Lyrics from “The Gambler” by Kenny Rogers (“You’ve got to know when to hold ‘em, know when to fold ‘em, know when to walk away, know when to run”) ran through my head as I talked with OPEN MINDS team members about the How To Build Value-Based Payer Partnerships: An OPEN MINDS Executive Seminar On Best Practices In Marketing, Negotiating & Contracting With Health Plans led by OPEN MINDS Senior Associate Paul M. Duck during The 2020 OPEN MINDS Performance Management Institute last week in Clearwater. Our big takeaway—health and human service executives need to boost their negotiating skills to succeed in the new world of payers and health plan contracts.
Macro-level changes are reshaping relationships. For example, there’s more value-based contracting (see Where Are We On The Road To Value? The 2020 OPEN MINDS Performance Management Survey), an increase in episodic payments and bundled rates (see Trends in Behavioral Health: A Population Health Manager’s Reference Guide on the U.S. Behavioral Health Financing and Delivery System), and growing interest in centers of excellence (see What Does It Take To Be A Center Of Excellence). This is not an environment of standard services for which provider organizations are paid the same amount. The question is how do you negotiate better contracts to ensure success for consumers and financial viability? The answer: Reset your approach to developing and optimizing relationships with managed care organizations with this four-part framework for negotiating more effectively. Mr. Duck made these four recommendations:
- Know your data
- Know your customer
- Know what you want
- Know when to walk
These four elements are essential to long-term success in an increasingly competitive, integrated, and value-driven health and human service marketplace:
Know Your Data There are standard metrics that executive teams should know – unit costs, service line profitability, productivity, overhead, and more. But executives need to extend that list with services that set them apart in terms of “value” – health outcomes, satisfaction scores, rates, and cost effectiveness. With this market positioning information, the point person on negotiations should identify unique selling points and create a marketing plan and pitch deck that tells a persuasive story (see From Organizational Strategy To Marketing Strategy: How To Develop A Successful Marketing Plan In Sync With Your Future Vision).
One important set of reference information is to create a spreadsheet with weighted average payments for each contract and each service, side-by-side with costs (personnel, space, as well as information technology authorization requirements from the payer) for that service. This analysis is helpful in understanding which contracts are profitable and which are not – and what is needed in a reimbursement rate to break even.
“It’s no longer just about chasing CPT codes,” said Mr. Duck. “How do you—as a provider organization—design programs that make sense, drive down system costs, and improve the right outcomes?” Provider organizations need to know what they do well, measure it, and report it so that you can negotiate performance risk into contracts (see Proving Your Unique Value To Payers: Data Speaks Louder Than Words). “If your organization doesn’t become data driven you will no longer exist. I guarantee that. The risk and peril of that gets greater with every day that passes.”
Interestingly, specialist organizations in mental health, addictions, and social services have a leg up right now since they are the drivers of cost and can shift direction to avoid or reduce costs across the spectrum (see Using Data To Follow The Money & Stay True To The Mission).
Know Your Customer Knowing your data – and how you compare to competitors – is only part of the story. Preparation is key to any negotiation. Know the payers with the greatest market share in your service. For the health plans and accountable care organizations, know their structure and customers, their current service delivery network, executive teams, and their enrollment in your service areas. And then take that one step further and meet with their managers to identify their pain points. With that, you can build the case for how your unique services can help them (see What Are Health Plans Actually Doing? and Trends in Behavioral Health: A Population Health Manager’s Reference Guide on the U.S. Behavioral Health Financing and Delivery System).
Know What You Want As you prepare for meetings with health plan executives to discuss your current contracts and your proposed services, be sure you know what you want. Are you looking for a rate increase on the current contract? If so, how do you stack up against the competition and what additional value do you offer? Is the health plan looking for value-based reimbursement arrangements? Does your organization want value-based reimbursement arrangements? If so, what services, what reimbursement model, and what rate? Come prepared with a proposal and assess your readiness for these newer payment models (see Value-Based Reimbursement Readiness Assessment).
Know When To Walk Before you meet with health plan managers, you need your own “drop dead” number for each proposal. It’s easy to know what you’re asking but you need to know the reimbursement rate that will make you terminate an existing agreement (or not enter into a new one). As Mr. Duck said, “sometimes losing 10% of your revenue is the best decision you can make if it’s a bad deal.” Without that data, you’re operating in the blind, he added.
But before you walk, be sure that health plan managers know what your “best and final” offer is. “It’s not in our best interest to bankrupt you,” said one health plan representative in attendance. “We are very interested in quality and we are willing to pay a premium for quality.” Acknowledging there are varying definitions of behavioral health quality he added, “We’re all in this together so if we can find common ground for what we think of as quality we are willing to pay for it” (see Are Bundled Payments The Future Of Autism Reimbursement?).
Negotiating relationships with customers, like health plans, is not a one-time management event. It is an ongoing relationship management process. Before any formal negotiations or formal pitch, give your team four or five months to prepare, practice your “game face,” and have data ready. Doing any less is gambling with your organization’s future.
Stay tuned for additional coverage from this payment seminar and get more information about how to position your organization for future success with these OPEN MINDS Circle Library resources:
- Negotiate Those Contracts
- Identifying Strategic Opportunities: Cultivating, Negotiating & Decision-Making
- The OPEN MINDS Health Plan Partnership Summit: A Guide To Developing & Negotiating Partnership Agreements With Health Plans
- Identifying Strategic Opportunities: Cultivating, Negotiating & Decision-Making – Sponsored By Credible Behavioral Health Software
- Executive Compensation: How To Negotiate & Manage The Compensation Process
- Are You Ready For Risk-Based Reimbursement? How To Assess Readiness & Negotiate Contracts
- 3 Keys To Building A Strategy For Growth
- Developing Case Rates? Better Find Your ‘Single Source Of Truth’
- Performance Management Is Never Done
- VBR—Where’s The Beef?
And join us June 2 for “The Payer Perspective: An OPEN MINDS Forum On Innovative Treatment Programs” with OPEN MINDS Senior Associate Joe Naughton-Travers, EdM, at the The 2020 OPEN MINDS Strategy & Innovation Institute in New Orleans.