Why disputes between providers and payers are getting worse

The key driver for providers taking a more hardline stance in negotiations is inflation, Hudson reports. In 2021, the U.S. inflation rate spiked at 7% and now sits between 3% and 4% — a fluctuation that's made it more difficult for providers to predict their future costs, especially when negotiating multiyear agreements.

Chicago-based CommonSpirit Health said earlier this month that it intends to take a "firmer stance" in contract negotiations and ensure payers absorb their share of inflation.

In addition, providers are facing increased denials, which is creating more administrative burdens and slowing down the payment process, Hudson reports.

A 2022 survey by the American Medical Association found that physician practices spend around 14 hours each week on prior authorization requests, completing 45 requests per week per physician on average.

Brent Estes, chief managed care officer at Mount Sinai Health System, said providers don't have any other choice but to fight back, adding that inpatient claims denials have doubled in the last three years at Mount Sinai.

"That takes a significant amount of the revenue that we negotiated as part of our deal off the table, which is just exacerbating people's financial pressures," Estes said.

However, payers argue that providers are being paid more than enough.

The trade association AHIP in a statement said that many providers have more leverage to demand above-market reimbursement rates.

"Coupled with required public disclosures of rates paid to other providers, corporate-owned provider groups and hospitals have seized an opportunity to extract more money from health plans and employers," AHIP said. "More than ever, it is essential to have health insurers negotiating on behalf of employers and consumers to make health care more affordable."

"You go through periods where both the plans and the hospitals have a good sense of what they want or what to expect, and then something upsets that, and we had [a] pretty profound event," said Paul Ginsburg, senior fellow at the USC Schaeffer Center. "I think both sides would agree that rate increases need to be higher. It's just a matter of not agreeing on how much higher."

Providers cancel contracts

If negotiations fail, some providers will cancel contracts, Hudson reports, including Medicare Advantage (MA) contracts.

Great Plains Health, a 116-bed regional medical center in North Platte, Nebraska, which serves patients in west Nebraska, northern Kansas, and Northern Colorado, announced earlier this month that it will end its MA contracts effective Jan. 1.

Great Plains CFO Summer Owen said MA plans were hindering access to care, causing service delays, higher out-of-pocket costs for some patients, and increased lengths of stay.

"We felt that we were unable to fulfill our mission by continuing to participate in these contracts," Owen said, adding that Great Plains lacks the negotiating power to compete against large commercial insurance and has very little, if any, input on policy changes. Owen said she'd like to see clearer language in the contracts and more local decision-making.

Similarly, Cape Fear Valley Health in Fayetteville, North Carolina canceled a large MA contract last summer, largely because it saw the claim denial rate getting close to 30%, according to Bart Fiser, VP of corporate revenue cycle and managed care for Cape Fear Valley.

Fiser added that Cape Fear Valley has had similar issues with multiple large payers, including those with a greater presence in the MA and managed Medicaid markets.

"It's a very hard relationship [with insurers] now. It's not as collaborative as it used to be," Fiser said. "Help me understand why it would be better to be in network again." (Hudson, Modern Healthcare, 5/29)

The physician landscape has changed drastically in recent years, largely due to an acceleration of provider consolidation and the entrance of new entities looking to disrupt the market. Today, more stakeholders than ever are competing for physicians' attention — making it especially challenging for health plans to engage providers. Read on for our take on how health plans can usher in a new era of payer-provider relationships by enabling physician partners.