How The Payer-Provider Relationship Has Evolved In a COVID-19 Landscape

The COVID-19 pandemic of 2020 has impacted most (if not all) businesses around the world, in various ways. For healthcare especially, the ongoing pandemic and its aftermath have changed the ways that payers and providers do business with and interact with each other. 

But how?

Let’s take a close look at some of the most immediate impacts of COVID-19 on payer-provider relationships, including increases to volatility in patients’ insurance coverage, a lower volume of patients (especially for inessential treatments), and skewed performance metrics. 

From there, let’s discuss the best ways to account for these challenges moving forward, such as diversifying services, revisiting contracts, and working with payers to provide the best patient outcomes.

Before any of that, though, let’s establish how things were before the pandemic.

Payer-Provider Relationship Baseline: How Things Were Before COVID-19

Payers and providers worked together in relative harmony before the pandemic. Both sides benefited from factors like steady but manageable increases to patient flow, widespread and near-universal insurance coverage, and commensurate payments for service. Smooth sailing.

The landscape in the healthcare system was and continues to be characterized by a “value-based purchasing” model, also known as “pay for performance.” A few key qualities of the model are ripe for COVID impacts:

• Financial incentives are offered to healthcare providers for meeting performance goals
• Errors and poor outcomes are tied to penalties, often shared by providers and payers
• Metrics tend to be short-term, as long-term performance is harder to measure

These factors work together to create an environment where a chaotic influx that generates numerous short-term errors and inefficiencies can be damaging to all parties.

Immediate Impacts of COVID-19 on Payer-Provider Relationships

The onset of COVID-19 in the US and abroad has had a wide variety of effects on businesses both inside and outside of the healthcare industry. Locations with higher population densities have dealt with waves of cases, which has led to shortages of staff and supplies. Delays across many supply chains have held up the production and distribution of all needed goods and services.

However, these primary effects of the pandemic are not necessarily the most important.

A recent whitepaper co-authored by the advisory teams at Jones Day and BDO charts the more subtle impacts COVID-19 has had on the industry and payer-provider relationships in particular.¹

Short-Term Impact #1: Volatility in Payment Plan Coverages for Patients

The COVID-19 pandemic has led to drastic changes to the employment landscape across the country. Initial closures and work-from-home mandates have led to layoffs and unemployment, peaking at nearly 15% in April of 2020 before reverting to the still-high 6.7% in December 2020.²

Impacts on coverage, and by extension payer-provider relationships, include the following:

• Many who lost their jobs also lost their health insurance coverage, short or long term
• Other changes to employment status may also have caused lapses or losses of coverage
• Some patients may have sustained several changes to coverage within one calendar year

All of these factors combine to create instability in relationships between patients, payers, and healthcare providers. Retroactive adjustments to coverage, or continuation of services no longer covered, in addition to frequent changes to payment sources, all complicate these relationships.

Short-Term Impact #2: Lower Patient Volume for Inessential Treatments

Somewhat counter-intuitively, another major impact of the COVID-19 pandemic has been a general reduction in the volume and diversity of services provided. These have caused a decline in the revenue hospitals, and other providers can expect—both overall and per treatment.

The main reason that providers have seen a decrease in overall volume is that the prevalence and danger of COVID-19 has led to pausing, rescheduling, or outright cancellation of many kinds of inessential or elective operations and procedures. These include but are not limited to most cosmetic and outpatient services. Providers have felt this impact.

Any catalyst that reduces revenue streams is likely to strain relationships between providers and payers. This is especially true given the “value based care” model of patient care and these relationships in healthcare.

Short-Term Impact #3: Skewed Performance and Performance Models 

Harkening back to the “value-based” or “pay for performance” model detailed above, one last impact of COVID-19 on payer-provider collaboration is the damage it’s done to short-term performance outcomes and providers’ ability to systematically improve them over time.

The influx of COVID-19 patients has coincided with a decrease in other baseline clientele—as noted above. In addition to sidetracking treatment for these individuals, another impact of this is that providers are inundated with COVID cases, likely to produce bad outcomes, while also barred from treating many cases that are more predictable or likely to produce good outcomes.

