Behavioral health provider organizations have seen a 64% decrease in revenue since March of 2020, according to a newly-released national survey conducted by Qualifacts and the National Council For Behavioral Health (see The New Role Of Virtual Care In Behavioral Health). Overall, health care provider organizations saw a revenue decline of 45% to 48% in March and April, compared to the same period last year (see Healthcare Professionals And The Impact Of COVID-19: A Comparative Study Of Revenue And Utilization). These figures included financial data in seven specialties: cardiology, dermatology, oral surgery, gastroenterology, orthopedics, pediatric primary care, and adult primary care. For adult primary care alone, from March 2019 to March 2020, utilization fell by 60% and revenue by 47%. In April 2020, the utilization decline was 68% and the revenue decline 54%.
While provider organizations may be able to tide over revenue declines in the short-term, the pandemic appears to be dragging on—along with its revenue impact. Most executive teams of provider organizations have already cut expenses, a lot. So, the question becomes how to increase revenues right now, from the payer contracts that are currently in place. That was the focus of our recent executive web forum, Getting Paid More For What You Do – Tactics To Increase Fees & Rates From Payers & Moving To New Reimbursement Models, presented by my colleague and OPEN MINDS Senior Associate, Paul Duck. His advice—evaluate four possible tactical approaches to get more revenue from current payer relationships.
1. Increase referrals for current services
These days, increasing referrals for services requires new thinking. The crisis demands a crisis referral plan—a new approach to thinking about how to reach payers and consumers (see Referral Well Running Dry? Your Referral Development May Need A Crisis Plan).
There aren’t many conferences happening now, or meetings with referral sources. This virtual environment demands a virtual approach. Our team has developed a six-point virtual marketing plan—know your audience; become mobile friendly; embrace all areas of search engine optimization; manage your online reputation; focus your social efforts; and measure, learn, adjust, and repeat. If executed right, the return-on-investment from your virtual marketing will be immediate—in the form of new referrals, new inquiries, and preventing your competitors from taking away your business (see Finding The Path To Online Marketing Success: An OPEN MINDS Executive Seminar On Best Practices In Website & Social Media Marketing and You Operate Virtually, You Serve Virtually, But Are You Marketing Virtually?).
2. Increase rates for current services
You won’t get a rate increase if you don’t ask. But first do your homework—know your own costs, know the market rates for all health plans, and know your market share with each health plan. Find out what your competitors are being paid for the same services. When you put all the facts and figures together, it will become clear whether or not you can make the business case to payers for a rate increase.
If the numbers justify the ask, the next step is the negotiation.
The big “must” is to understand payers’ pain points, advised Mr. Duck. Rapid access to treatment is a key concern—and this will intensify in behavioral health as the pandemic continues. Payers are looking for rapid appointments (in person or virtual). They want to divert people with serious mental illness from emergency rooms and prevent readmission to hospital settings. They want to improve their HEDIS scores by improving their scores on 5-day and 30-day follow up after psychiatric hospitalization. Can you prove (with metrics) why your organization should be paid more? And why your organization should be paid more than your competitors? (For more, see What To Say When You Want More and Show Me The Value, Show Me The Money.)
It may be worth considering upgrading your team that is focused on contract rates and renewals. Not sure you can afford it? Consider the potential return. Mr. Duck shared the real-world example of a large behavioral health organization that hired a contract negotiation specialist who was able to negotiate a 17% blended rate increase, resulting in annual net revenue increase of $65 million in one year.
And one word of advice. If your organization is being paid less than the cost of delivering a particular service, either cut costs or cancel the contract. “Now is not the time to subsidize payer contracts,” Mr. Duck suggested.
3. Change reimbursement models for current services
Maybe fee-for-service reimbursement isn’t working for all of your services. One option is to consider proposing a change in reimbursement models. Again, getting the numbers in line is a must. If you’re proposing a performance bonus, what are the performance measures you’re proposing? How is your organization performing on those measures now? What is the “net gain” for the payer? The answers need to be part of your proposal for alternate financing.
