NEGOTIATING PROVIDER CONTRACTS IN A HEALTH REFORM ENVIRONMENT

July 2, 2013

William J. TenHoor

AHP Healthcare Solutions

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Objective

• To review the fundamentals of becoming a better negotiator and contracting more advantageously for your organization with managed care organizations and other payers.

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Understand Your Markets• Good performance compels expertise• Understanding markets, their payers, parity and reform• The Markets

• Public Market: Federal MH and SUD Block Grants, State and Local Government, Medicaid, Medicare, TriCare, HRSA

• Commercial Market:, Self Insured Employers (Large Group, Small Group) Individual, MCO and Traditional Insurers, HMOs, MBHOs

• Self-Pay Market

• Markets versus Products (Health Plans)

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Parity and Reform Environment• Both parity and health reform impact behavioral health

• ‘08 Parity law (MHPAEA) restrains the restrainers in group insurance products – potent but requires continuing monitoring and enforcement

• Evolution from grants to insurance and exchanges• The many parties in a health insurance contract • The “ten essential health benefits” (MH/SUD, chronic disease mgnt.)• The exchanges – non-stigmatized, non-exclusionary individual purchasing• Insurers become retail “health solutions companies”

• Growth in commercial and public coverage (est. 30 M by 2014)• Medicaid expansion, Exchanges

• New products lines and provider consolidation• New delivery entities incorporating BH – ACOs, PCMH, FQHCs

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Contracting• Relevance

• Growing level of commerce in health care will be insurance-based• Insurance is based on agreements (contracts) between 3 parties:

payer, provider, subscriber• Can also include intermediaries (MBHO)

• Many types of contracts• MOU, MOA, verbal only• Many applications in many industries

• health care, government procurement

• Focus: provider-insurer/MCO/ACO contracts – new/renewal• End point of a “sale”

• Not about selling but about building/assuring trust and rapport

• Note: This Is not legal advice

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Preliminaries• Contracts represent large portion of asset value of a

service business, deserving commensurate attention• Contracts express policy environment

• 2010 Aetna contract modification• From medical appropriateness to medical necessity

• Key aspects of a contract• Memorializes intention to create a legal obligation• Mutual assent• Involves offer and acceptance

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Managed Care Contract Basics• Operationalizes behavioral expectations regarding the

delivery of care to members• Requires recognition of and understanding about who the

other party is and what their motivations are:• MBHO with a full risk contract with an insurer• Insurer administering a Medicare Advantage PPO• Market (who are your likely customers?)

• Commercial, Medicaid and/or CHIP, TriCare

• Review higher level contract into which your contract fits• Medicaid – MCO• BCBS - MBHO• Contracts (Medicaid especially) generally available, given

transparency & FOIA

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Many Important Components• Definitions – ensuring clarity• Scope of covered (and non-covered) services

• Full capabilities of the provider, such as prevention/wellness• Scope of license of providers

• Covered products (both Medicaid and commercial?)• Compensation and payment processing• Term, termination, post-termination, severability

• New AQCs are 3-5 year contracts

• UR/UM, QA, clinical coordination practices, guidelines and standards (medical necessity)

• Privacy, reporting and recordkeeping• Member eligibility, enrollment & disenrollment

• Procedures – negotiate greater MCO responsibility• Verification (and risk of error) and effective date

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Entire Agreement• Means everything in it but only what’s in it• Watch out for “incorporate by reference”

• Get copies (such as the “provider manual”)• Get prior approval for any future change, amendment or

modification• Specify hierarchy of attachments for conflicts

• Watch out for what’s not said• Other party’s agreements imposed on you

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Compensation Provisions

• Price is not everything• Understand amount of payment, when and how

• All arrangements• FFS to full risk - continuum• Tie payment to population, products, services covered• Define timely payment, late payment penalty• Third party payment collections, obligations, penalties

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Risk Arrangements

• Rate setting only for what you can control• Rate fairness - using actuaries, accountants• Payment calculation basis – changes to• Assignment/enrollment procedure• Sufficient numbers and adverse selection• MCO Withholds

• Rationale• Lower is better• Method and timing of distribution

• Stop loss insurance

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Negotiation

• The process of reaching agreement that meets your interests better than your best “no deal” option

• “The art of letting the other party have your way” Daniele Vare

Good Deal No Deal Bad Deal

Many FACTORS affect your interest in and the shape of a deal, such as price, timing, scope, operational considerations, value perceptions, exclusivity, competitor impacts, territory/place, etc.

