Providers urged to leverage data and strategy for successful payer negotiations

Finance leaders at hospitals and health systems can get better results from negotiations with a better aligned, data focused approach, says a former long-time payer executive.

Scott Ellsworth, a former executive at Centene, UnitedHealth Group and Excellus BCBS, urged provider finance leaders to implement a six-part approach to obtain better results from negotiations with payers:

1. Use data, analytics
2. Use leverage
3. Start early, use strategy
4. Align leadership
5. Prioritize contract language
6. Reach decision makers

Improved rates and contract language are increasingly important as providers face growing number of administrative hurdles, such as denials, and payment rates that have lagged inflation.

“You have more leverage than you realize,” said Ellsworth, a consultant and interim chief managed care officer for Bon Secours Mercy Health. “From a payer perspective, at the end of the day we sell networks, we sell access: no network, no profits.”

Data and leverage

The most important part of this approach is for hospitals and health systems to lead with real data, he said, speaking at the HFMA Annual Conference this year.

“You got to have the data,” Ellsworth said. “If you don’t have the data, if you’re just taking a swipe at it, if you’re just making up numbers, believe me, payers will know that in a heartbeat.”

Using data from price transparency files allows providers to see how their payment compares to others in their markets helps build internal consensus on negotiation targets and to make the case to payers.

However, data must be combined with leveraging some type of negotiating advantage because payers are unlikely to boost rates on data, alone, he said.

“The truth is, they use leverage and so should you,” Ellsworth said. “The question real is: What leverage do you have; how do you create leverage regardless of who you are?”

Leverage can come from understanding patients are more loyal to their physicians than they are to their insurance company. Additionally, public opinion in any dispute is going to favor providers, he said.

Timing and leadership

Strategy planning should start a year before negotiations begin to allow enough time to collect and analyze data and determine the best approach to the payer.

“It tends to be approached from a more transactional standpoint [by providers], which really de-leverages you at the negotiating table,” said Ellsworth.   

Advance leadership alignment also is important, so all executives and the board are ready if the negotiations reach critical points that require tough steps, like leaving a payer network he said.

Negotiations

Instead of trying for broad changes in an existing contract, Ellsworth encouraged providers to focus on a small number of “must haves that are deal-breakers.”

Those key targets should be followed by a longer “like to have” list and a third list of “nice to have” changes, Ellsworth said.

“You’re not going to get everything but if you can home in on one or two, especially hospitals having more leverage [based on market share], you can often be successful,” he said.

A focus on decision makers is another key in negotiations, he said. The executives assigned to contract negotiations often lack the authority to make any substantive changes to contracts and negotiations can run out before late stage appeals to payers’ senior executives.

“You have to start [negotiations] with the frontline folks, but you want to have a strategy for ultimately talking to the executive leadership at” the payer, Ellsworth said. “Your best deals are going to come from those folks who understand the broader dynamic of what it would mean if you were potentially out of network.”