Hospital financial 'never events' need attention

There have been plenty of contentious payer negotiations in the last year as hospitals request increased pay rates to match inflation and cover services for the community while insurers seek slower rate growth after the pandemic.

Jim Wilson, Mayo Clinic Health System's CFO, joined the "Becker's Healthcare Podcast" to talk about payer relations and share insight into his approach to these contentious negotiations.

"One of the core things that we've forgotten about, or that we've wanted to selectively forget about, is the fact that we had COVID and we got a lot of relief from payers. A lot of payers had provided a little bit of a bump in rates from time to time, and we saw these complex cases come through our system," said Mr. Wilson. "But as I always like to say, there is no such thing as a free lunch."

Now that COVID-19 cases have slowed and hospitalizations have become more manageable for health systems, negotiations between payers and providers have become more contentious as insurance companies aim to recoup some of the relief provided during the pandemic. But those efforts put health systems in a hard spot because inflation, labor shortages and needed technology purchases have increased expenses.

Mr. Wilson is responding to the current payer climate pragmatically.

"The best way to win any argument is with fact," he said. "I think data-driven analysis, having a good representative idea of what the argument and the issue that you're trying to solve for is, and having the data to back up your position helps provide clarity of the right thing to do in this particular situation."

Denials are one area many healthcare providers see becoming more challenging. Mr. Wilson takes an inquisitive approach when examining the system's denials, wondering why a treatment was denied, and strategizing around how to solve for each situation.

Mr. Wilson also said he's seeing a significant increase in the number of denials and slowdown in pay rates from commercial payers. Mayo's physician practices are experiencing more front-end denials and aim to change practice behavior to avoid them.

"Once we get those denials, we've essentially worked for free, which is not necessarily a good thing when you wrap around all of the other cost constraints that we have with just being able to provide staff and being able to provide physician services for the day," said Mr. Wilson.

Once a front end denial occurs, there isn't much the health system can do to appeal on the backside, he said. Prior authorizations have also ticked up and need approval before moving forward with a treatment.

"Those kinds of things that are, as I call them in hospital speak, my 'never events' on the financial side," Mr. Wilson said. "We should strive never to have a situation where we have no authorization or strive to have a position where we are never not getting an ANB where one is required. The cost of care, the cost of some of these pharmaceutical agents that are now being done in practice settings, is simply too great for us to ignore the requirements that go along adjudicating those and acquiring those types of drugs."

There is also complexity to live out Mayo's mantra of "patients come first" and paying attention to payer policies. Clinicians and caregivers want to provide the best patient care possible, which sometimes leads to denials or unpaid care.

"We do everything we can to provide the greatest good to our patients. The time and type of care that we need every day, that's what we pay attention to, and oftentimes paying attention to that, the greatest need for our patients, sometimes we get hit in the face on the backend by maybe not paying as close of attention to the things that are very important on the fiscal side," said Mr. Wilson.

It's a tough balance for hospitals overall to strike, especially in today's tough economic environment.

"By doing the right thing, sometimes we are penalized for it on the backside," said Mr. Wilson. "So it's that reconciliation or adjudication of how do we balance the two. I think by and large, and along with the rest of the provider community, we strive to do the right thing, and I do think also in the insurance community, they want to do the right thing with the right kind of cost containment too that is absolutely needed. Sometimes we find ourselves out of whack a bit with these pieces in the middle, and we end up oftentimes on a really stretched thin margins on the hospital side of the world, adding a lot more burden on the cost to collect by chasing down some of these denials that maybe ultimately we shouldn't have."

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