Negotiating Health Plan Contracts: Best Practice Tips
For hospitals, “care” typically refers to providing patient care. Yet a hospital’s financial health requires care and attention, too.
A sound financial strategy supports the provision of patient care and services communities need, and a significant component of healthcare organizations’ revenue frequently comes from health plan contracts.
So what do your health plan contracts look like? Have you reviewed them recently? Are there opportunities to modify those arrangements to maximize your reimbursement?
Here are some best practice tips for health plan contracting.
Review your health plan contracts regularly – at least every year. Place this task at the top of your to-do list to help prevent future revenue loss.
Request full access to Policy and Procedure Manuals for each of your contracted health plans – before you “sign off” on those contracts. Your signature reflects your agreement with the current policy and procedure manual, but plans can (and do) change their policies. You’ll want to stay abreast of changes to make contract adjustments when necessary.
Know the health plan options offered by the largest employers in your community. In addition to the hospital, sizable employers in a service area often include the school district and the city. Have these employers changed their health plans recently? For instance, has the local school district switched from a lower-paying plan option available to employees to one offering more favorable compensation or the reverse? Monitor these activities and changes. Keep information up to date.
Analyze reimbursement rates by payer. Are you receiving the appropriate compensation for the care you provide? Here are some factors to consider.
How does reimbursement for your commercial health plans compare to Medicare rates? Comparing one health plan’s reimbursement to another’s makes good sense. However, all health plan rates should be measured against Medicare. Plans with rates below Medicare could compromise the hospital’s financial health.
Unearth internal claims data. Review claims history before negotiating with an existing payer. Study how much revenue the payer brings to your hospital by service line. This reimbursement data could significantly influence the negotiation process since patient care and service lines are always changing.
Evaluate fixed rates and patient deductibles in rate negotiation to maximize revenue reimbursement. Hospital compensation under many health plan contracts features a fixed rate. Although this provides a level of predictability for the payer, fixed rates aren’t always the hospital’s best reimbursement option (and at a minimum, fixed rates should be adjusted up each year due to inflation, supply costs, etc.).
Also, for high-deductible health plans (HDHP), consider how easy will it be for a hospital to collect patient charges before a patient’s deductible has been met? HDHPs benefit the employer and the health plan, not necessarily the hospital.
Assess your payer-provider relationships. Look beyond the rates.
Establish or nurture long-term payer-provider partnerships, particularly when health plan payers represent a significant portion of your revenue. Are there new product offerings or risk-sharing models? Enhance positive working relationships to facilitate communication and negotiation.
What’s the revenue cycle telling you? Evaluate the processes associated with claims processing, payment and revenue generation. Are there opportunities for improvement to more effectively support the billing and collection efforts? (See a related CHC blog post for more on this topic.)
Keep up with health insurance changes for consumers covered through the Affordable Care Act (ACA). Many health plans have left the ACA marketplace and others are raising premiums and narrowing provider networks. What percent of patients do you see through the ACA? What impact do their high deductibles have on your collections? Under the new U.S. Administration, it is unclear how changes to the ACA or proposed health reform would impact care delivery – so staying abreast of what’s known will help your hospital going forward.
Learn more about the CHC Health plan evaluation process to review health plan relationships resulting in improved contract terms and reimbursements.