Payer Management for Providers: How to Optimize Contracts to Prevail Over Payers

Payer technological advantages

Payers were early adopters of automation and now leverage AI to manage claims more aggressively, often without transparency. They have more capital than providers for initial investment and subscription fees. One indicator of this headstart comes from a recent Bain & Company and KLAS Research survey of 150 payer and provider executives. The researchers found that while just 15% of providers said they had established an AI strategy (the latest tech advance), 25% of payers had.

 Payer use of AI has led to several tough issues for providers:

• Increased claim denials: AI systems are being used to review claims more stringently. Missing or inaccurate data is one of the top reasons for denials and AI systems have proven more adept at catching them than previous staff- and automation-led systems.  
• Retroactive reviews: AI tools are conducting post-payment audits, sometimes reversing previously approved claims based on reassessed medical necessity. When they can carry out this work quickly and with little oversight, the effort is worth it for payers.
• Lack of transparency: Healthcare providers often aren't aware that AI is being used to evaluate their claims, making it difficult to contest AI-generated denials.

The increasing use of AI by payers has worsened an already uneven playing field. As a result, healthcare organizations are now compelled to allocate more resources to navigate this complex landscape, potentially impacting their financial stability and operational efficiency.

As early technological adopters, payers have also traditionally had access to vast amounts of data and sophisticated analytics capabilities. With these tools, they get insights into provider performance, cost trends, and patient outcomes that individual providers often lack. Payers then leverage this information to negotiate rates, identify high-cost providers, and implement targeted cost-containment strategies.

The financial advantage

Payers have the focus and legal teams to parse contract details and strategies in a way providers cannot. In most cases, they initiate contracts that busy providers simply sign off on. Payers also have more experience in risk assessment and management, giving them an edge in negotiations and contract terms. With contracts at the center of their business model, payers have the knowledge and expertise advantage.

On the other hand, providers’ laser focus on patient care makes them vulnerable. Indicators of their success are patient outcomes, not revenue. As such, contract and payer management is not as high of a priority. 

The market consolidation advantage

The consolidation of the payer market has further strengthened payers’ positions. Mergers and acquisitions have led to fewer, larger payers with increased market power. As of last year, the Herfindahl-Hirschman Index in this HHS report concluded that 75% of health insurance markets could be considered concentrated. A high level of concentration indicates that there are indeed fewer, larger payers dominating these markets. A large footprint in a market affords payers more control. 

Just ask the justice department.

 When fewer competitors exist in a market, each entity enjoys more price-fixing power. Our Antitrust Department asserts that, “anticompetitive conduct and mergers deprive American consumers, taxpayers, and workers of the benefits of competition.”

In some areas (often rural), providers have just one payer reimbursing them for care provided. Unable to get members from any other source, they are stuck, powerless. Pushing for better contract fees and terms isn’t an option. Providers cannot function without income from payers. The payer knows the provider has no other choice but to comply.  

The regulatory influence advantage

Add to the technological and structural advantages the fact that payers exert more influence on healthcare policy and regulations than providers. More money and time, along with a head start in making connections in Congress has helped them shape policies that favor them, according to the AMA. As a result, payers have been able to implement complex reimbursement rules and documentation requirements that providers must continually navigate.

By leveraging these five advantages, payers have long maintained a dominant position in their relationships with providers. However, recent trends towards value-based care and increased provider consolidation are beginning to shift this dynamic, encouraging more collaborative partnerships between payers and providers.

AI prompting higher denials

If payers are using AI to double down on coding errors and increase denials, healthcare organizations must double down on doing the same to submit clean claims the first time.

Fight fire with fire or AI with AI by unleashing NLP algorithms – traditional AI – to review clinical documentation to ensure accurate coding. When you manage denials with software, you address potential issues before claims are submitted. This step reduces the risk of denials due to coding errors. AI-driven claims management software can significantly reduce denial rates, with some organizations reporting significant reductions.   

Retroactive reviews

Providers and patients are particularly frustrated when payers revisit approved claims with new technology and then issue a new denial. Often, the patient has already begun treatment, made arrangements, and even seen their health improve. The financial and even medical consequences of a flip-flop can be devastating. 

