Outsourcing Managed Care Contracting: A Strategic Approach for Hospital and ASC CFOs

What if I were to tell you that, in many ways, successful healthcare organizations and medical groups are not experts in all aspects of managed care contracting? Would that surprise you? It shouldn't.

In a narrow but significant sense, it’s true. Today’s leading hospitals and ambulatory surgery centers (ASCs) and medical centers often lack expertise in many of the specialized analytical and negotiating tasks required for effective managed care contracting. They also are not ready for bundled case, pricing, and for that matter pricing integrity.

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As such, they are unprepared to handle the newer types of direct with employers and personal injury payer contracts that are not anything like the HMO and PPO contracts of the past.

So, what’s their secret? How do they consistently achieve financial stability and growth in a complex and competitive healthcare environment? It may be easier than you think but you simply don’t know how or aren't sure you do. I can fix that for you.

The most successful healthcare organizations excel at recognizing their strengths and identifying areas where they need support.

When they lack the expertise to negotiate managed care contracts at the highest level, they seek out professionals who specialize in this field.

They outsource these critical skills to consultants like myself who will review the contract and suggest revisions for renegotiation on an hourly basis without hefty retainers. Now, you might be thinking that your organization already outsources certain tasks. So, what’s different about this approach?

First, it’s been my experience that the leading healthcare organizations outsource managed care contracting tasks significantly more often than their less successful counterparts. If you saw the brand names on my client list, you'd immediately see this. They understand that hiring external experts is often more efficient and cost-effective than training and relying on the revolving door of internal staff to handle the more complex and specialized negotiations. After all, lots of times, you invest in the training for the staff and a quit and take that knowledge someplace else.

Second, they are less likely to burden their existing staff with learning new and complex contracting skills. While it might seem cost-effective to keep tasks like contract analysis and negotiation in-house, this approach often leads to lower performance and inconsistent results.

But picking the right consultant with the right experience and know how is no easy task. Successful healthcare organizations are selective about the experts they choose to work with. They seek out consultants with deep industry experience and a proven track record in managed care contracting. For example, my track record is more than 40 years established. And my clients are the leading brands in healthcare not only in the USA but worldwide. Remember, CIGNA, Aetna, Blues, United, and others contract for managed care pricing and discounting on a global basis, not just in your state. By hiring top specialists of which there are actually only a few, they achieve superior results in less time.

Which Managed Care Contracting Skills are Outsourced?

When it comes to outsourcing, I’ve learned by experience that there are specific managed care contracting skills that leading organizations frequently delegate to people like me.

NEGOTIATION

Contract negotiation seems the most daunting to many. I suspect that the reason for this is fear of the unknown. They assume that the other side has more data. NOT TRUE!

... It also requires possession of a full stack of data, not just the sliver that pertains to a specific payor. Only you have that!

I can tell you for sure that negotiating with payers requires a deep understanding of reimbursement models, regulatory requirements, and market trends. But it also requires possession of a full stack of data, not just the sliver that pertains to a specific payor. Only you have that!

Successful organizations outsource the actual negotiation more often than their slower-growing peers because they recognize the impact it has on their financial performance. In my experience, it’s been the regulatory requirements and market trends I’m requested to translate into information that is more pertinent to them and their contracted reimbursement strategy. most often for them. No one ever handed me all their contracts like Rumpelstiltskin and said "Here you go! Have at it!"

For one thing that's not how it works, and it's not efficient. I am assigned very niche-focused selected tasks on a handful of significant contracts. As a health law paralegal and having worked with national and micro brands in 49 states and 121 other countries, I’m a trend watcher and an executor. While some consultants "talk about" what to do, I am experienced and qualified to go do it. I don’t just talk about the trend. I am asked to guide execution for that particular client. That takes “know how”; not “know about”.

SPECIFIC FINANCIAL ANALYSIS

Financial analysis, in second place, plays a crucial role in evaluating contract terms and ensuring profitability. While CFOs generally do their monthlies, they don't have time to do these critical analyses on particular contracts. Nor do their AVPs.

I analyze contracts very differently. This is most likely because I possess both the clinical and administrative background to do so. I help CFOs make informed decisions that support their financial goals. I don’t make them for them.

COMPLIANCE

Compliance management is another area where outsourcing is common. You'd be amazed at what I've discovered in terms of breach of state and federal compliance in contract terms that were assumably drafted by expensive attorneys. Not so fast! Don't ASS-U-ME there's an attorney behind many of the payer agreements you've been sent for signature.

Navigating the complex regulatory environment in healthcare requires specialized knowledge and constant vigilance, making it an ideal task for external experts.

ERISA - The SELF FUNDED EMPLOYER DOMAIN

For example, I am an expert on ERISA (working with self insured employers), patient redirection and cost containment, state regulated network management and adequacy, ERISA is under the aegis of the Department of Labor and the IRS, not any state department of insurance.

I am a master at exposing and triggering sanctions for late payments and short paid claims and negotiating them into the contracts, and know how to push payers to pay faster and more accurately -- and even to prepay for surgeries. I also set up "Patient Redirection" programs directly with employers so that they can save upwards of 70-80% of hospital charges - even the discounted contracted rates! So employers want this - even if you are not in their contracted discount network's provider list.

My track records in each of these areas speak for themselves. An "All Payer Agreement" has many concessions to standardize to state laws, I sort them out and eliminate them. Most CFOs don't recognize which ones they are and how to eliminate them. The art form is in the compelling argument that comes from the statement in the contract that states "This contract shall be governed and interpreted in accordance with state and federal laws.". I use that against them and win e-v-e-r-y t-i-m-e! {{knocking on wood here!}}

DATA ANALYTICS

Rounding out the top four is data analytics. While many organizations attempt to manage data in-house, high-performing ones outsource analytics more often to gain insights into their operations and identify opportunities for improvement.

I am never asked to analyze everything about the organization and frankly, I don't accept those assignments because I don't have the time and I shouldn't be the one doing that. Instead, I am asked to focus on niche problems and suggest solutions. Because of the clinical background that I possess, I can marry the data with operations and understand what went wrong and how to fix it. The results of my root cause analyses generally point to system inefficiencies, rather than contract language. As a former OR nurse and ASC and hospital administrator, I've been in the board rooms and a nurse on the floors and in the OR. I know where the waste is and how to neutralize and improve on it. Everything I fix drops to the bottom line without increasing payor rates which is often not possible.

But I also understand activity based costing in healthcare. It was the focus of my thesis. This enables me to find the low hanging fruit, get results, and then work on the more difficult problems afterwards.

I began this discussion with a provocative statement: successful healthcare organizations and their CFOs aren’t experts in all aspects of managed care contracting. While this is true for many individual tasks, the CFOs and executive managers often excel in strategic “management” when they have a proper roadmap. They have honed their ability to differentiate their brand, develop compelling value propositions, and handle cash. They recognize when to rely on outsourcing to provide the specialized skills needed to outperform their competitors.

Outsourcing is not only a strategic decision but a financially sound one, allowing organizations to purchase only the expertise and services they need.

I’d love to hear from you! Happy contracting!