Health systems are entering payer negotiations with a sharper edge — and far more data.
Amid mounting frustration over stagnant reimbursement rates, providers are taking more aggressive contracting strategies, pursuing multi-year rate increases and leaning heavily on price transparency tools to make their case. With new analytics capabilities and publicly available data showing what health plans are paying competitors, hospitals and physician groups are shifting from a defensive posture to one grounded in evidence and value.
This evolving strategy reflects a broader transformation in the payer-provider dynamic. Rather than relying on anecdotal evidence or historical benchmarks, providers now have the data to prove when they’re undervalued — and to demand parity when they’re providing care more efficiently, at a higher quality or in lower-cost settings. As health systems reduce inpatient stays, cut readmissions and invest in technology and patient experience, they’re pushing payers to recognize and reimburse that value accordingly.
But with health plans facing their own cost pressures, many negotiations are reaching a breaking point — and in some cases, going to term or ending in contract terminations. The era of vague rate comparisons is over. Health systems that once struggled to prove their position now have the tools to hold payers accountable — and they’re using them.
Ken Steele, partner at ECG Management Consultants, recently joined the “Becker’s Healthcare Podcast” to share how these trends are shaping negotiations and driving new strategies in payer-provider contracting.
Editor’s note: This is an excerpt from an episode of the Becker’s Healthcare Podcast. Responses are lightly edited for length and clarity.
Question: How have health systems’ approach to payer negotiations changed? Are there any new contracting strategies they are exploring or implementing?
Ken Steele: We’re seeing growing frustration from providers due to the lack of meaningful rate increases. As a result, we’re seeing more aggressive rate proposals for two- or three-year contracts. Providers are also being more vocal about their value proposition. Often, payers don’t fully recognize the quality of care hospitals and physicians provide or the cost savings achieved when care shifts from hospital-based settings to outpatient facilities. Providers are pushing harder to highlight these efficiencies and encourage collaboration with payers.
Hospitals are also becoming more efficient, reducing inpatient stays and readmissions — actions that benefit payers but don’t always translate to financial gains for providers unless value-based contracts are in place. Another major shift is in data transparency. Previously, payers asserted during the negotiations that providers were above market rates, but there was little or no data to verify it. Now, with publicly available price transparency data, additional data sources and analytics tools, hospitals and physician groups can accurately compare their rates to competitors. Many organizations are now using this data to justify rate increases, demonstrating that they’re delivering greater value than what they’re being paid for.
This transparency has changed the negotiation landscape. Health plans can no longer claim providers are above market without evidence, and that shift improves providers’ chances of securing fairer rates. However, friction between payers and providers is likely to persist. Hospitals, health systems and physician groups must operate with a margin to reinvest in technology, staffing and other critical areas. When rate increases aren’t sufficient, some providers have no choice but to terminate contracts.
Q: How important is having robust data and analytics when engaging in payer negotiations? Can you give us a sense of what that data entails and the kind of impact it can have at the negotiation table?
KS: Robust data analytics are now essential for negotiations with payers. In the past, payers had better analytics than hospitals and health systems, but that’s changed. Providers have caught up, and in some cases, they now have better insights than payers. Typically, we analyze 12 months of payer data — across inpatient, outpatient, ER, lab, imaging and more — then compare those payments with publicly available price transparency data. This allows us to determine what payers are reimbursing competitors.
If our data shows that a hospital or physician group is receiving lower rates than competitors despite providing comparable or better services, that becomes a key point in negotiations. We present this data to payers, demonstrating the need for fairer reimbursement to ensure continued investment in quality care, technology and patient experience. Without this level of insight, providers are at a disadvantage. In today’s landscape, data is power.
