In a constantly changing healthcare reimbursement environment, provider organizations are seeking innovative payor contracting and revenue improvement strategies to help navigate the market’s growing focus on price transparency and payor cost-containment efforts.
Managed care negotiations consistently involve both payors and providers seeking to best position themselves to maximize revenue or cost savings opportunities within a limited reimbursement setting.
As health plans continue to implement increasingly restrictive reimbursement policies, administrative requirements, and artificial intelligence (AI) tools, payors are better able to control their medical spend outside of the core parameters of the payor-provider contract. The application of underlying adjustments continues to put downward financial pressure on providers’ margins, resulting in the erosion of the intended value of negotiated contracts.
How Are Payors Adapting Managed Care Contract Language?
While contract template updates by payors are common, legacy contracts have often been ambiguous, or largely silent, when it comes to the payor’s ability to apply specific material adjustments via reimbursement policies such as bundling services or downcoding. However, more recently, health plans have more aggressively restructured contract language that limits their risk and increases their flexibility and leverage to apply unilateral changes mid contract without requiring a renegotiation.
In addition, updated payor contract templates may also place operational and contractual limitations on providers, restricting their ability to offset the revenue impact of these mid contract adjustments or appeal the use of AI-driven tools in claims decisions.
This approach allows payors to redefine reimbursement rates and manage budgetary risks while limiting assurances to providers around the actual value of their negotiated reimbursement. In an effort to implement these new templates and language, payors will often require a new core agreement, rather than an amendment alone, as a condition of acceptance of rate renegotiation requests by providers.
How Can Healthcare Providers Negotiate Contract Language That Protects Their Interests?
While securing sustainable rates remains a critical element of any negotiation, providers must place equal emphasis on implementing protective language to prevent the erosion of the value of negotiated increases. As payors implement more complex and less provider-friendly contract templates, providers should maintain focus on the following key areas:
- Limiting material adverse impacts of contractual and policy changes
- Defining how and when AI usage is appropriate
- Protecting against unilateral amendments
- Decreasing administrative burden on providers
Providers will also benefit from understanding the current state of each of their key payor partnerships and tracking changes over time to identify areas of contractual vulnerability that they can address in future negotiations or that may require mid term resolution.
Tracking changes in payor policies over time and understanding their financial and administrative impact are also important for preventing margin erosion.
How Forvis Mazars Can Help With Managed Care Contract Negotiations
Our dedicated managed care consulting team helps providers develop a strategic approach to payor contracting focused on increasing revenue, protecting margins, and reducing organizational burden. We can assist with rate benchmarking against peers in the market, managed care strategy development targeting areas of existing risk and opportunity, and payor negotiation support, including both rates and language.
If you have questions or would like assistance, please reach out to our professionals today.