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The State of Our 2019 Payor/Provider Predictions & Their Implications for 2020

At the beginning of 2019, we shared a report titled "A New Era for Payor/Provider Relations: Combating Distrust in an Industry Myopically Focused on Price," which outlined expected trends for 2019 and beyond. As 2020 quickly approaches, we thought it might be interesting to take a look at "the state of the trend" and review each of the four trends we outlined at the beginning of the year. So here it goes!

 

Trend #1

Conflict between payors and providers is at an all-time high, and contract renegotiations that used to be perfunctory are now protracted, involved, and difficult. 

Today's take: Unfortunately, there seems to be no end in sight for this trend. From 2018 we've seen a continuation of high-profile disputes into 2019, impacting provider organizations such as the University of Alabama at Birmingham Health System, Northeast Georgia Health System, and Stanford Hospital.

And, as in 2018, this doesn't just show up as typical out-of-network (OON) disputes. Anthem and UHC are continuing to push payment approaches such as outpatient imaging and diagnostics, which continue to erode margins for providers.

 

Trend #2

Payors are targeting market-leading "must-haves" and challenging the balance of power that stabilized provider networks and resulted in few OON situations. Today, "must-have" hospitals or health systems are referred to as "market-leading brands," a change in definition spurred by the wave of tiered and narrow networks.

Today's take: Payors continue to leverage this tactic to effectively drive fear-based messages through the word-of-mouth network that all providers listen to. When this approach is effective for one major negotiation, it compromises internal and external stakeholders' confidence in the provider—making every subsequent negotiation for that payor that much easier. This approach becomes even more effective for payors when the negotiation in question is grounded in traditional tactics built on consumer perceptions and legacy beliefs, rather than a negotiation strategy informed by analytics. Today's battles center around the brands we all know – yesterday's "must-haves" are today's targets.

 

Trend #3 

Payor and provider priorities are misaligned, and the symptoms are most visible in permutations of programs that have taken off in the last few years, such as value-based care (VBC) and reference-based pricing. The ways in which payors distort and misuse these tools widens the gap between what payors prioritize (unit price), and what providers prioritize (informed patients and payment reform).

Today's take: This trend is continuing in full force. The results of this misalignment have become very public in 2019 with many constituents – providers, payors, consumers, government officials, and others – debating the ills of practices such as balance billing and how to resolve these issues. Further, payors have been doing an excellent job of directing responsibility for these practices to providers, even though they have a hand in driving this practice.

 

Trend #4

Payors are positioning at the "top of the funnel." Health plans own many consumer access points such as primary and urgent care services, while also exerting more considerable influence over consumer choice of hospitals, specialists, and subspecialists.

Today's take: This trend has accelerated dramatically in 2019 with Optum and United announcing as recently as October that they intend to unite care and coverage in a new model that is already live in California. Other prominent players such as CVS Health, via their Aetna acquisition, are quickly diving in to claim their stake in this space.

 

Fighting the Trends

We wish we had better news about the prevalence of payor's "terminate to negotiate" strategies we've seen proliferate. A small silver lining is that there are exceptions to the rule. There are definitely payors who are negotiating in good faith with providers for fair, balanced contracts.

Yet what was evident at the beginning of 2019 still rings true today: there is a clear, fundamental shift in the payor/provider landscape that can't be ignored. "Easy negotiations" may be a thing of the past, but providers can level the playing field with well-informed negotiation strategies powered by analytics, market intelligence, and carefully crafted communications.

November 14, 2019
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