Providers can push back against AI-driven post-payment audits and claim reversals in several ways:

• Invest in expertise: Develop in-house capabilities to understand and combat potential biases and errors in payers' AI systems. Recruit data scientists, AI engineers, and healthcare informaticists with expertise in AI bias detection and mitigation. These professionals can be found through healthcare technology roles, partnerships with universities offering healthcare AI programs. Also reach out to organizations like the American Medical Informatics Association (AMIA).
  
• Conduct self-audits: regularly review billing practices to identify outliers that may trigger AI audits, focusing on high-volume codes and profitable procedures.
• Implement proactive monitoring: use advanced analytics and AI-powered tools to identify potential issues before claims are submitted, reducing the likelihood of post-payment denials.
  
• Appeal aggressively: consistently appeal denied claims, as the low appeal rate encourages payers to continue using AI audit tools.
• Improve documentation: Ensure thorough and accurate documentation to support medical necessity, making it harder for AI systems to justify claim reversals.
  
• Leverage technology: Implement robust post-payment audit management systems instead of relying on spreadsheets, which are used by over 31% of hospitals.
  
• Collaborate with other providers: Share information and strategies to collectively address the challenges posed by AI-driven audits.
  
• Advocate for transparency: Push for payers to disclose their use of AI in claims processing and provide insight into the algorithms driving these systems.
  

By implementing these strategies, providers can better protect themselves against unfair post-payment audits and claim reversals, ultimately improving their financial stability and operational efficiency.

Payer lack of transparency

When providers have to fight hard even to get an updated contract, it’s no wonder they’re skeptical about getting a peek into payers' AI-driven claim evaluations. Still, some providers are successful with the following tactics:   

• Demand disclosure: providers should push for payers to include information about AI use in coverage agreements. A recent court ruling against UnitedHealth Group supports this approach, stating that disclosure about AI use should be included in coverage agreements issued by healthcare insurers. Legislators are watching AI use in healthcare coverage determination. California's Senate Bill 1120 (SB 1120) which took effect just a month ago regulates how healthcare service plans and disability insurers use artificial intelligence, algorithms, and other software tools for utilization review and management functions. 
• Collaborate with AI startups: counter payers’ willingness to invest in technology by partnering with companies like Regard, which uses data from electronic health records to recommend diagnoses and increase approval rates. Evidence is emerging that these brand-new companies are adapting their pricing strategies to work with healthcare providers, including smaller organizations with limited budgets. As Dr. Michael Gao, co-founder and CEO of another AI startup SmarterDx explains, “At the end of the day, it’s just about evening the playing field,” said.
  
• Implement robust monitoring: Use contract and denial management software to track and analyze denial patterns, which can help identify potential AI-driven denials.

By implementing these strategies, providers can better navigate the challenges posed by payers' AI-driven claim evaluations and work towards a more transparent and fair reimbursement process.

Regulatory influence

Shaping laws in Washington may seem outside of your organization’s time and bandwidth, but you can at least be an ally. Organizations and many congresspeople are actively pushing back against payers.

• Learn about AMA, AHA, and AAFP lobbying initiatives: join these groups and get on their newsletter lists. Consider volunteering. By joining these groups, providers can amplify their voice.
  
• Advocate for AI oversight: push for increased regulatory scrutiny of AI use in claims processing, similar to how Claimable sends copies of appeals to relevant regulators.  
• Engage in grassroots advocacy: Providers can contact their representatives directly, participate in letter-writing campaigns, or attend town halls to voice their concerns on healthcare policies.
  
• Provide expert testimony: healthcare providers can offer their expertise by testifying at legislative hearings or submitting written statements on proposed regulations.  Platforms like JurisPro, SEAK Expert Witness Directory, and ForensisGroup allow healthcare executives to list their qualifications and expertise for potential legal cases.
  
• Form coalitions: by collaborating with other provider groups or healthcare stakeholders, individual groups can increase their influence and present a unified front on key issues.
  
• Leverage data and research: - even your own. Presenting evidence-based arguments and real-world impact data can strengthen providers' positions when advocating for policy changes.
  
