Navigating Payer Relationships: 2 MSO Approaches for Optimal Reimbursement

With headlines like “Payers and Providers Are Fighting” and “There’s a Surge in Payer-Provider Disputes,” MSO executives have to wonder what kind of fracas they’re entering when buying up practices and physician groups. 

Perhaps you think that, surely, when an insurance company hears that a management services organization has taken over a provider’s business tasks, it breathes a sigh of relief. 

After all, the MSO's prime directive is to modernize, reduce costs, and increase overall provider efficiency, all goals that benefit payers as well. 

Your insurers’ responsiveness and willingness to work with you is something you have to gauge once you begin your relationships. Starting out with a positive but direct approach makes sense. Still, should the insurer prove intractable or unreachable, you may have to shift to a more aggressive, even adversarial stance. Both approaches have their advantages.

Here, you’ll discover the tactics for taking the high road – treating the payer as a collaborative partner – and how to best bring out the big guns when payer relationships become adversarial. 

The high road: treating payers as collaborators

MSO involvement frees physicians to focus on clinical practice and patient care, a move that can improve location reputation and patient volume, both of which impress payers. MSO oversight also aims to increase efficiency by implementing uniform operations systems and reducing costs. Volume orders allow them to negotiate better rates for supplies and equipment. 

Payers have been looking for improvements like these from providers for a long time. Emphasizing how you’ll simplify the provider / payer relationship could warm the payer rep to your demands.

In the MGMA Healthcare Financial Management certificate course, payer contract consultant Doral Jacobsen holds that adversarial relationships with payers only backfire. Jacobsen — once a contract manager on the payer side for decades — explains that staff turnover rate is just as challenging for payers as it is for providers. 

Jacobsen is not the only expert lobbying for collaborative MSO / payer relationships. A recent opinion piece in Medical Economics asserts, 

“The shift from adversarial to collaborative relationships between physicians and payers is not only possible — it is increasingly necessary…”

Writer Rajiv Mahale argues that positive partnerships are the best way to put patients at the center of care.

Steps for establishing the collaborative MSO / payer relationship

Jacobsen and others encourage providers who want to build a positive, mutually beneficial relationship with payers to follow these steps: 

1. Get to know the payers

Jacobsen emphasizes that payer reps have the same stresses provider revenue cycle staff endure: insufficient staffing, high turnover, contract complexity and constantly shifting governmental regulations. When you relate to the payer rep as a person – rather than the insurer – you will be more successful. 

Ways to get to know the payer reps include:

• Watch their websites for updates.
• Read their newsletters.
• Always start calls with small talk about the weather and pets, sports teams, etc. 
• Find out when their birthday is and send them a card. 
• Explore payer goals and initiatives. Try to understand them.  
• Learn about payer operations and priorities.
• Educate payers on provider workflows and challenges.

2. Be a good collaborator

• Know your contracts – what is and is not working for your organization. Contract performance tools rank your payers by their value to your organization.
•  Schedule regular meetings with payer representatives
•  Designate a point of contact for payer relations
•  Be proactive in reaching out to discuss concerns or updates
• Take notes when on the phone with payer reps. Before you conclude the call, say “here’s what we’ll be doing, and here’s what you’ll be doing. Did I miss anything?”  
•  Be ready to demonstrate how your services contribute to payer success. Remember, they’re trying to achieve “network adequacy.”

• Before the meeting, send a short meeting agenda

The following suffices: 

• Intros (& friendly warm-up)
• What’s new at ___________ (insurer)
• What’s new at ___________ (provider)
• Share your value proposition
• Collaboration
• Next Steps

• Bring a possible solution for the issue to the meeting. Do more than complain. 
• Document everything. Reps change out constantly. If you can bring up a conversation, a date, and details, a new rep will respect it. 
• Identify and focus on shared objectives like improving patient outcomes and reducing costs.

3. Establish your value

• Always have your practice’s or physician group’s value proposition top of mind. This important framework strengthens your negotiation stance and gives you confidence. Carefully construct a robust value proposition. 
• Prove that you are actively reducing expenses through digitization, AI implementation, integrated delivery systems, or efficient claims management.
• Have a plan to address how you are simplifying the practice or physician group’s administrative burdens.
• You can help them with their NCQA ratings.

4. Provide high-quality, cost-effective care:

•  Implement evidence-based practices.
•  Focus on preventive care and early interventions.
•  Track and report on quality metrics.
•  Be open about challenges and improvement plans.
•  Provide regular performance reports.
•  Follow through on commitments.

