By Mark Riordan
Healthcare Practice Lead
As margins at health systems continue to contract, and insurance company profits continue to surge, contract negotiations are becoming increasingly contentious. With billions of dollars potentially at stake, you need to be prepared and aligned well in advance.
Fee for service. Value-based contracts. Price transparency. Polarizing debates about healthcare costs led by outspoken critics on both sides. All these factors dramatically shape the very guts of managed care contract negotiations behind closed doors, where tensions rise given how much is at stake for all involved – especially patients.
In these negotiations what feels true is true: payers hold the upper hand. In particular, the large payers. They negotiate contracts for a living. They’re skilled and they strategize every day. They’re equipped with high-priced modeling software and large teams of analysts and economists – not to mention a hefty dose of leverage.
It all begins and ends with the right contract in place. But before there’s a contract, there has to be a strategy, not just a goal of a higher rate. In addition to understanding your system’s financial needs and how that will impact what you ask for and how you ask for it, you have to have a communications strategy that supports your contract and negotiation strategy.
The stakes are too high and there are too many interested parties. Having clear and compelling reasons to support your proposed contract terms will make a difference in the outcome.
The financial and reputational risk inherent in these negotiations feed off one another. These health system best practices – launched one year ahead of the negotiations themselves – can help drive a speedy and successful outcome:
#1 – Acknowledge the obvious. Take a deep breath, appreciating that this is a long road that too often becomes personal for those involved. A game plan helps.
#2 – Gather your data. Labor costs, supplies, pharmaceuticals. Medical loss ratios and ACO effectiveness. Investments in improved patient outcomes, such as key equipment. Patient support offerings that go above and beyond. Quality metrics. These data points matter — and are not always at our fingertips, so starting to pull this together early in the process will pay off time and again.
#3 – Establish your value proposition and make your case. This is not the time to be shy. What does your organization bring forward that sets you apart? This can include breadth, specialties, patient services and offerings and the like. These things, along with the data above are the foundation for the case you’ll have to make to the payer and perhaps other stakeholders, including the media.
#4 – Establish alignment with all internal stakeholders. The work of partnering across teams to succeed is critical. Communicate with your internal stakeholders early in the process and as needed throughout. Their understanding and support is crucial to your success.
#5 – Know your audiences and where they communicate with you. Given the public nature of these negotiations, the most successful health systems think beyond the payer. Messaging should be delivered to: patients, doctors and employees of health systems, and community leaders including policymakers.
#6 Identify your advocates, ask them to provide support. Beyond your four walls are voices that champion the role of health systems in effective patient care. Just as payers tap into these voices, you should and can too.
#7 – Practice your negotiation techniques, literally. Communicating effectively and on the spot is not an inherent skill for most; it is often a learned one. You wouldn’t go into a major concert without voice coaching, so why enter a negotiation room (or worse yet, Zoom) without message coaching and practice?
#8 – Boost Your Brand, tell your story. Paid media. Earned media. Social media. Direct emails. Regardless of channel, surrounding the negotiation period with positive storytelling Increases leverage in negotiations by ensuring there is good visibility for the very factors that set you apart.
Even the best prepared systems may find themselves in messy, public negotiations. Being prepared can impact the speed and success of the talks for health systems. The end goal is to get a contract, ensure the health system is protected and that patient care is not disrupted.