The secret to successfully negotiating with health plans

June 27, 2018

Negotiating with health plans is not about who you are or what you do. It is about fair compensation for what you deliver.

Negotiating with health plans is not about who you are or what you do. As a healthcare provider, it is about receiving fair compensation for what you deliver. As a health plan, it is about controlling liabilities, and, in the rare occasion when one arises, supporting assets.

Assets represent value. Effective value-based providers can be valuable assets. Yet many doctors refer to being paid for performance as “ghost money,” believing value-based programs to be just another clever scheme by health plans to cheat them when it is rarely the health plan at all. It is the program. That could be a hospital or hospital system not wanting to cannibalize its revenues to share the shortfall with others or “clinically integrated networks,” Accountable Care Organizations, or Independent Practice Associations naively not requiring change as a requirement for participation. 

Large physician practices, including hospital owned practices, make the promises of higher salaries, which they afford through higher fee reimbursement gained by aggressive consolidation and negotiation. While effective in the past, now it moves them from marginally valuable partners to voracious behemoths creating ever increasing liability, which will be controlled – or eliminated.

The refusal to make the cultural, behavioral, and organizational changes needed to transform from a liability to an asset is a liability to everyone – patients, practices, physicians, and payers. Anyone telling you differently is lying. 

If you don’t think that is true, consider the overwhelming rules, conditions, and regulation, from pre-authorization controls to scope of practice limitations imposed by commercial and public payers. Payers are controlling liabilities and mitigating exposure.

Physicians, particularly primary care physicians, in their view, must work long and hard to scratch out mediocre success, underpaid for performing tasks requiring expert skills. That is true, but repetitive tasks, however skilled, are incorrectly confused as providing value.

Treating people episodically for conditions related to treated chronic conditions is often viewed by payers as a failure to properly treat an underlying chronic condition. For anyone paying the tab, that is a liability. For health plans, it is a double liability. Their customer (the premium payer) is damaged, and they must pay for someone to try to fix it. 

Hence, more limitations, restrictions, and controls.

Conversely, cognitive activities, such as managing health and preventing, slowing, stopping, or reversing the progression of chronic disease, which is three of every four dollars of healthcare spending pre-Medicare and 96 of 100 dollars post Medicare, is an asset. Assets are supported. Assets are rewarded. Assets are protected. 

But, learning from experience, payers are cautious.

Value based reimbursement, which mitigates payer risk, generously rewards those who successfully make the transition from task-based service providers to clinical managers – and deliver results.

If you just think about that for a moment, payers mitigating liabilities makes all of the sense in the world. Managing price and some overutilization through regulations and controls are their two most effective tools – pretty much their only tools to reduce premiums.

Why would payers want to reduce premiums? Because it makes them more competitive and allows them to grow, particularly when they are competing for self-insured employers, who represent most of a health plan’s business.

How can providers do better? They can control spending, lower relative risk on a population scale (an advantage because lower risk to lower rates is a year’s lag), and improve patient experience. The combination gives payers a competitive advantage. Competitive advantages are assets as are those who deliver them.

The secret to success is fundamental, and, for many, uncomfortable, because it requires abandoning victimhood, the quiet comfort of managing a fiefdom, and adopting fundamental change in collaboration with others who have had success in transforming liabilities into assets.

The present system is a familiar nest that many are not ready to leave, which is why accountable care organizations, clinically integrated networks and the like don’t require any meaningful change in order to grow and increase care coordination fee income. It is a liability that will be controlled, and, eventually, starved.

Our parents told us all that you can never get something for nothing. The cost of an entitlement mentality is to be forever controlled. The cost of being a lone wolf sticking to the old ways is to be caged until you are no longer of any use at all.

I, for one, would rather be productive.

James Doulgeris is the CEO of Osler Health. Osler Health is a statewide clinically collaborative accountable care organization comprised of elite primary care physicians dedicated to setting the high bar for the best care, service, and value in New Jersey.