• Raise awareness via social media: garner public support through strategic communication efforts.
  
• Participate in advisory committees: some regulatory bodies have advisory committees that include healthcare providers, offering an opportunity to directly influence policy decisions.
  

While individual provider groups may have less lobbying power than large associations, these strategies can help them make their voices heard in the regulatory process.

Market concentration

To counter payers' large market footprint and gain more power in the payer-provider relationship, providers can employ several strategies:

Technology budget

As the healthcare landscape becomes more complex and technologically advanced, providers struggle to afford the necessary investments in modern systems like AI-driven tools. Finding the expertise to run these systems is another challenge. As mentioned above, payers have historically invested more staff time and financial resources in technology.

But providers can catch up. Use these tactics:

Catch up to payers on AI-driven contract management

Are you worried your organization is falling behind on the promise of generative AI? 

First, generative AI has not shown to be much use in the revenue cycle yet. 

Our article on AI in RCM covers how generative AI (the one everyone is so excited about) is a subset of traditional AI. Traditional AI includes automation, optical character recognition, neural linguistic programming, and natural language models, but mostly automation. Today, 46% of hospitals and health systems are already using traditional AI in their RCM operations, according to the AHA.  Most likely you’re already using it to automate claims, billing, scheduling, patient eligibility, and even RCM analysis. 

At this time, even though you have some traditional AI working in your revenue cycle, you may not be using healthcare contract management software. That means you’re spending quite a bit on manual contract management or you’re not managing your contracts well at all. 

A recent Strategic CFO Survey conducted by Coupa, a leading financial management software and services company, surveyed 600 CFOs from North America and Europe. They found that only 35% reported having a contract management plan in place. While this study involved healthcare as well as other industries, it provides a glimpse into the sorry state of contract management today. We’ve had clients pull hard-copy payer contracts from drawers that hadn’t been open in 12 years, and we’ve seen many clients who haven’t looked at them in five. Healthcare organizations just don’t have the staff time or expertise for an intense level of payer management. 

If you do not have a contract management system – either manual or automated – in place, you’re turning significant revenue control over to payers. After all, “what gets measured gets managed,” as business management guru Peter Drucker told us long ago. Having the data that measures payer performance and deriving solid insights from that data are the first two steps in asserting your power in your relationship with payers. 

Take a quick, self-guided tour through a powerful contract management and underpayments identification tool:

Proactive contract management software delivers data and insights by revealing: 

• revenue lost due to denials and underpayments 
• which payers, CPT codes, physicians, and locations trigger the most denials and underpayments
• how payers rank against each other as far as adherence to contract terms, meeting deadlines, and “hassle factor” 
• contract renewal and other key dates (alerts)
• root causes of revenue leakage  
• how rate changes will impact your revenue
• benchmarking data to negotiate for better terms

This data gives you control in many aspects of the payer relationship. It empowers you to:

• prioritize negotiations with high-performing payers and potentially terminate relationships with consistently problematic ones.
• use concrete benchmarking data to negotiate for better terms.
• evaluate, reject, or accept rate and term changes only after calculating just how those changes will impact net revenue.
• provide payers with proof of underpayments and demand recovery. 
• use data to justify escalator clauses.
• negotiate carve-outs for high-utilization services to maximize revenue impact.
• use data to demonstrate to payers that their proposed changes will negatively impact your revenue even though they may downplay that possibility. As one reviewer writes on G2: 

“Love it to keep payers honest!!!” 

Contract management software also illuminates healthcare organization operational issues. It surfaces the CPT codes causing the most issues, and locations or physicians contributing to revenue leakage. Since this article focuses on payer management, however, we want to highlight the possible power moves contract management automation and software make possible.

Use predictive analytics for payer management

A key value in contract management software is predictive analytics. This technology uses machine learning algorithms to analyze historical claims data and identify patterns associated with denials. By examining factors such as diagnosis codes, treatment types, insurance plans, and other relevant data points, the contract management software can predict which new claims are likely to be denied. 

With staff notified about the tricky claims, staff is justified in spending the necessary time. Hopefully, your claims submission software can further back up staff by catching issues like missing information, incorrect codes, and patient insurance coverage discrepancies.