Successfully Negotiating Managed Care Contracts

Successfully negotiating managed care contracts takes a lot of patience, determination, drive and perseverance…

In successfully negotiating managed care contracts, parties should mutually benefit in a number of ways. First, a healthcare provider adds a list of patients to its practice. They also have an opportunity to engage with a group of diverse patients who prefer specific doctors. The patient benefits by knowing that they can now be seen directly by their chosen doctor on a long-term basis. The patient and doctor will build excellent rapport and promote continuity of care. Patients will also enjoy the benefits of being “in network” that includes receiving care at a lower cost. The managed care company, who is the payer in this case, is happy that they have a new revenue stream.

A guide to successfully negotiating managed care contracts:

Keep the focus away from rates

The amount a hospital is reimbursed is very important, but it is not as critical as numerous other factors that make the contract doable. For example, you must have a full working understanding of the payer and how they conduct business before entering into any negotiation. There are payers who are very slow to reimburse you, keeping the healthcare institution chasing cash for what could be months. Obviously, this is not a good model because those earnings are needed for the hospital to continue to provide adequate care. Those revenues could also be invested in research and development and many other critical areas.

Payers can also be particularly slow in responding to claims from the start. This creates a backlog and makes it hard for hospitals to monetize their service. Files can pile up, delays will occur and, sometimes, patients are kept waiting unacceptably long periods of time for their care.

Another important consideration when successfully negotiating managed care contracts is the breadth of services the payer offers to all. The more products and services they offer, the higher the incentive becomes to enter into a contract. More products mean more clients, which translates into higher revenue. There are payers who focus on smaller products while others offer Medicaid, tiered networks, value based care and managed Medicaid. Some payers have significantly inferior products. Most of the time, a wise decision would be to select a diversified payer because it expands the foundation of product lines available.

As stated, rates are just part of the process since there are other critical areas that should be considered. No organization should sign a contract exclusively because they are offered a generous reimbursement schedule.

Goals should stay firmly in perspective

Hospitals want to hold on to good payers. One sign that a payer is a good fit relates to how long they are willing to commit. Short-term payers leave a lot of grey areas in contracts because they are always looking for an exit strategy. In addition, they tend to put a small amount of detail on the table, meaning there is a good chance you won’t see a significant return. Short-term contracts need to be airtight, and the rules of engagement need to be THE top priority.

Long-term contracts are good for the hospital because they guarantee a flow of revenue over an extended period of time. They are normally more flexible and should be filed away for future renegotiation. Importantly, the content of any managed care contract needs to align with the financial and logistical goals of the provider or institution. What is the projected ROI? Is their sufficient staff on board to handle the additional work-load? A successfully negotiated managed care contract is not all about eliminating conventional wisdom to chase a quick return.

Compromise is a necessary component

Payers will want what they consider to be appropriate rates for giving patients the coverage they choose. Hospitals want the same thing. On occasion, disagreements surface between the payer and the provider over minute issues. More often than not, these issues can settled easily given each side is willing to give a bit of ground. Each party also needs to understand that there are times when a request simply won’t be met or agreed to.

Successfully negotiating managed care contracts takes a lot of patience, determination, drive and perseverance. When completed, both parties should walk away knowing they got most of what they wanted initially.

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Contact Steve at (682) 593–3430 or email steven.krohn@att.net