Skip to main content

Playing Ball: 4 Payer-Provider Partnership Strategies for CFOs

Analysis  |  By Delaney Rebernik  
   April 10, 2024

Here's why playing nice can be a competitive edge.

Editor's note: This story is the second in a two-part series on how health system CFOs can help melt the payer-provider freeze. Read part one here.

Audits, denials, reimbursement dips.

It's brutal out here.

"Folks are very frustrated right now," says Robin Damschroder, MHSA, FACHE, executive vice president and chief financial and business development officer at Michigan health system Henry Ford Health (HFH), which has more than 250 care locations, including five acute care hospitals, and upward of 650,000 members enrolled in its Health Alliance Plan (HAP).

"Profitability on Medicare Advantage plans has dropped significantly below fee-for-service payments" for many providers, Damschroder explains.

It means "you're seeing more and more health systems selectively partnering and/or exiting" their MA partnerships, says Brian Fisher, director of healthcare strategy, provider and payer, at global consulting firm Guidehouse.

And now, shifting regulatory winds are only fanning these "flames of conflict," says Richard F. Bajner, partner and payer and provider leader at Guidehouse.

During the height of COVID, payment "very much tilted in favor of health plans," he explains. Now, things are "tilting a little bit back," and payers are feeling the heat. But amid all the heartburn is hope for a new negotiating table—one with "mutual growth" on the menu—as early as next year.

"It's forcing the dialogue between payers and providers to shift," Fisher says. "It's becoming less transactional and more focused on, 'What are our demands and pain points that, on each side of the table, we need to solve for.'"

Make your pitch

Determine what you need from—and can offer to—prospective payer partners based on your goals and circumstances. Consider what you "need to solve" on strategic and operational fronts, both today and five years from now, and who's going to help you get there, Fisher advises.

Because payers are doing the same. "They're looking at markets and saying, 'okay, who do we want to align with as our health system leader or health system of choice that helps us improve on our cost of care, our quality, and our initiatives," Bajner explains.

To find common ground, "focus on alignment where growth benefits both parties," Fisher says, and look beyond cost to compatibility in places like service lines, quality aims, and administration and marketing capabilities.

In other words, lean in on where you can complement (and maybe even compliment) each other. Despite "the animosity," payers and providers both have roles to play in delivering value-based care, says Richard L. Gundling, FHFMA, CMA, senior vice president of content and professional practice guidance at the Healthcare Financial Management Association. "Providers are great at performance improvement; payers are great at risk management." So how can you work together to do both?

Take it easy on the hardball

Too often, both payers and providers come into negotiations with the mindset of, "'Here's our set of demands, and if you aren't able to reach those demands, we're going to walk,'" Fisher says. "That's a tough line to toe, and you know, sometimes it's not putting the patients and the members at the forefront."

Instead, come to the table prepared to give and take on multiple fronts, not just "how are we getting paid?" he advises. "It gets important to say, 'here are our objectives,' but doing so in a way that leaves the options for how we contract or partner together rather open."

This framing will allow you to have better, more strategic conversations from the vetting process onward. And sometimes, Fisher says, that may mean culling partnerships from your portfolio that are no longer a fit. So don't be afraid to say, "Look, if this doesn't make sense for us, and it doesn't make sense for our patients, then maybe this isn't something that we need to be participating in moving forward."

At the same time, remember that real change takes time, Damschroder says. Quality scores are—rightfully—"often a gatekeeper" to dollars in risk-sharing agreements, "and you can't affect those by being in a contract for one or two years."

Go long (and short)

Once you've determined your needs and offerings, shape them into an incisive value proposition. The sooner the better, Fisher says, because "time kills deals."

Not so fast, though. Even in today's environment, "where short-term returns are creating the necessity to prioritize short-term actions," speed shouldn't equal shortsightedness, Bajner says.

Instead, he recommends seeing payer partners "as another lever and chassis for growth." And that means thinking beyond terms like unit prices to bigger-picture considerations like PMPMs.

It's about creating a "strategy where short-term decisions don't negatively impact that longer-term strategy and sustainable model," Fisher says. Because moves that are "helpful tomorrow" don't always aid "those growth opportunities five years from now."

Field admin curveballs

Ending the "administrative arms race" is a must to reduce the cost of providing and receiving care, Damschroder says.

Your payer partners should help, not hinder, this goal. "How is a health plan willing to invest in health system capabilities so that we're better managing patients across the continuum of care?" Fisher asks.

Assess how your collaborations can strengthen core administrative functions, including those involving utilization, prior authorization, medical necessity reviews, referrals, care management, and related documentation, experts advise.

When such considerations are overlooked or mismanaged, it's patients who are left in the lurch, Gundling says. "It just causes so much dissatisfaction and plus just adds a lot of administrative costs" in an environment where "no more money's coming in."

Finding efficiencies takes a lot of talking, says Damschroder, who has "ongoing dialogues" with Michigan's dominant payer, Blue Cross Blue Shield, along with other major players like Aetna and Humana.

Additionally, Henry Ford Health just revved up their machine for addressing denials and audits—both of which are up by 30%—with more staff and tech capabilities, including Epic's payer platform to "ease the exchange" of documentation, Damschroder says.

Since rolling out these enhancements, HFH has managed to overturn 90% of the denials. But it hasn't been cheap.

The system is planning a sit-down with their largest payer to discuss how administrative hurdles are costing both entities, Damschroder says. "We spend $4.5 million dollars on pre-authorization for their members, and we want to know, if we're spending $4.5, how much are they spending, and collectively, what could we do to reduce that spend?"

It's all in service of something better, Damschroder says: developing "a mechanism where we trust each other." 


Delaney Rebernik is a freelance editor for HealthLeaders.


Shifting regulatory winds are fanning "flames of conflict" between payers and providers. But amid all the heartburn is hope for a new negotiating table—one with "mutual growth" on the menu—as early as next year, finance execs and experts tell HealthLeaders.  

To build strong partnerships, system CFOs should set sights long, sharpen their value proposition, and get ready for some real give and take.

Get the latest on healthcare leadership in your inbox.