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Reducing Expenses: How Payers Can Take Charge in Contract Negotiations

Analysis  |  By Marie DeFreitas  
   June 20, 2024

Payers can successfully negotiate if they can prove they can stabilize finances.

The tug-of-war between payers and providers hits the precipice at the negotiating table. Contract negotiation is more than just tough business, and the strategies each party takes to the table can be do or die for any organization.    

Before going into a negotiation, both payers and providers need to put in some research.

For example, providers must ensure they’ve reviewed their contracts and create a habit of doing so often. On the other hand, payers must also ensure they are up to date on their contracts and can supply providers with accurate information and data throughout the negotiation process.

When it comes to successful negotiations though, proving that you can help reduce expenses is an important strategy for payers to utilize.

How to Show That You Can Reduce Expenses

Payers can successfully negotiate if they can prove they can stabilize finances. Although most healthcare leaders on both sides are optimistic and expect financial performance to improve, a few key areas will push them to do so.

“Rising labor costs in healthcare and a substantial increase to the regulatory and legislative mandates are driving increased costs for both providers and health plans,” said Krishna Ramachandran, Blue Shield of California’s senior vice president of health transformation and provider adoption.

Payers and providers will need to collaborate and examine specific avenues that health systems can take to reduce expenses to have a portion of the funds returned to their organization.

Both parties can bring up digitization, which can play a large role in the negotiation: from utilizing AI to reduce administration workload, to implementing EHRs to reduce paperwork and streamline operations, leaders must examine options that work for their system. Payers can cut costs and pass savings onto their organization; this is beneficial to both parties.

For payers this is important because the less the administrative cost, the better for everyone, Piyush Khanna, vice president of clinical services at CareFirst Blue Cross Blue Shield, explained, agreeing that AI has the potential to help, but must be done responsibly.

Part of that responsibility goes back to ensuring accurate data sets; technology will only be as good as the data. “The data backbone is extremely critical for these statistical models of the future to be able to leverage this information,” Khanna said. “These tools need good, curated data sets [in order to] to be meaningful.”

But health leaders should not only look to the newest digital solution to fix their problems. Digital tools and programs must be integrated in a way that best paves the road to success for that specific organization.

Ramachandran stated that to drive tangible change, industry leaders must provide solutions that are proactive and integrative, giving an example of how Blue Shield is investing in tools and partnerships to bring healthcare into the digital age: “This includes tools to streamline data exchange between providers and health plans so that we can reduce the burden of administrative transactions and focus efforts on member health.”

Read this entire cover story here.

Marie DeFreitas is the finance editor for HealthLeaders.


Payers can prove their value in negotiations by showing they can help reduce expenses, particularly through collaboration with providers and exploring avenues such as digitization to cut costs and pass savings onto their organization.

While digital tools like AI can be beneficial, it is important to ensure that they are integrated in a way that best serves the specific organization and that accurate data sets are utilized to make these tools meaningful.

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