In the latest Summit Series, Chief Communications Officer Ryan Colaianni interviewed Shawn Fitzgibbon, Managing Director and Payor/Provider Practice Lead at BDC Advisors. Bringing more than 30 years’ experiences to July’s chat, Fitzgibbon led the conversation on contract portfolio management, providing great insight on how to navigate a continuously changing – and increasingly uncompetitive – marketplace.

During the session, Fitzgibbon shared his thoughts on how to best address and/or avoid the market share advantage, especially in an era with increasing payor leverage that challenges the playing field for providers. When just one to three payors are dominant in a market, it creates dependency on behalf of providers. The ultimate goal should be to increase rate parity among payors, so that no single one has too much premium pricing power.

The most important piece of advice? Playing the long game. Fitzgibbon urges providers to think long-term, especially when it comes to promoting a competitive marketplace. In his view, it’s best to evaluate your system’s contract portfolio as a whole, not just as individual contracts, and aim for meaningful, incremental progress over time – like from three to five years – and not just in the short term.

1/ How should providers navigate the 3–5-year contract cycle?

Given the need to course correct and navigate constant challenges, like rates and administrative burdens, health systems can, and should, approach immediate negotiations through a collaborative approach that focuses more on long-term success.

Whether opting for a three-year contract or a five-year deal, negotiating requires a delicate balance that respects fluctuating market conditions, rate trends, and inflation. Healthcare is no stranger to the unknowns of the future, and it’s imperative to emphasize that going to the table earlier rather than later is the way to avoid falling prey to the “short negotiation” times that payors often use to their advantage. Insist on conversations early to give enough time to reach agreeable rates and terms.

Let’s examine differences between a 3-year contract and a 5-year contract. A 3-year, for example, allows for more frequent adjustments to the changing market conditions we’re referencing, but it requires more work. A 5-year, though, relies on more predictable market conditions, but allows for more time between negotiating cycles. Don’t worry; we’ll touch more on negotiation timing below!

2/ How can providers’ hesitancy be minimized?

Providers are increasingly hesitant to participate in government programs like Medicare Advantage; as of 2023, only about 1 percent have formally opted out. But could this number rise? Possibly, says Fitzgibbon.

Yields are the biggest driver of provider participation in Medicare Advantage, but reduced yields are making systems rethink their place in the market. Don’t rely on it as a negotiation point; instead focusing on penetration rate and seeing if there is an opportunity to improve those yields without pulling out of the market entirely.

3/ How can payors and providers best align on value?

The most successful negotiations avoid being distracted by payor tactics and keep the end result in mind. Collaboration is key irrespective of each party’s goals. Ensuring that all involved can agree on what can be done for all parties involved to benefit, then building on top of that success.

Importantly, avoid directly addressing parity at the negotiating table, as it’s not a shared goal payors value. Instead, focus on the gaps between revenue, inflation trend and operating costs and, emphasize that gap closure is high priority.

4/ When’s the right time to negotiate?

Time is of the essence with negotiation, but not everyone operates that way. Conventional wisdom says starting about 12-18 months in advance is the best method, but many plans can delay sharing a definitive proposal until about 30 to 60 days prior.

While there’s no real “magic bullet” to keep negotiations from approaching the 11^th hour, preparation is the best way to go about it. Maintaining regular contact with stakeholders well ahead of the non-renewal notice and understanding the potential impacts to access to care allows for a better cadence for negotiations. Set a rhythm for conversations that can be maintained. Fitzgibbon’s personal preference: every two weeks transitioning to once a month.

5/ How can we get payors to address the administrative burden?

What – if any – language could be used to get payors to effectively address administrative burden challenges?

“Knowing what the rules are,” says Fitzgibbon. Knowledge about what systems and policies used, for example, where prior authorization lists are published, is key to incorporating contract language that addresses operational challenges. It’s also critical to include material change and ”make whole” language, which allows providers to review and adjust for impact, even outside of normal negotiation periods.

Frank and honest conversations about navigating a complex and ever-changing healthcare system – like Summit Series – are more important than ever as healthcare’s players work to improve healthcare for all. Join our next conversation on August 22 with Paul Keckley, healthcare policy analyst and revered industry expert.