5. Share data and improve interoperability

•  Exchange clinical and claims data. 
•  Collaborate on population health initiatives.
•  Use data analytics to identify areas for improvement.
•  Research how to improve interoperability from your end.

6. Collaborate on innovative solutions:

•  Propose pilot programs for new care delivery models.
•  Suggest technology-driven solutions for improved efficiency.
•  Participate in value-based care programs.

7. Focus on the patient/member experience:

•  Work together to improve care coordination.
•  Align on quality measures and outcomes.
•  Collaborate to enhance access and convenience.

8. Maintain clear contracts and policies:

•  Develop standardized agreements outlining expectations.
•  Articulate payment terms and dispute resolution processes.
•  Ensure mutual understanding of obligations.

By focusing on these elements, providers can foster collaborative and mutually beneficial relationships with payers, ultimately leading to better patient care and outcomes.

Let data drive the discussion

While the above steps have proven to build positive MSO / payer relationships, we want to dive into the power that data and analytics have to create common ground between the two parties. 

Fraught with competing goals, contract negotiation can raise conflict, and conflict is stressful. 

When you let your data step up for you, however, the emotion eases. The facts derived by objective algorithms escape the realm of opinion. Data reveal real, indisputable outcomes. 

Until the last five years or so, payers had the data advantage. Where providers have always been driven by patient care and positive outcomes, payers’ primary goals are financial risk management and cost control. With money top of mind, payers started investing in analytics capabilities early. 

With the help of their MSO partners, however, healthcare organizations are making strides in the use of data. In an academic Journal of Big Data article,  researchers conclude that “medical facilities are moving towards data-based healthcare, together with its benefits.” Data gathering and analytics are becoming more integral in clinical decision support, population health management, and operational efficiency. 

The business side mirrors these findings. Grand View Research forecasts an increase in data analytics for healthcare in the coming years. While the global healthcare analytics market size was valued at USD 43.1 billion in 2023, the firm expects the market to quadruple in just six years, expanding at a compound annual growth rate (CAGR) of 21.1% to 167 billion by 2030. 

Dr. Britt Berrett PhD, FACHE, has served as CEO of several health systems. Now the managing director at Brigham Young University, he tells HealthLeaders, 

“I think providers are going to have to do more diligent data mining and use predictive analytics more so than they have ever done before. Big platforms like Epic, Cerner, and the rest are going to have to step up to the plate and provide that information. They're going to have to have up-to-date, real-time information on utilization, cost, and expense.” 

The payer’s perspective is helpful here. In the same article, Piyush Khanna, vice president of clinical services at CareFirst Blue Cross Blue Shield, says that at this time, providers have some data, but it can be unorganized and take effort on the payer’s part to elicit in full. 

Now is the time to access and organize your data and the healthcare payer analytics you can derive from it. The HFMA and others recommend gathering the following data points as you approach negotiation time for your practices and physician groups: 

1. Cost utilization data:

• Detailed information on service usage and associated costs
• Trends in utilization over time

2. Expense data:

•  Comprehensive breakdown of operational expenses
•  Labor costs, including rising trends
•  Administrative costs

3. Market trends:

•  Future market projections
•  Competitive landscape analysis

4. Fee schedules:

•  Current and historical fee schedules
•  Comparison with market rates

5. Reimbursement data:

•  Historical reimbursement rates
•  Updates and changes in reimbursement policies

6. Key Performance Indicators (KPIs):

•  Relevant metrics that demonstrate organizational performance
•  Quality measures and outcomes data

7. Denial rates and patterns:

•  Frequency and reasons for claim denials
•  Administrative burden associated with denials

8. Patient outcomes data:

•  Clinical data showing treatment effectiveness
•  Readmission rates

9. Operational efficiency metrics:

•  Data on administrative processes and their efficiency
•  Potential cost savings from process improvements

10. Population health data:

•  Information on patient demographics and health trends
•  Data supporting value-based care initiatives

11. Financial performance data:

•  Profitability metrics
•  Revenue cycle performance

12. Technology implementation data:

•  ROI on digital health initiatives
•  Efficiency gains from EHR and other health IT systems

13. Inflation impact analysis:

•  Projections of how inflation might affect costs and reimbursements

14. Merger and acquisition (M&A) considerations:

•  Data on potential or recent M&A activities affecting the market

15. Regulatory compliance data:

•  Information on adherence to regulatory requirements
•  Costs associated with compliance

It’s a lot, but it must be done, according to many healthcare leaders including consulting firm McKinsey. 