Financially, this means racking up penalties while not being able to accumulate incentives. As these costs are often shared by payers and providers, they can easily strain their relationships.

Strengthening Payer-Provider Relationships, After COVID-19 and Beyond

Adapting to these main impacts and the whole new landscape of the healthcare industry will be a long process. It will require buy-in from both the payer and provider sides. To that effect, there are two main categories of approaches providers can take to shore up their payer relationships:

• Focusing on internal optimization, such as diversifying services and reducing all risks
• Focusing on external factors, such as re-negotiating contracts and payer collaboration

Given the still-evolving nature of the pandemic and its long-term effects, it is crucial to begin these processes as soon as possible and prepare for sustained adaptation over the long haul. 

Diversify Services and Minimize Future Risks Opened up by COVID-19

The first step is looking inward. Steps providers can take to reduce the cost burdens of COVID-19 from the impacts above will in turn help to improve their relationships with payers. These steps include broadening the scope of services provided and preparing for increases to volatility risks. See our blog for more tips on how to grow your practice. 

With respect to the former, the pandemic has highlighted the strengths of telehealth and remote based services in the event of emergencies. Providers should look to take full advantage of increased infrastructure and societal adoption of remote platforms like Zoom. Patients who were not previously able or willing to meet remotely might be now, which can lead to cost savings for both providers and patients. These can create greater performance outcomes.

With respect to the latter, providers also need to account for all risks associated with the new, remote “normal.” Aside from volatility, these also include miscommunications and heightened vulnerabilities leading to cybercrime. Patching these gaps is the key to successful relationships.

Negotiate and Collaborate with Payers to Optimize Payment Solutions

Finally, after optimizing their internal operations for the post-COVID future, providers will also need to revisit their relationships with existing payers and bolster all new relationships with them and other strategic partners. This means preparing for potentially difficult negotiations.

Regardless of the difficulty, collaborating with your payers is essential for all parties’ success.

Working with a payer contracting service provider like PayrHealth can take much of the stress out of these dealings with payers. We offer three distinct approaches to optimize relationships:

• Signing better contracts with powerful data and analytics and the confidence to navigate a “no.”

• Negotiating higher rates by understanding your position and the right questions to ask.
• Expanding your team and its flexibility to get the best workers but pay affordable rates.

Within these key strategic areas, your provider company will better position itself to negotiate with existing payers, as well as any new ones you hope to add in the future. To see how simple and effective the PayrHealth approach can be, contact us today! We’re happy to help you grow. Check out our blog for more information on this topic. From price transparency to payment collections, we are here to help!

Sources: 

1. Jones Day. Health Care on the Other Side: Changing Payer-Provider Relationships in a Post-COVID-19 Landscape.  https://www.jonesday.com/en/insights/2020/05/health-care-on-the-other-side-changing-payerprovider-relationships-in-a-postcovid19-landscape
2. Congressional Research Service. Unemployment Rates During the COVID-19 Pandemic: In Brief. https://fas.org/sgp/crs/misc/R46554.pdf
3. American Hospital Association (AHA) / 3M. Payer-Provider Collaboration: Fostering stronger relationships to achieve high-quality, affordable care. 
4.  https://www.aha.org/system/files/media/file/2020/10/3M_PayerProviderCollab_Oct2020.pdf
5. BDO. Health Care on the Other Side: Changing Payer-Provider Relationships in a Post-COVID-19 Landscape.  https://www.bdo.com/insights/industries/healthcare/healthcare-on-the-other-side-changing-payer-provid
6. Healthleaders Media. Navigating the Payer-Provider Relationship: 4 Lessons. https://www.healthleadersmedia.com/finance/navigating-payer-provider-relationship-4-lessons
7. Healthpayer Intelligence. Strategies to Improve Payer-Provider Relationship, Data Quality. https://healthpayerintelligence.com/news/strategies-to-improve-payer-provider-relationship-data-quality