Becker's Hospital Review

27 THOUGHT LEADERSHIP CommonSpirit CFO calls for 'return to reason' in payer negotiations By Alan Condon e battle at the bargaining table has never been more intense. Hospitals and health systems, still grappling with the financial aershocks of the pandemic, are locked in increasingly difficult contract negotiations with commercial payers. Operating costs — driven by soaring labor, supply and utility expenses — have surged, yet reimbursement rates have failed to keep pace. Hospitals, many of which absorbed double-digit cost increases during the pandemic, are seeking rate adjustments to remain financially viable. Yet, payers seeking to protect and expand their market shares — while improving their margins — are pushing back, leading to heightened friction that shows no signs of easing. As a result, providers are locked in a high-stakes struggle to close the widening gap between revenue and expenses. CommonSpirit CFO Daniel Morissette and Ken Steele, partner at ECG Management Consultants, discuss how health systems are navigating this turbulent landscape — advocating for fairer rates in contracts, standardizing payer language, utilizing data analytics, and, when necessary, taking a tougher stance in negotiations. With hospital margins razor-thin and inflation continuing to squeeze operations in many markets, the fight for adequate reimbursement has never been more critical. Editor's note: is is an excerpt from an upcoming episode of the Becker's Healthcare Podcast. Responses are lightly edited for length and clarity. Question: It's no secret that the volume of denials is growing at an alarming rate. How is CommonSpirit addressing this issue? What strategies have been most effective in reducing denials and accelerating payment? Daniel Morissette: We've been doing our best to advocate for fair reimbursement, not just in terms of base rate increases but also addressing the growing number of claim denials. e volume of denials, downgrades, underpayments and administrative burden through additional and unnecessary reviews that we're seeing now is significantly higher than at any other point in my career. It's a tough environment, and while we've worked hard to improve quality and patient satisfaction scores — factors that help us indirectly — the fundamental issue remains: the gap between revenue growth and expense increases is unsustainable. Given that we operate in 24 different states, some markets are even more challenging due to higher inflation rates. In certain states, inflation has been so severe that it's difficult to see a viable path forward without increases in per- patient reimbursement rates. We've also worked to standardize contract language to mitigate these challenges and make it administratively efficient for payers through consistent terms and provisions. While base rates matter, the sheer volume of payer-specific denials and downgrading our services makes contract language a key factor in securing fair payments. If we can clarify terms upfront — what will be covered, what won't, paying clean claims in a timely manner — it could significantly improve outcomes. Additionally, where possible, we've tried to have system-level negotiations while gaining efficiencies for payers and their operations staff. In markets where we have a strong presence, aggregating multiple facilities and physicians in contract discussions can help demonstrate our essentiality within the healthcare landscape. However, success with this strategy has been mixed. At the end of the day, it's an uphill battle. We're doing everything we can to make our case to payers, emphasizing the value we bring, but it's a difficult environment with no immediate resolution in sight. Q: How have health systems' approach to payer negotiations changed? Are there any new contracting strategies they are exploring or implementing? Ken Steele: We're seeing growing frustration from providers due to the lack of meaningful rate increases. As a result, we're seeing more aggressive rate proposals for two- or three-year contracts. Providers are also being more vocal about their value proposition — something Dan touched on. Oen, payers don't fully recognize the quality of care hospitals and physicians provide or the cost savings achieved when care shis from hospital-based settings to outpatient facilities. Providers are pushing harder to highlight these efficiencies and encourage collaboration with payers. Hospitals are also becoming more efficient, reducing inpatient stays and readmissions — actions that benefit payers but don't always translate to financial gains for providers unless value-based contracts Image Credit: Fierce Healthcare

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