Provider-Payer Negotiations: Contention vs Collaboration

A recent slew of failed or near-failed network contract negotiations emphasizes the many challenges facing providers and payers at a time they need to more deeply collaborate to ensure mutual success in value-based care (VBC) arrangements. In the last two weeks alone, three BCBS plans and two managed Medicaid plans reported struggles in coming to terms with six various provider organizations.

Negotiating sound network contracts is a key financial strategy for both providers and payers. For providers, these contracts represent revenue preservation, as well as new revenue potential through new payer products.

But, it isn’t all about the money. Patient satisfaction is enhanced when access to providers is maintained or increased, benefiting both providers and payers. Additionally, items that impact provider workflow and represent sources of provider-payer friction, such as claims resolution, credentialing, and prior authorization processes, often come into the negotiation.

The struggles providers and payers face as they renegotiate network contracts is a component of the age-old feud over fee-for-service (FFS) rates and terms. The observed tension is a manifestation of the increasing cost pressures facing both payers and providers, each hard-pressed to negotiate the best terms possible.

These contract stalemates embody the unpleasant complexities inherent in simultaneously straddling FFS and VBC business models. VBC demands collaboration, data sharing, and technology and workflow integration. Forward progress is made, only for FFS realities to keep pulling the industry a step or two backwards.

Provider-payer convergence clearly faces headwinds from traditional friction points such as these network contract negotiations, as well as the entirety of the prior authorization process. The trust that must be carefully nurtured between providers and payers negotiating VBC contract terms can too quickly erode as a result of FFS negotiations.

Providers and payers that prove they can negotiate the peril of “one foot in, one foot out” of the proverbial FFS-VBC boat will be prepared with mitigation strategies in place. Whether negotiating FFS or VBC contract terms, organizations must think about the kind of long-term provider-payer relationship they are seeking.

Jennifer Rogers

Author Jennifer Rogers

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