1 Negotiating Provider Contracts in a Health Reform Environment Webinar – July 31, 2013 William J (Bill) TenHoor AHP Healthcare Solutions Initially developed and presented 6/19/13 by Patrick Gauthier 2 Objective • To learn fundamental aspects of contracting with managed care organizations and other payers and better understand key aspects of negotiation 3 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) 4 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 5 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 6 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 7 What the MCO Wants • Business as Usual • What this means • Call to provider relations • Submission of application, background information • Credentialing process • Signing the standard contract without questions or modification 8 What a Provider Typically Wants (but rarely asks for) • Ability to provide good service to MCO members • Opportunity to practice with integrity and relative clinical independence • Ability to cover cost of service plus some margin • A good client to do business with – fair dealings • Other goals? 9 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 10 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 11 Entire Agreement • Means everything in it but only what’s in it • Watch out for “incorporate by reference” • Get/review copies of each (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 (MCO’s) agreements may be imposed on you 12 Compensation Provisions • Price is not everything • Understand amount of payment, for what, 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 13 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 14 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. 15 “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 16 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 17 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 18 Other Suggestions • Meeting in person – don’t text • Don’t teleconference • Manage the physical space 19 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 20 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 21 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 22 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. 23 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 24 Negotiation Business Process 25 Plan and/or Simulate the Experience Contract Negotiation Steps & Timeline Steps 1 2 3 4 5 6 7 8 9 10 11 12 13 14 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 26 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. 27 Questions & Discussion Bill TenHoor bill@tenhoor.com © 2012 by Advocates for Human Potential – Healthcare Solutions. 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