Use data to prepare for payer/provider risk contract negotiations

Elena WhiteIn my experience negotiating risk contracts with providers on behalf of payers, I saw some significant differences in the way provider organizations approached these negotiations.

Some providers came to the negotiating table with data, analytics and a clear strategy to support their position. Others would accept proposed terms without fully evaluating and analyzing the cost associated with managing the medical services for which they will be financially responsible.

Now that I typically work on behalf of providers, I counsel clients to fully analyze and evaluate the medical costs and drivers associated with the division of medical services responsibilities. How do you get that data to evaluate the reimbursement terms? Ask for it.

Some health plans will provide the medical claim and cost driver data they use in developing their risk reimbursement models to providers with whom they’re negotiating. Analyzing the same data set on both sides of the table can eliminate arguments over whose data are more reliable. If a health plan won’t share its data, providers can use proxy medical cost data to estimate the cost for managing the population based on the demographics of the population and payer mix in the service area about which they are negotiating.

With the appropriate data in hand, providers and payers can have negotiations that can help make the risk contract beneficial for both organizations. It allows both parties to really dig in to the requirements for managing the medical services for the population and identify ways the provider can maximize opportunities in accepting risk while also delivering high-quality health care outcomes and high patient-satisfaction rates.

Once you have the data, how do you use it to prepare? Entering into risk agreements requires evaluation of medical services and the cost to deliver these services to patients. Providers taking on financial risk need to capture upside opportunity while minimizing downside risk.

I recommend that providers come to the negotiating table with a clearly defined strategy for the level of risk they can manage based on actuarially sound reimbursement terms and the qualified financial impact of various clinically integrated strategies. You need to know your organization’s capabilities, shortcomings, market drivers, investment requirements, provider network opportunities and strengths, and patient needs. You know your strengths better than anyone else. By sticking with what you know, you can lead your organization to more profitable outcomes with better medical cost management, quality performance maximization and increased patient satisfaction.Magazine-cover-fall-2015

With a clear understanding of your strengths, providers and payers can work together to enter into a contractual relationship that will drive successful management of care for the patients you jointly serve.

For more insight on payer/provider contract negotiations, check out the new article, “Contracting on the level”, in the Fall 2015 edition of RISKMATTERS.

About the author

Elena White currently serves as Vice President of the Risk Quality & Network Solutions division for Optum. She has over 18 years experience leading network optimization initiatives, network development and expansion, business planning, provider reimbursement development, transformation to risk based arrangements and medical cost management strategies for both health plan and provider organizations.

Elena holds a Bachelor’s Degree from University of California at Riverside and Master’s Degree in Business Administration from Loyola Marymount University.

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