Becker’s Hospital Review asked healthcare leaders to share their tips for getting the most out of payer negotiations. Read their responses below, presented alphabetically.
Editor’s note: The following responses were lightly edited for length and clarity.
Kevin W. Barron
Executive director of managed care contracting and payer relations at University Health System (San Antonio, Texas)
As a foundation to any negotiation, you must do your homework. Pull the necessary performance data, complete the required competitive analyses and talk with your internal peers about operational requirements. Beyond that, you should take the time to speak with senior leaders within your organization to define your goals and negotiating authority.
One way to do this is to define a zone of potential agreement or ZOPA. The term, ZOPA, was coined by Fisher & Ury in their book Getting To Yes. Under this model, the description of your ZOPA should include the appropriate maximums and minimums, as well as a wish list and (importantly) all deal-breakers. For example, if you are negotiating price as a buyer, your ZOPA should include the maximum price you will pay for a good or service. As a seller, your ZOPA should include the minimum price you will accept. By defining your organization’s ZOPA before negotiations begin, the boundaries of your authority as a negotiator will be clear, as will be the triggers for you to walk away from the negotiation table. Applying a ZOPA successfully requires that you either directly or indirectly identify your counterpart’s maximums, minimums, wish list and deal-breakers, as well. Negotiations between two organizations will fall apart when the two parties’ ZOPAs don’t overlap; they succeed when common ground is identified.
With your homework completed, it should be recognized that actual negotiations revolve around relationships, and relationships cannot be initiated at the start of a negotiation. Get to know the other party through online research and casual conversations with him/her ahead of time, if possible. By doing so, you will build a genuine rapport and better understand and interpret statements made during the actual negotiation. Misinterpretations can kill a negotiation more quickly than just about anything else. Further, because the ZOPA of your counterpart may not, and often is not, clear, it is important to try to identity his/her goals as soon as possible. Often the direct approach works when all else fails, so simply ask your counterpart to define how he/she would characterize a successful conclusion to your negotiations. Through this question you will receive valuable information.
Finally, because negotiation styles vary with the personalities of negotiators, try to ascertain the personality and communication style of your counterpart. While a data-driven, email-centric exchange may be persuasive to one person, in-person meetings and casual exchanges of real-life implications might hit home for someone else.
Zach Chambers
Director of payer relations and contracting at Centura Health (Centennial, Colo.)
If you want to get the most out of your talks, start the negotiation process early with extensive internal planning sessions leading into initial discussions with the payers. Be intentional and highly analytical with every modification to the contract and create a running “contract wish list” throughout the year driven by close collaboration with internal operational and financial departments.
Howard Gold
Executive vice president and chief managed care and business development officer at Northwell Health (New Hyde Park, N.Y.)
In general most hospital negotiators do not have a clear understanding of what they want and what they need. Though this sounds obvious, most negotiators do not do this first and most fundamental of activities. They need to develop a narrative, a game plan, a strategy for the negotiation, not just go to the table and ask and see what happens.The latter is a sure fire way of not getting what you need. The negotiator needs to discuss this narrative with their organization and get critical feedback. They need to make sure they have the proper support. They also need to know why their ask is justified and how to defend their point of view. This means they need to spend a lot of time extracting meaningful information from the data. Also, the provider needs to spend time with understanding as best as possible the motivation of both the payer’s negotiator and the company the negotiator represents. In short, Spend time with the data. Spend time with others in your organization to clarify your strategy. Most importantly, the negotiator must have confidence in their own abilities, the strategy, the back up strategy and the back up-back up strategy — that’s right it takes understanding at least three levels of strategy to clearly be the winner in a rough negotiation.
Don’t kid yourself: A negotiation is a series of arguments, verbal moves and agreements among adversaries that may lead to a winning deal.
Tom Golias
Chief managed care officer of Bon Secours Mercy Health (Cincinnati)
Preparation for the negotiation is key and should start months before proposals are exchanged. A financial review and modeling of the contract’s net performance compared to the rest of the portfolio is critical, but don’t overlook the impact of payer policy changes, front and back end revenue cycle performance and market dynamics.
A goal should be to look for areas where objectives between the payer and health system align. “Partnership” is the most abused term in managed care at times, but there are opportunities to work more closely together (e.g. value-based care, network design, innovative pilots around data-sharing to improve quality). Finding ways to make the negotiation something other than a solely unit cost discussion can result in new pathways for both and strengthen the overall business relationship.
Gary May
Vice president of managed care and payer relations at Stanford (Calif.) Health Care and Stanford Children’s Health (Palo Alto, Calif.)
One key component of our negotiations with payers is utilization data transparency. We work closely with the payer’s actuarial team to ensure that the utilization we’re using in our modeling is consistent with theirs. This takes a great deal of time, but it assures that we’re all on the same page when we calculate the financial implications of changes to our rate schedules.
Susan Mego
Executive director of managed care at MetroHealth System (Cleveland)
The MetroHealth System’s negotiation focus is on evolving payer relationships through more advanced value-based/risk models, rather than just renewing contracts. To do so, it’s important to identify and examine all aspects involved in such transitions and understanding those dynamics before leveraging. Four key components to maximize the success of these and any payer negotiations are knowing the current contract’s composition very well; benchmarking that contract’s actual performance against multiple considerations using critical comparisons and empirical data; defining expectations for the negotiation from that refreshed reality check while recognizing unexpected twists will occur; and strategizing proactive approaches for both near-term and future vision.Even while setting the stage and managing timing of the negotiation, MetroHealth remains open to new opportunities that emerge to more closely align with our payer partners’ priorities.
Ketul Patel
CEO of CHI Franciscan (Tacoma, Wash.)
The healthcare landscape continues to evolve. New market entrants, consumer behavior and expectations, the advent of new technologies, and changing reimbursement models are just a few of the unique challenges healthcare leaders face in our industry. However, regardless of these new challenges, our No. 1 priority is to ensure we are caring for all those in need and furthering our mission — that is the precedent we base all strategic decisions from, including payer negotiations.
In the past few years, we have seen a shift from traditional fee-for-service reimbursement to value-based payment models. While fee-for-service continues to play a primary role in our payment structure, we build strategic and innovative partnerships with payers that share our priority to deliver high-quality, affordable care. These include:
- Moving to value-based payment models that incentivize health systems for improving patient quality and safety, while lowering the total cost of care.
- Participating in high-performing insurance products (narrow networks) that include direct-to-employer contracting.
- Using our clinically integrated network, Rainier Health, as a vehicle to bring both employed and independent community providers together in an effort to increase access, improve quality and lower cost— the [healthcare] triple aim.
As we strive for innovation, both in care models and reimbursement structures, we recognize that our overall portfolio of payers needs to be balanced to meet the evolving care-needs of our communities, while also providing value to health plans and their plan sponsors. We also recognize that paramount to all payer negotiations is maintaining strong relationships built on trust and collaboration and ensuring we are making decisions that are in the best interest of our patients and communities.
More articles on payer issues:
HCSC’s CEO steps down: 3 things to know
The average price for treating primary care conditions in ED? $2,032, UnitedHealth says
BCBS of Minnesota defends restrictive policies that hospitals call unlawful
