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The Four Key Components of Contracting

Part Three - Establish Your Expectations


Previous: Two - Benchmark Contract Performance
Next: Four - Strategize Your Proactive Negotiation


Transcribed Video Content Below

Susan: So as we start to prepare the next step, establishing your expectations for this negotiation, by now you would have researched the contracts early. But it's time to look at what parts of the payer relationship you're in. Are you included in all the networks you want to be in with that particular payer? Maybe you're negotiating a particular contract for one product line, but you're excluded historically from another. This is the time for that to be on the table. It may be unbreakable. There might be a rationale that they're doing a narrow network with a lot of organizations and you can't possibly join, but that shouldn't be something that's not talked about, not understood, and perhaps you need the same to be created to develop around your relationship with the payer. Know which ones you’re in, which ones you’re not, why, and if you want that changed.

Same thing for products or services. Many times, I'm sure you've seen from your experience, payers are creating niche networks or carving out best-practice type scenarios where the business for one particular service is going only to a handful of providers not across the whole network. If you want to be a player in that and you’re excluded, you'll want that on the table for this negotiation. And to really understand it. Maybe you didn't qualify with volume in the past, but now you do because you've created, you know, a larger service area than you had before.

Second is modeling that complete contract as we talked about. Prepare everything you know about the current contract before your proceeding with crafting the various changes you want to have happen to the contract. It's important to know where you are and what you want before you're reacting to the payer's incoming proposal. It's always a guessing game on what serves you best. Who should propose first? It's likely as much as you want the contract to renew at different rates, so does the other party. But if you know what you want first, you're more likely to be able to accomplish that back to the roadmap. And then you're going back to that for your comparison point instead of starting wherever the other party started the negotiation. We'll talk a little bit about anchoring shortly.

Establishing your target for certain services, all things not equal. You may feel very content with certain aspects of your contract and your negotiating station is all about protecting those. Having them not be discussed because you want it to stay the same and that's fabulous. But it may be other areas where you need adjustments, maybe dramatic adjustments, to become more competitive. And it doesn't matter why it's not competitive now, it matters that you know what you want it to be. So establish where those markers are so that you don't lose sight of it in the aggregate analyses later. A contract that goes up by a nice number you can be proud of. An aggregate percentage increase overall may not have solved the problems of the organization if the services that you're planning on more volume or you're planning to be from your provider the network on get underserved in that negotiation. So you need to know what you want first.

Determining methodology changes. We've talked about it earlier. Don't be afraid to pull things out of a methodology that they lived in previously. That might be the only way to get the change you need. Everything else would stay constant except for this carve out that could be treated differently as its own unique rate. A different kind of methodology or same methodology. A different rate level. That might be the way to focus on those services without trying to demand an increase across a broader area that really wasn't necessary. And prepared for the future should also mean knowing as much as you can what you're likely to do in the future. Rates aside, you need to know what you're likely to do with your chargemaster for the near future for the contract term that you're negotiating. If you already know that figure, you should be including that in your contract modeling. The payer side will only know your history and they'll know what your contract allowance was for a chargemaster change in the past, but they won't know the way you can what's likely to be approved by the organization for the forthcoming period, so you'll want to show that. And if you're not sure, you'll want to see a range. You'll want to model with and without a possible change if the organization hasn't decided yet because those literally will result in different revenue outcomes for that contract.

Be prepared to model each iteration of the counter proposals exchanged. It seems tedious. It's time-consuming, but you won't know the value of each of those incremental moves unless you're letting the modeling system show you and point you to that discussion. And finally, be prepared to share information about your vision. If you know why you're pursuing something, and it's not, you know, tied to someone else's confidential contract but it's tied to your strategy, share that. Help them to see what you see so they can embrace it. Get the payer the talking points to take back to their own organization as a rationale that was wrapped around your financial proposal. There's got to be more than just I want an increase. I want more money. The “why” matters and it will help to create that story that lets them see it the way you see it, to see that it's the right investment because you're driving toward either correcting something that that in the past you tolerated. You've been underpaid and now it's time to catch up or to help them to bring patients where you're about to grow. But the more you can do that, the more you're forming relationships which will always make for a more sound contract. I believe now we're going to pause for some more questions.

Poll Questions

Enrique: Yeah. Thank you very much, Susan. With that, we'll pause for our second Q&A break, but first, we'll share the results of our previous in-conference poll. As a reminder, that question was:

Q: Are you using payer scorecards today to measure payer performance?

A: The results of that were 9% said yes, and they share the result with the payer: 23% said yes, but they don't share the results; and 68% said no they do not.

And now, we'll launch our final in-conference poll. The question is:

Q: How are you modeling contracts today?

A: The answers are utilizing internal staff and Excel, utilizing internal staff and decision support tools, utilizing internal staff and a contract management system, utilizing a third-party organization for negotiations and modeling, or we don't model contracts.

Q&A Session

So here are some questions for our Q&A:

Q: Should we share any information with payers about our desire to do terms before negotiations formally begin so that our time at the negotiating table can be used most effectively?

A: Susan: I think that’s wise and can actually grease the wheels in the discussion for being productive at the table.

Enrique: Very good. Here's another one.

Q: If we are negotiating with a new payer or even with a new counterpart at a new contact at the payer that we have previously contracted with, what are some tips for quickly building a good rapport to support negotiations?

A: Susan: That's a fabulous question. In all of the types of backgrounds, all of us came from somewhere. I myself have more of my experience on the payer side than the provider side. So if someone asks me, I have a stories to tell, right? I can talk about my career path. I can talk about things I've seen in my various moves across negotiation table, and it actually starts to form. I am actually revealing where I come from in my negotiation seat if I'm having that kind of discussion. Each person you work with has a background, and each person you work with probably also knows people that you know. So you start comparing. You start building a camaraderie network. Even in my case, I know these folks I ran into who literally had been my staff in the past and now they're negotiating sitting with me across the table because we're in payer-provider opposite relationships, but there's something there to build upon. So if it's there you want to, you know, acknowledge it. If it's not there, you want to form it. But I think it's much like any business relationship. You should know the people, where they come from. They will share with you more than you expected, so you'll know what kind of power position they're in as far decision making. They'll share with you what is going on in the organization that is important growth-wise. If it's a new organization entering the market, what are their goals? How are they being measured for their success? So that you're feeding into that to help them be successful while you're getting a contract that meets your needs.