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Who benefits the most from your payer contracts?

In my last blog, we learned how to identify varying populations within your practice and why it’s important for your value-based care strategy. Now, it’s time to examine contracts. Contracts with payers are a must to practice medicine and provide care to patients, but sometimes they can be an overwhelming pile of red tape that seems to be more of a burden than a benefit. But it doesn’t have to be this way! Let’s take a dive into contracting and see how we can make contracts beneficial to your patients and your bottom line.

Providers understand they need contracts in place to be considered “in-network” for patients. Having network status ensures appropriate reimbursement and the least out-of-pocket cost for patients. Does that mean providers should have a contract with every payer in their area? No! One of the first things we can think about in terms of contracting: consolidation.

Let’s take Medicare Advantage (MA) plans as an example. There are major, nationally-based MA payers (and we all know who those are) but there are vastly more regionally based MA plans and payers. One geographic area can have a multitude of MA offerings in the market, including the major payers (Humana, Blue Cross and Blue Shield, Cigna, etc.) and smaller, locally owned plans (often owned by health systems or large employers).  It’s enough to make anyone’s head spin. If you decide you need to cut your MA plans from seven to four, which four plans should you keep and which three should you give the proverbial axe? How many patients (or beneficiaries as the payers call them) are covered by each plan? Because we have completed the exercise of knowing the population, we now know which of these plans are of most importance to us based on how many patients are connected to each plan.

Another very important point to consider is which payer plans are open to negotiation and financially incentivize good performance. If Plan “X” builds incentives around clinical measures and Plan “Y” offers very little incentive, it seems that retaining Plan “X” and cutting Plan “Y” would be a clear choice. But what happens to the patients that are covered by Plan “Y” if you cancel your contract and are now listed as out-of-network. And what does this do? It eliminates a plan that wasn’t as lucrative as it could be and thereby eliminates another set of rules (or red tape) for claims and pre-authorizations and increases the population of the plan that does offer lucrative incentives.

Bold strategic moves like the one described above and payers that act like partners are integral parts of succeeding within value-based care.

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