For a case rate or capitation model financing, even more work is required. The “bundle” of services, the cost of each service, the estimated utilization. These are the clinical and financial ingredients that are part of developing risk-based compensation rates. With these financial metrics, it is possible to evaluate whether some form of alternate payment is possible. And, if it is, the key is to prevent the proposed new reimbursement model as a “win-win”—for both your organization and for the payer (see VBR: Are You Walking In Your Customer’s Shoes? and Think Like A Health Plan).
4. Propose new services
The last tactic is finding the opportunity to provide a new service to one of your current payers. Keep in mind the payer pain points we discussed earlier, explore “service adjacencies”—new business areas that build from your organization’s current assets or existing services and complement the brand image. For example, if you are delivering mental health services, can you add primary care for consumers with serious mental illness given their high rate of co-occurring medical conditions? If you serve consumers with intellectual and developmental disabilities, can you offer home-based services in addition to or instead of a day program?
But this tactic demands an opportunistic and nimble perspective on meeting your payer customers’ needs (see Aggressive Business Development Strategies – Adding To The Top Line With Breakthrough Services – An Overview and Improving Your Decisionmaking Skills: How To Be A Nimble Leader).
Executive teams need the ability to sort through the “wish lists” of their payers, identify opportunities that are worth exploring, conduct a fast feasibility analysis, and bring up new services (or kill them) rapid fire. We have developed a best practice model for service line development and implementation at OPEN MINDS—a two-phase stage-gate model that allows organizations to make a “go or no go” decision at every step—a way to both “fail fast” and minimize investments until far into the process (see New Service Line Development: The OPEN MINDS Step-By-Step Approach To Developing Innovative Programs). The key in the current environment is to do it quickly!
At the end of the day, “You must be relentless in your pursuit of new revenue,” counseled Mr. Duck. “Relentlessly run the numbers, strengthen your value equation, make customer service a guiding practice, and engage consumers and payers alike.” Even if executives of provider organizations and payer organizations are a bit like cats and dogs—not naturally sympatico—they can learn to get along, Mr. Duck said. As someone who has two dogs and eighteen cats, I would endorse that notion.
For more resources and examples on negotiating with payers and meeting their evolving needs, check out these resources in The OPEN MINDS Industry Library:
- Maximizing Revenue Amid The Crisis—Resources For Recovery
- Making Your Clinical Programs VBR-Ready
- Driving Better Outcomes With A ‘Whole Life’ Approach
- Paddling Four Canoes To Steer Through The Crisis
- VBR: Are You Walking In Your Customer’s Shoes?
- Making Your Clinical Programs VBR-Ready
- Are You Negotiating (Or Gambling) With Health Plans?
- Negotiate Those Contracts
- The OPEN MINDS Health Plan Partnership Summit: A Guide To Developing & Negotiating Partnership Agreements With Health Plans
- Developing & Negotiating Partnership Agreements With Health Plans: An OPEN MINDS Executive Summit
And for even more, join us virtually for The 2020 OPEN MINDS Management Best Practices Institute, August 24-26. In the session Best Practice Models For Collaborative Care: Coordination Between Health Plans & Provider Organizations, Jim Coffee, chief operating officer and deputy director of Cowlitz Family Health Center; Susan Foster, chief medical officer of Hill Country Health and Wellness Center; and Margaret Kisliuk, behavioral health administrator of Partnership HealthPlan of California will discuss how provider organizations can forge payer relationships by bringing data to the table; committing to an integrated, community-based approach; and knowing their costs and the value they can offer. And in the session Navigating Health Plans: Keys To Developing Long Term Relationships, Robert Ciaverelli, behavioral health medical director at CareFirst; Katherine Knutson, senior vice president of United Health Group and chief executive officer of Optum Behavioral Care; George Kolodner, founder and medical director of Kolmac Outpatient Recovery; and Ann O’Grady, chief clinical officer of New Directions Behavioral Health will discuss best practices to build and nurture long-term relationships between provider organizations and health plans.