Payor Contracting

Key Challenges of Managed Care Contracting

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The rise of value-based contracting within the managed care healthcare delivery system has fundamentally shifted the relationship between managed care organizations (MCOs) and providers. What is a managed care organization? An MCO works with healthcare providers to lower the cost of services for member patients. Understanding the challenges of managed care can help a provider, or physician, develop a strategic plan that helps them not only adapt to a managed care environment, but thrive within one.

#1. Communicating Value

The first of the challenges of managed care can be seen when communicating the value to payors. Transitioning from a fee-for-service reimbursement model to a value-based care model will require providers to understand how to communicate their value to a payor both during contract negotiations and beyond. What is value within a value-based care system? Value is measured by assessing actual health outcomes achieved versus the money spent to achieve those outcomes. Higher quality patient care and better health outcomes equal greater value within this framework. Without a large amount of data on your processes, products, and patients, it can be difficult to quantify exactly how you offer value to a payor network. Communicating that effectively during contract negotiations with ? managed care organization can be an even greater hurdle. Yet, in order to thrive under a managed-care health plan model healthcare provider will need to shift their thinking towards achieving better value by delivering higher quality care more efficiently.

#2. Understanding Your Place In the Market

While competition is nothing new, under a value-based care regime, the way you define competition and understand your place in the market changes. While it can be challenging, clearly viewing your place in the local or regional market and incorporating that information into your strategic decision-making is essential for success under a managed care plan. Many providers struggle to gain access to payor networks by not understanding what a payor, or enrollee, is looking for in a health plan, what the provider offers, and how the provider compares to other competitors. Put another way, under a managed care plan, it is important to understand not only the value you can offer an enrollee, but also what your competitors offer and how they compare.

#3. Increasing Visibility

A prominent challenge that is introduced by value-based contracting is that a physician needs to enhance their visibility into their processes, workflows, and patient outcomes in order to succeed. Value-based contracting requires a primary care provider to understand the cost of delivering high-quality care per patient to gain insights into how to improve that metric and how to maintain profitability. This will allow you to go into negotiations with managed care organizations and have a solid strategy along with a desired outcome to improve your services. Increasing visibility isn't simply about gathering more information. It's about gathering that information to produce actionable insights that providers can use to generate process improvements, increase efficiency, and prehealth outcomes, and deliver higher quality care. All of this speaks to the fact that data gathering and strategic decision-making cannot occur in silos, but rather must be integrated in order for a provider to thrive. Within a managed care program framework, providers must be nimble and responsive, and truly understand what is helping them achieve their strategic goals and what isn't.

Provider credentialing

#4. Building Relationships

Within the managed care healthcare delivery model, providers and payors are often involved in a risk-sharing relationship. Whereas, under a fee-for-service reimbursement model, payors generally carried the risks of rising healthcare costs. Under the managed care system, the risk for rising healthcare costs is distributed between provider and payor. For example, some Medicare managed care contracts feature capitation reimbursement, where the provider is reimbursed a defined amount per covered patient they treat per month. Under this type of agreement, if the healthcare costs of beneficiaries for the month exceed the capitation payment, then the provider must cover the difference. In order to excel in this type of relationship, it's important for providers and beneficiaries to work together to achieve the common goal of delivering high-quality patient care at a lower cost. Though in the not-to-distant past the relationship between provider and payor was often difficult and contentious. Success under the managed care model is better achieved through collaboration than contestation.

#5. Unified Contract Management

Creating a centralized, unified contract management system is one of the most challenging aspects facing providers entering the world of managed care contracting. Given the financial, operational, and legal implications of managed care contracts, automating contract terms and managing the requirements of a multitude of contracts has moved beyond the capabilities of manual processes. In order to achieve success within the managed care model, providers will see an increasing need to implement a centralized managed care contracting system. A unified contract management solution offers some key advantages, including:

  • Improved accuracy in payments
  • Reduced contract risks
  • Full-view audit tracking
  • The ability to develop more complex payor contracts
  • Enhance managed care contract negotiations.

Closing Thoughts

Though the managed care healthcare delivery model offers the promise of higher-quality care at a lower payment rate, those results are contingent on providers being able to achieve those outcomes. Doing so requires adapting to the managed care model. Under value-based reimbursement models, providers must enhance their visibility into their patients, processes, and outcomes to drive innovation and support growth. Managed care has also increased the need to unify contract management processes across value-based contracts. Automating processes through a centralized contract management solution offers several key advantages, most notably limiting contract risks. Building new relationships or strengthening existing ones between MCOs and providers is crucial to achieving the promises of a value-based managed care healthcare delivery system. Our team at PayrHealth can help. Whether you are negotiating managed care contracts that are new or renegotiating existing contracts, relationships are the backbone of the contract negotiation process. Our team at PayrHealth has worked for decades to help providers with negotiating managed care contracts with terms that are more favorable. We understand the importance of effectively communicating value within a value-based care system, and can help your team better communicate your value to payors during negotiations. Our team at PayrHealth is standing by to help assist you with your managed care contracting needs. To learn more, contact us today!


Value-Based Care Modeling Drives Meteoric Demand for Contract Management Tools per Black Book's CFO Survey:

Negotiating effective contracts requires careful planning and a willingness to collaborate.

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