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Top 10 Hospital Contracting Priorities

 |  By Margaret@example.com  
   August 22, 2012

Despite all the talk about long-range goals to achieve affordable and accountable care, hospitals set very short-term goals when it comes to their contracting priorities with health plans. Hospitals are more concerned with increasing their reimbursement rates and limiting claims denials than they are with developing bundled payments or ACOs, according to survey results.

The annual survey was commissioned by ReviveHealth, a Nashville-based public relations firm that focuses on healthcare, but is performed by Monigle Associates, a Denver-based branding research firm. The survey captured responses from more than 400 hospital and health system CEOs, CFOs, and payer relations executives who negotiate managed care contracts with national health insurance companies such as Aetna and Cigna.

Insurers don't like the survey because it generates a few attention-getting favorability ratings about the health insurer (WellPoint) that hospitals and health systems love to hate. That's the story that has gained the most media attention.  It's too bad, because a deeper dive  uncovers some real meat regarding the often contentious relationship between hospitals and health insurers.

Hospitals were asked about their health plan contracting priorities over the next 12 months and asked to rank 10 issues in the order of importance for their organization's success. I asked Brandon Edwards, president of ReviveHealth, to provide some insight into the results.

1. Higher contracting rates with their largest payer

Hospitals view getting a better payment rate from their largest customer as their best opportunity for revenue growth. Bundled payments and ACOs are important, but Edwards says hospital execs tell him that without better rates it doesn't matter what else they do. According to the survey, independent Blue Cross Blue Shield plans and WellPoint/Anthem account for the largest share of hospital net revenue.

2. Higher contracting rates with their second and third largest payers

If hospitals can't move the needle with their largest payer then they'll move onto others. UnitedHealth and Aetna are ranked second and third in terms of hospital net revenue, and according to the survey, hospitals may be prepared to put more pressure on those payers.

3. Better protection against denials

Edwards notes that denials protection is growing in importance among hospitals, which are concerned about actual reimbursement yields in relation to denials. A hospital could negotiate a 6% rate, but in the face of clinical and administrative denials the yield might be only be 3% or 4%.

"Hospitals are saying that they know they can't get 9% anymore, but if they negotiate 6% then that's what they need to get. Hospitals recognize that trend isn't going to be their friend anymore so they have to do better on yield. They are looking for ways to protect themselves."

4. Better claims processing and payments

Payers are the bank, says Edwards. They hold the money and control the process. Claims processing, protection against denials, and better contract language are variations on the same themes of timeliness and accuracy.

"It's not whether a hospital will get paid, it's how long it has to wait for the correct payment," Edwards says.

Hospital claims are usually expensive and complicated because they have a lot of moving parts. Insurers complain that hospital claims are often incomplete and filled with errors. Hospitals contend the claims rules are often unclear and open to interpretation.

5. Better rates for physicians

Whoever gets the docs wins, says Edwards. It's about the ability to steer membership to hospitals and out-patient facilities. If the hospital pays the doc then it gets the referral pattern.

6. Shifting market away from one payer

What would it take to accomplish this? Edwards says some narrow network deals may enable hospitals to drive business from one payer to another, but they aren't very common.

7. Better contract language with the largest payer

Hospitals are looking to improve the language that affects the timeliness and accuracy of payments, as well as the coverage of high cost drugs, carve outs, and medical devices. Edwards says he knows of hospitals that have refocused their negotiations with insurers from reimbursement rates to coverage issues. For example, they work to make sure they are reimbursed not just for a knee replacement procedure, but also for the knee implant itself.

8. Better reimbursement for carve outs

Carve outs can include services provided in trauma and neonatal intensive care units, as well as transplant and implant procedures. Edwards says this is important, but ranks as a lower priority because not as many hospital provide these services or uses carve outs. "Now they try to cover these items in their overall rates," he explains.

9. Better Medicare Advantage rates

Aging baby boomers are increasing demand for Medicare Advantage and payers such as Cigna are acquiring MA plans in an effort to grab a significant share of the market. Although reimbursement rates are an ongoing battle, Edwards says this priority is less important to hospitals than it was last year. "Did they rate it low because they just don't think there's anything they can do about the rates?"

10. Bundled payments for medical home, ACO

Making this a lower priority item doesn't mean they aren't doing it explains Edwards. "It means they care about it less and it moves the needle less than the other factors. Other priorities can be done quickly but the return on bundled payments and ACOs could take years."

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Margaret Dick Tocknell is a reporter/editor with HealthLeaders Media.
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