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“Principled Negotiation”• Fisher’s & Ury’s Win-Win: Getting to Yes• Popular, fundamental, simplistic

• Separate the people from the problem• Focus on interests, not positions• Generate options before deciding what to do• Require objective criteria/standards for achieving results

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Principled Negotiation in ActionPROBLEM SOLUTION

Posture Soft Hard Principled

Participants Friends Adversaries Problem solvers

Agreement Agreement Victory Wise outcome, efficient, amicable

Concessions Make to cultivate relationship

Demand as condition of relationship

Separate people from the problem

People/Problem Soft on both Hard on both Soft on people, hard on problem

Attitude Trust others, make offers

Mistrust others, make threats

Neutral on trust, explore interests

Positions Change easily, accept one-sided losses

Dig in, fortify, demand one- sided gains

Focus on interests, explore mutual gain option

Adapted from “Getting to Yes”, Fisher and Ury

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Inventing Options – Fisher and UryWhat’s wrong What might be done

In T

heory

In t

he R

eal

Worl

d

1. The Problem• What might be

done• Current

symptoms

2. Analysis• Diagnosis• Categorize

symptoms• Suggest causes• ID barriers,

what’s lacking

3. Approaches• Strategies• Theoretical

cures• Broad ideas

about what might be done

4. Action Ideas• Quantify, qualify• Specific steps to

deal with the problem

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Other Suggestions• Meeting in person – don’t text• Don’t teleconference• Manage the physical space

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More Recent Emphasis• Expand and divide the pie by productively managing the

negotiation• Cooperative moves to create value

• Example – As part of contract renewal, offer an EAP to a payer who does not have one, but could sell it to the employers the payer services

• Competitive moves to claim value• Negotiating an acceptable price for both parties

• Game theory and non-rational participants

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Common Problems• Neglecting the other party’s problems and interests

• Relies fundamentally on depersonalized assessment• Understanding/addressing the other party is the path toward

solving your own problem

• Prepare by role playing and role reversing

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Common Problems

• Neglecting BATNAs• Best alternative to a negotiated deal• Protecting yourself & making the most of your assets• The insecurity of an unknown BATNA• Each side has their own – know both

• Examples• Walking away, working more closely with a competitor,

creating a stalemate and prolonging it, going to court• The depreciated asset sale – invoking competitors

• A good BATNA is potent bargaining tool

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Common Problems

• Neglecting to convey your offerings and strengths and build relationships• People do business with those they know• Don’t assume purchasers know who you are• Many health insurers still do not understand behavioral health –

worse, they misunderstand

• Objective criteria are lacking. Instead,• By issue, jointly search for measurable objective criteria• Use reason to determine most appropriate, how to apply• Do not yield to pressure, only to principle

• Precedent, reciprocity, tradition, equal treatment, moral standards, etc.

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Common Problems

• Letting price override all other issues• Letting position drive out interests• Searching too hard for common ground

• Differences are sources of value as well as commonality – the difference inventory

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Negotiation Business Process

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Plan and/or Simulate the ExperienceContract Negotiation Steps & TimelineSteps Activity or Event 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Next End Date of ContractTermination Notification Requirement Date

1 Select Project Team & Issue Schedule w2 Contact and Schedule Client w3 Project Team Initiation Meeting: Roles, Responsibilities, Timeline #4 Compile Data, Issues # #5 Evaluate & Rank Issues & Develop Positions, Interests, BATNAs # #6 Role Play Negotiations 7 Executive Approval for Negotiation Goals and Strategy8 Meet with Client (TRC or Client Site): Sell & Initiate Negotiations 9 Continue Negotiating & Finalize Contract 10 Executive Approval for Contract & Signature 11 Temporary Contract Extension When Not Reaching Agreement 12 Continue Negotiating and Finalize Contract, Termination or Alternative 13 Executive Approval for Contract & Signature w14 Sign, Deliver and Receive Counterparty Signature w

Key: Partiesw Process Manager# Project Team Negotiators

Week

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Conclusion• We hope you leave this session

• With a better understanding of important elements involved in negotiating generally and in concluding the negotiation of more rewarding managed care contracts, and as a result, increasing the value of your organization

• Good luck and thanks for your participation.

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Questions & Discussion

Bill TenHoor

bill@tenhoor.com

© 2012 by Advocates for Human Potential – Healthcare Solutions. All rights reserved. No part of this document may be reproduced or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without prior written permission of AHP.