must remind patients and stakeholders that even when they were down, they were not out of the fight against the global pandemic.
- Be prepared to justify your COVID-19 billing practices. Be ready to produce a number for the standard charge for COVID-19-related services so you can quickly identify anomalies and correct errors, without risking the perception of profiteering behavior. Recent media coverage has spotlighted providers who bill insurers thousands of dollars for basic COVID-19 testing without a clear rationale for the high charges. Even if patients don’t receive the bill, there is increasing scrutiny on how much providers bill insurers for seemingly simple tasks. Make sure you can justify those charges in a way that makes sense to consumers — something providers should be doing anyways as they prepare for January 1, 2021 implementation of the new Federal Price Transparency rule (see commentary from my colleague Ryan Colaianni on this topic).
The court of public opinion has a short memory. Providers need to remind payors and the public that they have sustained a significant financial hit, while simultaneously rising to meet an urgent public health challenge. Government stimulus money and recaptured volume may have helped pay some light bills for providers, but it will not be enough to erase the impact of months of revenue loss. If providers are to remain critical pillars of their community’s response to COVID-19, they will need payors to reach fair deals — but it is up to each provider to tell that story for themselves.