By gathering and analyzing these types of data, MSOs can build a strong, evidence-based position for contract negotiations with payers, demonstrating their value, efficiency, and the necessity of favorable contract terms. 

Healthcare data collection systems

Healthcare organizations rely on various sophisticated software systems to collect, analyze, and leverage data across clinical, financial, and operational domains. Take an inventory of which of these tools currently exist at your new acquisitions: 

1. Electronic Health Record (EHR) Systems

Description: Comprehensive platforms for managing patient health information and clinical workflows. They serve as the primary repository for patient data in healthcare organizations.

Data collected: Patient demographics, medical history, diagnoses, medications, lab results, imaging studies, clinical notes, and treatment plans.

2. Practice Management Systems (PMS)

Description: Software designed to manage the day-to-day operations of healthcare practices, including scheduling, billing, and administrative tasks.

Data collected: Appointment schedules, patient registration information, insurance details, billing codes, claims data, and payment information.

3. Revenue Cycle Management (RCM) Systems

Description: Specialized software for managing the financial aspects of healthcare, from patient registration to final payment of a balance.

Data collected: Insurance eligibility data, claims data, remittance information, denial rates, accounts receivable metrics, and payment trends.

4. Contract Management Systems

Description: Tools designed specifically for managing payer contracts, including storage, analysis, and optimization of contract terms.

Data collected: Contract terms, fee schedules, performance metrics, compliance requirements, and renewal dates.

Control of payer contracts leads to improved:

• reimbursements and compliance
• on-time renewals and renegotiations
• insights into payer performance and contract compliance
• business decisions
• collaboration with payers
• staff time for more patient-centered care
• financial transparency for patients

It is proven to limit: 

• compliance penalties
•  underpayments
• payer disputes
• administrative costs

Only by implementing proactive contract management can healthcare organizations significantly enhance their revenue cycle management.

Take a quick, self-guided tour through a powerful, automated contract performance optimization tool:

5. Financial Modeling and Analytics Platforms

Description: Advanced software for financial analysis, forecasting, and scenario modeling in healthcare settings.

Data collected: Historical financial data, cost data, revenue projections, market trends, and operational metrics.

6. Population Health Management Systems

Description: Platforms that aggregate and analyze data across patient populations to improve clinical and financial outcomes.

Data collected: Clinical data, claims data, risk scores, care gaps, social determinants of health, and quality measures.

7. Clinical Decision Support Systems

Description: Tools that provide clinicians with patient-specific information and evidence-based guidelines at the point of care.

Data collected: Clinical guidelines, drug interactions, patient-specific alerts, diagnostic and treatment recommendations.

8. Health Information Exchange (HIE) Systems

Description: Platforms that enable the secure sharing of patient health information across different healthcare organizations.

Data collected: Consolidated patient records, care summaries, lab results, and medication lists from multiple providers.

9. Quality Reporting Systems

Description: Software designed to track, analyze, and report on quality measures for regulatory compliance and performance improvement.

Data collected: Clinical quality measures, patient satisfaction scores, outcomes data, compliance metrics.

10. Supply Chain Management Systems

Description: Tools for managing inventory, procurement, and logistics in healthcare settings.

Data collected: Inventory levels, purchase orders, supplier information, usage patterns, and cost data.

These systems often integrate to provide a comprehensive data ecosystem for healthcare organizations, enabling holistic analysis and decision-making across clinical, financial, and operational domains.

The aggressive & ready-to-walk-away approach

Despite every attempt to negotiate fair rate increases using positive, collaborative methods, sometimes only the threat of termination gets payers’ attention. Even Doral Jacobsen, the proponent of the collaborative payer / MSO relationship, shares that often payers do not budge on their terms until the prospect of termination rises. 

While some think that you catch more flies with honey – the above collaborative partnership approach – sometimes it just takes tough negotiations to optimize reimbursements. 

Front and center should be your drive to ensure your practices and physician groups get adequate reimbursements to continue to serve their communities.  A Boston Consulting Group study reported in HFMA concludes that, 

“Hospitals that have traditionally just taken whatever rates payers will give them can no longer afford inaction. The typical health system needs a rate increase of 5% to 8% each year across all payers to break even by 2027.”

