State of the Industry: Rate negotiations

More complex reimbursement contracts make it tougher on providers

Rate negotiations between payers and providers are, by nature, contentious and bound to become more so as payment models evolve. But in areas of the country where payers and providers have forged solid working relationships, both parties are working to find equitable payment systems based on delivery and performance.

“It seems as if the areas where the relationships are more positive are ones where the clinicians have been able to come together in some sort of formal arrangement to negotiate with the local payers,” says Shari M. Erickson, MPH, vice president, governmental and regulatory affairs for the American College of Physicians.

Payers want to reimburse for “value”-a combination of high or improved performance with reduced cost-instead of individual services, she says. Clinicians are exploring new delivery system models, including patient-centered medical homes and accountable-care organizations.

“Both of these factors are changing the conversation significantly,” Erickson says. “How do you effectively pay for value and provide true and meaningful incentives for clinicians? There are many differing viewpoints on this question.”

While payers are widely viewed as having the upper hand in negotiations in our survey, the ground might be leveling for providers who have joined larger organizations, such as hospital outpatient departments and independent practice associations (IPAs) that negotiate on behalf of members.

In fact, at least 550,000 physicians have joined physician organizations, according to Robert Jenkins, CEO of the Managed Care Information Center, Wall Township, N.J. The center publishes the National Directory of Physician Organizations, which documents 505 IPAs and 568 physician hospital organizations, plus multispeciality medical groups and primary care networks, Jenkins says.

However, Erickson notes, many of the country’s patients still receive their care from clinicians in small- to medium-sized practices that find it “very challenging to effectively negotiate with payers, which leads to the view that payers have the upper hand.”

In the future, more complex reimbursement arrangements and risk shifting to providers will make the negotiation process itself more involved on both sides of the boardroom table.

“They’re getting beat up,” Jenkins says of independent providers. “I think they need all the help they can get.”

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