Last week at The 2019 OPEN MINDS Management Best Practices Institute in Long Beach I took away one important lesson from the executive seminar, How To Build Value-Based Payer Partnerships: An OPEN MINDS Executive Seminar On Best Practices In Marketing, Negotiating, & Contracting With Health Plans—brevity is good (see Brief Is Best).
Other key points from the session, which featured OPEN MINDS Senior Associate Deb Adler and Yanick Hazlewood, Esq., Vice President, Third Party Payer Contracting, LifeStance Health—health plan contracts should be reviewed and revisited every year; March to July is best contract renegotiation window; rate increases tend to be no more than 3% in any given year; access is the number one health plan “pain point”; and good negotiators ask 2.5 times as many questions as average negotiators, and share a third of the data.
To negotiate effectively, these elements need to be incorporated in a framework for success. To build a contract negotiation plan, Ms. Hazlewood presented six key principles—position your product and service; understand your capabilities; establish high targets; satisfy customer needs over customer wants; manage information skillfully; and concede according to plan.
Position your product and service—First, what are you offering? Payers have a small window of time to speak to a provider organization, and your answer needs to be quick. When you approach them, they want to know who you are, what you do, and what you want. Ms. Adler explained it this way:
You must be able to basically say your elevator pitch and highlight the unique value you bring as a provider organization. If you haven’t built a pitch with one, or a maximum of two slides, do that immediately. As the saying goes, ‘Be brief, be right, be gone.’ You have very little time to highlight what is different about you. What are the quality and value and cost differences that you bring? The more you can learn from payers and what they are struggling with, the more you can shape your programs to address what they need. Finally, you need to have a plan. That sounds so basic and simple, but many organizations show up with a 65-page deck and just wing it.
Understand your capabilities—Knowing yourself thoroughly is key to being able to explain the true difference between your services and the services of the competition down the road—what is also known as competitive intelligence. This is also a strength because it gives you both a solid ground to stand on in negotiations, as well as the confidence to know exactly what you are bringing to the table.
Establishing high targets—The saying to “shoot for the stars and hit the moon” will only work if you truly understand your capabilities and trust in your value story. But if you do, there is no reason not to aim high. For example, even if you must come down from your original expectations lower than you originally wanted, you are still positioned to get more than you would have starting low.
Satisfy customer needs— Focus on what the “customer” needs and wants. Depending on the situation, it might be the consumer and it might be the payer. In a negotiation, it comes down to what can you offer the customer so that it’s a win-win for everyone. Think about what they need and what can you give them to satisfy that need. This means developing relationships with each health plan at multiple levels. Ms. Adler noted:
I don’t know if there is any magic bullet. The more you can get to know the people on the payer side the better. One person can lead you to a door, then to another door, then to another door. If you get in the door, make sure you are using that time wisely. If you don’t know who your network manager is, you need to find out and get to know your network representative. Who signed your contract? If they aren’t there anymore, find out who replaced them and work your way through the system.
Manage information skillfully—If you like to negotiate, you will prepare your value story, figure out the payer, the market, and published rates where available (e.g., Medicaid). If you don’t like to negotiate, you may not prepare as thoroughly and that is a mistake. No matter where you sit with the negotiating, you must prepare, whether you like it or not. And remember that patience is also key to preparation. Payers usually have the advantage for time. When you are preparing yourself, you must look at how much time you can spend on the negotiation and understand there is a significant return on investment. Ms. Adler noted:
Patience is a virtue is an old adage that is absolutely true when it comes to contract negotiation. Payers are very busy with generally few staff to support the contract negotiation efforts. The payer is very much outnumbered. The level of attention that you will get will depend on how much your program can fulfill an important unmet need (e.g., access to an important specialty service). Be prepared for a 6-month or longer process for a fee-for-service arrangement and 12 months for a more complex value-based agreement.
Concede according to plan—No one wants to concede anything, but chances are you are going to have to. With that in mind, it pays to know exactly what you can give up and still look like you are committed to making the deal. If you have a bunch of things you are asking for, conceding a little on some of them will help show your willingness to achieve a win-win.
This framework emphasizes the importance of planning from concept to final contract terms—and having a person (or team) dedicated to managing and improving the contractual relationships with health plans and other payers. That goes hand-in-hand with another big takeaway from the day—the importance of brand building. In the coming years, networks will get smaller and smaller over time. If you want to be the preferred provider organization, you need to tie these negotiations to your marketing and business developing efforts. Brand messaging helps to support consumer and health plan executive perceptions of your value proposition. You need a consistent stream of normative messages establishing the value for what you do.
For more on this exciting topic, check out these resources from the OPEN MINDS Industry Library:
- Health Plan Relationship Building Skills Key To VBR Success
- Adjust Your Strategic Sails!
- Getting On The Marketing Plan Path
- The New Board Conundrum—Managing Value
- The Five-Step Process To Demonstrate Your “Performance” To Health Plans
- Becoming A ‘Blue Chip’ Provider Organization
- The OPEN MINDS Health Plan Partnership Summit: A Guide To Developing & Negotiating Partnership Agreements With Health Plans
- From Pain Point To Revenue
- Selling Social Services To Payers & Health Plans: A Step-By-Step Approach
- Health Plan Business Development For The Entrepreneurial Provider Organization—Step-By-Step
For more live coverage from Long Beach this week, tune in this week when we report on the The 2019 OPEN MINDS Management Best Practices Institute—be sure to check out our ongoing live and archived coverage of the event on Twitter @openmindscircle – #OMBestPractices.