Achieving this revenue level and more is your ultimate goal. Tough negotiations turn on a genuine willingness to refuse the payer’s demands and end the relationship. 

The positives of payer relationship termination

Hamilton Health Care System, a not-for-profit, fully integrated system of care serving northwest Georgia dropped Medicare Advantage years ago. CFO Julie Soekoro explains, “We would end up netting less than traditional Medicare because of denials and administrative hassles.” 

The team appreciates the reduction in time and money once expended on takebacks, pre-authorizations, and denials. If it doesn’t make business sense to continue with a payer, dropping it is the smart option. 

As much as you want to converge with payer needs, you do have to be on the lookout. In the same article, Britt Berrett, managing director at Brigham Young University and former CEO with HCA, Texas Health Resources, and SHARP Healthcare, explains, “Long before rates become contentious, hospitals are dealing with bad behavior and payer shenanigans.”  He objects to payers removing provider-favorable terms without mentioning the change, rejecting claims based on utilization review criteria, and other bad behaviors.  

Berrett’s organization also terminated a payer contract because the payer was unreasonable about the patient population’s higher case mix index (CMI).

“The impact [of terminating the contract] was very positive for the hospital. We lost volume but improved margins ...When we terminated the agreement, they could no longer sell lower premiums and their market share dwindled. They eventually retreated from the market.”

These examples demonstrate that termination is NOT a catastrophe. It can even help the bottom line.

Pre-termination, leverage what’s at stake for the payers

Awareness of the real ways in which payers need your providers and physician groups can give you the confidence to advocate for fair reimbursements and terms. 

This breakdown of what payers need from providers will give you confidence. Getting a clear understanding of your value to a payer empowers you to negotiate aggressively. Use these points as leverage to negotiate better contract rates:

 1. Access to High-Quality Care Networks

What Payers Need: Payers need a network of high-quality providers to offer comprehensive care options to their members. A robust provider network is a competitive advantage for payers, enabling them to attract and retain employer groups, individual members, and government contracts.

Leverage for Providers: Providers can negotiate better rates by emphasizing the quality and breadth of services they offer. Demonstrating strong clinical outcomes, cost control, patient satisfaction, and the ability to manage population health effectively can be key leverage points.

 2. Cost-Effective Care Delivery

What Payers Need: Payers are under constant pressure to control healthcare costs. They seek providers who can deliver cost-effective care without sacrificing quality.

Leverage for Providers: If providers can show that they excel at managing costs through care coordination, reducing hospital readmissions, and offering preventive services, they can push for better contract terms. Emphasizing the ability to manage complex cases efficiently is also a strong bargaining chip.

 3. Compliance with Value-Based Care Models

What Payers Need: As the healthcare industry shifts toward value-based care, payers need providers who are willing and capable of engaging in value-based contracts that reward quality over quantity.

Leverage for Providers: Providers who are adept at meeting quality metrics, achieving high patient satisfaction, and demonstrating measurable improvements in health outcomes can negotiate for higher reimbursement rates, particularly through value-based arrangements.

 4. Geographical Coverage

What Payers Need: Payers need providers in key geographic areas to ensure that their members have adequate access to care. Gaps in geographical coverage can hurt a payer’s ability to market to certain populations.

Leverage for Providers: If a provider serves a unique or underserved geographic area, especially one with high patient demand, they can leverage it to negotiate favorable contract terms. Urban providers with a large patient base or rural providers filling a critical access gap can be particularly influential.

 5. Data on Patient Populations and Health Outcomes

What Payers Need: Payers rely on data to assess risk, manage care, and negotiate their own contracts with employers and government agencies. Providers that can offer detailed insights into patient populations, health outcomes, and care patterns provide significant value.

Leverage for Providers: Providers who invest in health IT and can offer actionable data, such as reducing hospital readmissions or managing chronic diseases effectively, can use these metrics to negotiate more favorable contract terms. Strong reporting capabilities can also lead to better partnerships with payers.

 6. Collaboration on Care Management

What Payers Need: Payers often look for providers who are willing to collaborate on care management programs that reduce unnecessary utilization, such as emergency department visits or avoidable hospitalizations.

Leverage for Providers: Providers who can demonstrate expertise in managing high-risk patients, particularly those with chronic conditions, can highlight their role in reducing healthcare costs and improving patient outcomes. This can give them leverage to negotiate higher rates, especially if they excel in managing high-cost patient populations.

