Bolstering Collaborative, Data-Driven Value-Based Contract Negotiations

To minimize insufficient reimbursements, claims delays and denials, and the power imbalance inherent with Medicare Advantage and other value-based contract negotiations, health systems and payers will benefit from a new collaborative approach that centers on data-driven proof points, aligned incentives, and mutual transparency, said panelists discussing “Contracting and Securing Fair Payment” at the 2024 Guidehouse Medicare Advantage Summit.

Panelists for the contracting and payments session included:

• Brian Donovan, VP, Managed Care & Payer Relations for Inova Health System—a nonprofit healthcare provider across Northern Virginia and metropolitan Washington, D.C., that’s recognized as a national healthcare leader in safety, quality, and patient experience.
• Brian Walsh, VP, Managed Care for Northwestern Medicine—a nationally ranked nonprofit health system affiliated with Northwestern University Feinberg School of Medicine that serves people throughout metropolitan Chicago and Northern Illinois.

Key Pain Points

When asked about the costs of doing business with Medicare Advantage payers, panelists said that administrative burdens, lower contract yield due to final claims denials, and insufficient data access are the largest pain points most health systems face.

“We focus on what will reduce the administrative burden, provide data access, and better serve patients,” said Walsh, who has been with Northwestern for 25 years and previously served as CFO of its physician group, Northwestern Medical Faculty Foundation. “It’s getting the right language in the contract, reducing administrative burdens through automation and other means, and getting data we can manage.”

Lack of transparency has also been an issue for many health systems. “Transparency has to be the key,” said Donovan, a former value-based contracting consultant who designed and developed a national value-based contracting strategy for Catholic Health Initiatives. “If they’re not going to show us what’s part of their administrative spend, we’ll have to have a conversation about how much they’re making off that population.”

U.S. Rep. Claudia Tenney (R-NY), a summit keynote speaker, acknowledged the importance of transparency for Medicare Advantage payer operations and noted that legislation has been re-introduced to call for faster, standardized electronic prior authorization and claims reporting requirements.

“Medicare Advantage plans would have to report their claims approval and denial rates to the Department of Health and Human Services, as well as disclose their policies and criteria,” said Tenney, a small business owner who has served on numerous hospital boards. “We need to streamline those processes to improve patient care.”

Collaboration, Not Termination

While attention has been paid to providers trying to cut their losses by no longer accepting patients on Medicare Advantage plans—or threatening to terminate contracts as a way to negotiate better terms—panelists agreed that termination is not a preferred strategy because it can negatively impact patient access and providers’ hard-earned reputation in their communities.

“We take some upside risk on the Medicare Advantage side…it’s an element of the rate they pay you versus the administrative burdens they put on you,” said Walsh. “But termination is never good for everyone. Once you decide which payers you want to work with, you need to negotiate terms that work for both sides. We’re leveraging that so payers will work with us, and it benefits them, but the goal is to push them to work with us, not terminate.”

Donovan said that termination is a complicated consideration for health systems that have a heavy concentration of commercial business and are locked in with several national carriers.

“Our market is very competitive, so our commercial book of business is fairly evenly distributed among five national carriers—and all Medicare Advantage contracts come through those carriers as part of our larger national agreements,” said Donovan.

Walsh suggested that separating discussions over commercial and Medicare Advantage contracts can help, but that it’s hard to turn down patients if they’re out of network.

“In the next round of discussions, we will probably separate out our commercial and Medicare Advantage talks because it gives payers an advantage to combine those discussions,” he noted. “But with hundreds of thousands of patients, we have to know how to accommodate them and decide which Medicare Advantage payers we want to partner with going forward.”

The panelists agreed that it’s worth striving to collaborate with payers on contract terms to demonstrate to them that reducing administrative burdens, gaining access to manageable data, and increasing automation can be a win-win solution for both parties.

“We’re always taking the risk of less yield to have access to data, but payers are looking for market share,” added Walsh. “We need to say, ‘You’re in five counties; you can’t get access without us.’ It will take getting them to understand we need to work together.”

Donovan said that Inova has recently found payers more receptive to collaborating on denials, audit checks to limit overutilization, and pharmacy costs. Its negotiators are also emphasizing data sharing, interoperability, and transparency to make sure that claims are paid according to the contract and that initial denials are limited instead of having to rely so much on appeals.

“Payer platforms are supposed to solve problems, but they don’t always work right,” he said. “What do they need to make sure they’re paying according to contract? It’s workflow using the right tech that doesn’t place claims that should be paid for in the queue. The level of engagement we’ve seen going through that process is to have humans willing to sit down at a table and collaborate around these common issues. They’re just as frustrated with tech and processes as we are. That sets the table to find solutions.”

He added that Inova is actively working with two of its market’s largest Medicare Advantage payers to develop yield calculations for use in contract negotiations so that they don’t have to argue over whose data is the most accurate.

“This has been a journey that’s evolved since I’ve been here,” shared Donovan. “When you’re getting an 85% to 90% yield, there’s a misalignment in incentives versus what payers are focused on. We’re getting them to understand that and leverage it through the next contract cycle. It doesn’t have to be overnight, but it must be collaborative. The payers I’ve had discussions with have been very receptive to the idea. Because we’re at 98% now, that creates an opportunity for us to approach payers around a new concept: ‘Let’s come together and figure out how we create a mechanism that takes away pre-authorization requirements and claims denials…pay us 100% and we’ll get you the information you need and reduce all this administrative burden.’”

Harnessing the Right Data

According to summit host David Burik, partner and Guidehouse Center for Health Insights leader, many health systems find themselves at a disadvantage in contract negotiations due to payers’ laser focus on actuarial science and risk management. To rectify that, he recommended that health systems use data more effectively to collaborate with payers on the mutually beneficial goals of reducing administrative costs to yield higher returns while limiting overutilization. Seeking out preferred partnership models that feature gold-carding, unit rates, risk adoption, data sharing, operational integration, and growth initiatives can help health systems preserve their bottom line, he added.

Panelists also noted that health systems can afford to take on more risk if doing so represents part of a larger, long-term enterprisewide transformation strategy.

“We are playing the long game and not trying to solve these issues overnight,” noted Donovan. “It’s a three- to five-year strategy as we shore up the foundation and move toward more risk through our clinically integrated network. We’re sitting down with Guidehouse and figuring out what we need to do to set ourselves up for success by leveraging our data and structuring our financial incentives based on what our focus is going to be.”