Managed Care Contracting

Managed care contracting has become increasingly complex as the transition from ‘fee-for-service’ to ‘pay-for-performance’ type models takes hold. Now, a successful negotiating strategy with payers must take into consideration shared risk and shared savings. This has caused providers and payers, who historically have had somewhat adversarial relationships, to start working together collaboratively to find ways to improve patient outcomes and reduce costs. Those practices that have the ability to demonstrate this capability will likely have the greatest success in negotiating their managed care contracts, as well as the greatest likelihood of increasing, or at least, maintaining their current levels of income.

Before a managed care negotiating strategy can be developed, a practice needs to understand their payer mix, their in-network versus out-of-network mix and the top procedures they perform. They need to know how frequently referrals are being made to specialists and/or ancillary service providers, such as MRI facilities and labs. Having all of this information readily available will help a practice better understand where savings might be realized; savings that can potentially be shared between the practice and payers, if negotiated into the managed care contract.

As the world of “population health management” slowly becomes a reality, size does seem to matter when practices negotiate with payers. For this reason, having connections with other providers in a practice’s catchment area is important. Smaller practices will have a greater likelihood of success in their managed care contracting if they are working with other specialists and referring physicians, as well as key physicians and/or executives from local hospital systems. Having discussions at local medical society meetings as to how clinical information might be aggregated on a common reporting platform, which can be shared with payers (similar to an IPA), might give smaller practices a stronger negotiating position.

If you would like to further discuss the process of evaluating your payer contracts and developing a more comprehensive managed care contracting strategy, please contact one of Gettry Marcus’ healthcare experts.