 7. Specialized Services and Expertise

 What Payers Need: Certain specialties, especially high-demand ones like oncology, cardiology, or behavioral health, are critical for payers to maintain a well-rounded network.

Leverage for Providers: Providers with specialized services or who offer unique care models that are in high demand can use this as leverage. Payers are often willing to negotiate higher rates to ensure their members have access to essential specialty care.

By emphasizing the unique value they bring to the table, providers can rebalance the negotiation dynamics and achieve more favorable contract terms.

Conditions required for contract termination

If the payer hasn’t responded positively to your demands, it’s time to consider termination. Remind the payer rep of the date on which you will be out of contract and mention that you’re preparing for termination. This information will force the payer to prioritize you. 

As much as you feel justified in terminating, you don’t want to trigger a breach of contract. Understand the grounds for termination written in your provider’s contract with the payer. These three scenarios are the most common ways to justify the end of a provider contract. 

Contract Violation

A contract may be terminated if either party fails to adhere to the agreed-upon terms and conditions. For instance, if a provider consistently submits reimbursement claims beyond the 30-day deadline specified in the contract, this constitutes a violation of the agreement.

Failure to Meet Obligations

When a party does not fulfill its contractual responsibilities, it's considered a failure to meet obligations. For example, if a healthcare provider doesn't deliver services or maintain regulatory compliance as stipulated in the agreement, this could be grounds for contract termination. Similar to contract violations, failing to uphold your commitments can lead to the dissolution of the contract.

Mutual Agreement

In some cases, both parties involved in a provider contract may mutually decide to alter their arrangement. This could involve modifying the existing agreement to better align with changing needs, extending the contract duration, or agreeing to terminate the contract earlier than initially planned.

Steps in terminating a payer contract

Should one of the conditions above have been met, you can either threaten to or move forward with termination. Providers are now more willing to terminate, and payers don't want negotiations to spill into the public domain and risk losing members. 

Navigating a contract termination requires careful planning, clear communication, and a thorough understanding of the potential impacts on your organization and patients. The following steps outline a strategic approach to contract termination, ensuring that you proceed in a manner that is both legally sound and mindful of all stakeholders involved.

1. Review the contract: Carefully examine the participation agreement within your contract to understand when and how you are allowed to terminate the contract. Look for specific termination dates and any "termination without cause" provisions.

2. Analyze the impact: Conduct a comprehensive analysis of the potential impact of termination, including revenue loss, effects on patient relationships, referrals, and market conditions.

3. Build consensus: Discuss the potential termination with key stakeholders in your organization and ensure there is agreement on the decision.

4. Develop a comprehensive plan: Create a detailed plan that covers all scenarios, including how to communicate the termination to employees and patients, and how to handle patient transitions.

5. Provide written notice: Write a formal letter to the payer stating your intention to terminate the contract. Send it via certified mail with a return receipt requested to the appropriate contact person specified in the contract.

6. Follow proper procedure: Adhere to the termination procedure outlined in your contract, including providing the required notice period (often 90 days).

7. Prepare for patient transitions: Plan for how to handle patient discharges or referrals, allowing extra time to help clients through these transitions.

8. Monitor for counter-proposals: Be aware that the payer may submit a counter-proposal before notifying their members of the termination.

9. Implement communication plan: Execute your plan for communicating the change to staff and patients.

10. Follow up: Ensure the payer received your termination notice and be prepared to handle any responses or negotiations that may follow.

Remember, terminating a payer contract should generally be considered a last resort after attempts at negotiation have failed. It's often advisable to consult with healthcare legal experts throughout this process to ensure compliance with all contractual and legal requirements.

Let a contract management and modeling system help you win higher reimbursements

Many management services organizations are just beginning to adopt assertive contract management strategies. However, when these strategies are supported by solid data, you can confidently present your reimbursement demands and win your case with payers.

Our automated underpayment detection solution, RevFind, uncovers substantial revenue for our clients. It enhances the process of evaluating payer performance for healthcare providers and organizations. This innovative technology identifies top and underperforming payers, recognizes payment patterns, and flags potential underpayments. This data builds the foundation for your contract negotiations. 

RevFind centralizes all contracts in a digital format within a single, easily accessible platform. It also features automated alerts for crucial contract dates, including expiration, renewal, and termination deadlines, ensuring timely action. Users can customize notifications to provide advance warnings, such as 90 days before these key dates, enabling proactive contract negotiations.

Schedule a demo to see how RevFind can pinpoint contract improvements that can boost your net revenue.

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