In today’s complex healthcare landscape, providers often find themselves grappling with the challenging dynamics of payer negotiations. While the scales may seem tipped in favor of insurance companies, providers possess more leverage than they may realize — if they understand how to wield it effectively. The negotiation table is not merely a battleground for rates; it’s a strategic arena where savvy maneuvering can transform the prospects for both providers and their patients.
Weakening your position: common pitfalls
Many providers inadvertently diminish their negotiating strength through a series of missteps:
- Starting late: Initiating contract renewal discussions only a month or two before expiration leaves little room for maneuvering. Providers should aim to start these conversations 12 months in advance to build a case and leverage their position effectively.
- Unrealistic expectations: Setting initial asks that aren’t grounded in economic reality can alienate payers and derail negotiations. Aligning proposals with market standards is critical.
- Lack of market data: Providers must understand how their reimbursement rates compare to those of their peers. Without this knowledge, they lack the necessary insight to argue for equitable compensation.
- Focusing on the wrong issues: Arguing about payer profits or executive salaries distracts from the core issue—reimbursement rates. Providers should hone in on how payer decisions impact patient care and access.
- Failing to escalate: Spending too much time negotiating with junior payer representatives can result in stalled discussions. Engaging with higher-level executives fosters more meaningful dialogue and favorable outcomes.
- Being unprepared to go out of network: One of the most potent tools in a provider's arsenal is the threat of going out of network. However, this must be a legitimate option, not a bluff, to maintain credibility.
- Lack of internal alignment: Ensuring that everyone within the organization, from the CEO to the board, is aligned on negotiation strategies and potential outcomes is crucial for presenting a unified front.
Strategies to strengthen your leverage
Providers can take proactive steps to enhance their negotiating leverage:
- Utilize data: Leverage price transparency data to understand market positioning and build a compelling case for equitable reimbursement.
- Recognize patient loyalty: Patients often have loyalty to their providers, not to the insurance company. This loyalty can be a powerful negotiating tool, and providers should emphasize it during negotiations.
- Engage with payer executives: Building relationships with higher-level payer executives can lead to more productive negotiations and genuine dialogue about mutual interests.
- Consider legal action: When legitimate issues arise—such as chronic underpayments or aged accounts receivable—legal action may serve as effective leverage.
- Capitalize on government programs: By understanding and possibly terminating unprofitable contracts related to government programs, providers can reshape negotiations to focus on more profitable opportunities.
- Public opinion and regulatory pressure: Tapping into public sentiment and working with regulators can bring additional pressure to bear on payers, reminding them of societal expectations surrounding patient care.
- Moving patients to other payers 90 days prior to renewal: Providers must set internal deadlines for payer negotiations. If a fair agreement is not reached 90 days before contract termination, actions should be taken to retain patients by transitioning them to other insurance options through education and awareness.
The true leverage of payers
Payers may seem to have substantial negotiating power, primarily through their ability to impact patient volumes and provider revenues. Their tactics often involve fear, public shaming, and intimidation. However, many providers inadvertently reinforce these tactics by putting themselves in a weak position at the negotiating table.
It’s time for providers to approach negotiations with a winning strategy and recognize that it is a battleground. In today’s environment, this may mean being out of network with at least one payer on a sustained basis as part of the overall strategy. Focus on achieving outcomes that align with your financial and operational goals, rather than simply seeking to “close a deal,” which often results in weak negotiations and money left on the table.
Ultimately, embracing this new reality of negotiation as a battleground will prepare providers to maximize the leverage needed to optimize outcomes. Providers must trust that, with a strong stance, payer relationships can improve. Advocating for fair reimbursements not only strengthens an individual provider’s position but also advances the interests of the healthcare system as a whole, leading to better patient care outcomes everywhere.
Scott Ellsworth is the president and founder of Ellsworth Consulting. Prior to starting his consulting business in 2022, Mr. Ellsworth was a senior executive at Centene, UnitedHealth Group's Optum, and Excellus Blue Cross Blue Shield.