Payor Approaches to Cost Concerns: Considerations for Provider Contracting and Revenue Cycle

Practice area:

Hospitals and health systems face ongoing pressure to migrate away from fee-for-service models, reduce costs, and improve quality. From MACRA to commercial risk arrangements to self-insured employer cost containment models, it is important for hospitals and health systems to take a strategic approach to revenue cycle and contract negotiations.  The recent press surrounding Anthem’s rollout of its new policy regarding hospital-based imaging, which will redirect a significant portion of imaging away from hospitals to free-standing facilities, highlights the nuanced approaches insurance companies are taking to rein in what they regard as high cost services.  Add to that the proliferation of consumer-driven health care models where patients are on the hook for more of the costs of the health care services they consume and thus look for ways to shop for best quality and price.  Further, “repricing” companies engage with self-funded employers to redesign their plans to remain out of network for a host of services for which the plan will pay a percentage of Medicare, which for many hospitals translates to cuts in reimbursement.  These trends will undoubtedly continue as health care costs remain in the spotlight and employees and other consumers continue to shoulder more of those expenses.

We continue to provide strategic counsel to health care providers regarding the issues associated with repricing, nuanced approaches to managed care and risk based contracting, as well as aligning managed care contracting strategies with payor policies.  In doing so, we find that decreasing volumes and reimbursement can be mitigated, albeit not completely so, through efforts to rein in denials management, improving clinical efficiencies, and ensuring coding accuracy.  The fact is that while there are numerous examples across the country of provider/payor collaboration, we find that we still have a long way to go to deploy care delivery models that appropriately reimburse providers and enable a strategic approach to a multiyear contract arrangement. With that said, continued collaboration and care delivery redesign can positively influence the continued dilemma of the cost of health care services.

Developments in telemedicine, such as the VA’s announcement of its proposal to permit providers to perform telehealth services across state lines, and results from ACO models that demonstrate that commercial models fare better than Medicare ACO models alone, illustrate traction in changing how healthcare is delivered.  Further, states continue to foster and encourage value based reimbursement designs via initiatives that provide guidance on value based design options and public reporting.  Finally, providers are learning what works and what doesn’t in the value based reimbursement space; for example, they understand and stress the importance of addressing socioeconomic determinants of health.

It remains to be seen whether payers and providers can truly collaborate to offer new models of health care delivery that focus on patients as consumers, leverage technologies that foster improvements in care delivery and patient engagement, while also protecting the vast amounts of personal health data that is a target of many high profile data breaches. It will take ongoing partnerships between payors and providers to move the needle in contract negotiations. Wherever we go from here, strategic payor contracting approaches and revenue cycle efforts are critical.