Exploring successful strategies to change payer behavior

While many hospitals are operating in negative margins, payers are bringing in record revenues and profit margins. And healthcare organizations have fallen into a pattern of not fighting or simply accepting many denials, much to their financial detriment.

At Becker's Hospital Review's 2023 Annual Meeting, in a workshop sponsored by CorroHealth, Jay Ahlmer, president of Corro Clinical, and Jerilyn Morrissey, MD, chief medical officer for CorroHealth, shared insights and tactics into how to change payer behaviors to help hospitals and healthcare systems better recoup money.

Three key takeaways were:

  1. Payers are doing everything they can to increase profit margins, even as hospitals struggle. Payers' financial performance has continued to improve year after year. Meanwhile, provider organizations are struggling financially, and each year have to work harder to achieve the same level of reimbursement as the year before, particularly for Medicare Advantage programs.

    With large marketing budgets, payers are focused on capturing market share by signing on new members and are working to improve revenue per member. Payers invoke terms and initiatives such as "frictionless healthcare" and "frictionless billing." Being "frictionless" may sound great, but it is code for increasing margins by lowering administrative and medical costs, in some instances creating disadvantages for providers. "When payers think of frictionless healthcare, they think of ways to get to the end result, which is maximizing their profit margin with a lot less hassle," Dr. Morrissey said. "In many ways, the payer and provider relationship is a zero-sum game," Mr. Ahlmer said. "A substantial amount of the payer's profits come from limiting their payments for hospital services." 

  1. To change the status quo, provider organizations must learn to influence payers to change their behaviors. "Hospitals don't have to simply accept the role of victim in payers' pursuit of ever increasing profits. There are strategies and tactics that can be deployed to establish new expectations and boundaries with payers to create a more sustainable partnership," Mr. Ahlmer said.

    The payer-provider relationship needs transparency from both sides and balance among everyone's motivating factors. After that, provider organizations can benefit from taking these three steps to prepare to change payer behavior.
    • Get your house in order. "It's almost impossible to establish a payer strategy if the staff is not on board and is following the signals from the payer's influence," such as not appealing any but the most obvious denials, Mr. Ahlmer said.
    • Hold accountabilities and enforce your rights. Exercise the rights available in contracts and remember that it's ok to get a denial and push for the right status, such as inpatient versus outpatient. "What are other options beyond the individual transaction, because we can get buried in the day-to-day transactions?" Mr. Ahlmer asked.
    • Escalate payer issues to change payer behaviors. Using joint operating committees or executive escalation can help when other tactics fail or using arbitration and even lawsuits.

  1. CorroHealth has helped numerous health systems achieve sustained results in changing payer behavior. For example, three midwestern health systems in the same market were facing an unsustainable financial situation due to adverse payer relationships. Attempts to remove friction in the authorization and denials process had failed and reimbursement was significantly reduced, with no clear resolution. Optimizing overturn rates left many denials underpaid. And, prioritizing accounts receivable days and write-offs allowed payers to issue denials and not be held accountable.

    Working with CorroHealth, these health systems developed a strategy that included collaborating, measuring their efforts and partnering with local leaders to influence change. Ultimately, one system, with more aggressive appeals, was able to increase their net inpatient payment rate from a low of 50 percent to 72 percent. That led to payment improvement of $16 million for Medicare Advantage patients.

Health systems are facing tighter-than-ever financial dynamics. And payers have a great deal of power. But with the right strategy and a knowledgeable partner, health systems can retrain payers and improve their fortunes, especially to denials.

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