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 Action
PROBLEM
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 onesided gains
Focus on
interests, explore
mutual gain option
Adapted from “Getting to Yes”, Fisher and Ury
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Inventing Options – Fisher and Ury
In the Real
World
In Theory
What’s wrong
2. Analysis
• Diagnosis
• Categorize
symptoms
• Suggest causes
• ID barriers,
what’s lacking
1. The Problem
• What might be
done
• Current
symptoms
What might be done
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 Experience
Contract Negotiation Steps & Timeline
Steps
1
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3
4
5
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7
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10
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Key:
w
#
Activity or Event
Week
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Next End Date of Contract
Termination Notification Requirement Date
Select Project Team & Issue Schedule
w
Contact and Schedule Client
w
Project Team Initiation Meeting: Roles, Responsibilities, Timeline
#
Compile Data, Issues
# #
Evaluate & Rank Issues & Develop Positions, Interests, BATNAs
# #
Role Play Negotiations
Executive Approval for Negotiation Goals and Strategy
Meet with Client (TRC or Client Site): Sell & Initiate Negotiations
Continue Negotiating & Finalize Contract
Executive Approval for Contract & Signature
Temporary Contract Extension When Not Reaching Agreement
Continue Negotiating and Finalize Contract, Termination or Alternative
Executive Approval for Contract & Signature
w
Sign, Deliver and Receive Counterparty Signature
w
Parties
Process Manager
Project Team
Negotiators
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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
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