Issue link: https://beckershealthcare.uberflip.com/i/1535972
28 THOUGHT LEADERSHIP are in place. Another major shi is in data transparency. Previously, payers asserted during the negotiations that providers were above market rates, but there was little or no data to verify it. Now, with publicly available price transparency data, additional data sources and analytics tools, hospitals and physician groups can accurately compare their rates to competitors. Many organizations are now using this data to justify rate increases, demonstrating that they're delivering greater value than what they're being paid for. is transparency has changed the negotiation landscape. Health plans can no longer claim providers are above market without evidence, and that shi improves providers' chances of securing fairer rates. However, friction between payers and providers is likely to persist. Hospitals, health systems, and physician groups must operate with a margin to reinvest in technology, staffing, and other critical areas. When rate increases aren't sufficient, some providers have no choice but to terminate contracts. Q: Many health systems have taken aggressive stances in contract negotiations, sometimes even dropping plans — particularly with commercial Medicare Advantage plans. What lessons have you learned from recent contract disputes? What advice would you offer other organizations facing similar situations? KS: Historically, providers would renegotiate before reaching that point, but now, more contracts are terminating without renewal. Health plans argue that employers and members can't afford the rate increases, yet many of these payers maintain strong profit margins. As a result, we're seeing more contract terminations. Providers are also growing frustrated with the lack of responsiveness from health plans, as there is a high turnover among payer representatives. With no continuity in problem-solving, hospitals and health systems are increasingly turning to arbitration or lawsuits rather than waiting months — or even years — for resolutions to systemic underpayment or denial issues. Larger health systems have an advantage in these disputes due to their resources, and over time, I expect continued legal challenges to shi payer behaviors. At the end of the day, providers deliver essential services and create value, yet they still have to fight for appropriate payment. e current system isn't working, and I expect ongoing friction, contract terminations, and public disputes to continue making headlines across the country. Unfortunately, I don't see that changing anytime soon, which is troubling news for many hospitals. Q: Kaufman Hall recently reported that 37% of hospitals are still losing money. With this in mind, how are these payer challenges affecting the long-term financial sustainability of health systems — especially those operating at a loss or on razor-thin margins? DM: It's basic economics: the less you're paid, or the increased costs incurred to collect, for the services you provide, the harder it is to sustain operations. Some of our markets are performing well in terms of margins, which helps, but those positive margins are oen used to offset growing losses in more challenging markets especially with single payer dominance. In certain other states, payers have an oligopoly, controlling the commercial market to the extent that we can't offset significant Medicaid and Medicare Advantage losses. ese payers also use their market influence to impose unfavorable terms and rates across their Medicare Advantage, marketplace and managed Medicaid business lines. ese difficult markets have only become more challenging over the past year or two, largely due to the rising number of claim denials, downgrades, underpayments and the time and effort required to secure payments resulting in higher days in AR. Additionally, the transition to a value-based care payment model has become increasingly challenging. On one hand, we must invest in infrastructure, resources, staffing technology and analytics — including actuarial staff and data scientists. On the other hand, health plans fail to equitably share the healthcare savings generated by our physicians. Instead, they shi greater actuarial risk onto us without providing timely data or setting baseline targets based on their actual performance, ultimately leading to greater financial losses. How long can this continue? I don't expect things to change overnight, but I do hope for some return to reason. Even as the largest nonprofit health system in the country, we face the same challenges as smaller providers — delays in reimbursement despite meeting documentation and billing requirements. e system, as it currently functions, does not work in providers' favor. Even when we appeal denied claims at the state level, winning those appeals oen takes years and substantial financial resources. Q: What are some of the more challenging markets in which CommonSpirit operates at the moment? DM: For example, Washington State is a particularly difficult market due to extreme labor cost inflation. Salaries and wages make up over 55% of our costs, and when wage inflation in a state is double the national average, it becomes nearly impossible to sustain operations. Another example is Arkansas, where one insurer dominates the market, making it difficult to recover costs. While they've been a decent partner, ensuring fair reimbursement is an entirely different challenge. Q: What kind of toll does payer denials and the prior authorization process take on CommonSpirit's revenue cycle teams? How are you supporting them? DM: At its core, healthcare billing and collections are highly complex. To put it into perspective, I'd estimate that at least 100 basis points — in about 1% — of our EBITDA is tied up in these payment challenges. at's a conservative estimate, and the real impact is likely much higher. When you're already operating with narrow margins, these inefficiencies become a major burden. Running a health system is difficult enough without having to fight for reimbursement that should already be covered under contract agreements. Q: How important is having robust data and analytics when engaging in payer negotiations? Can you give us a sense of what that data entails and the kind of impact it can have at the negotiation table? KS: Robust data analytics are now essential for negotiations with payers. In the past, payers had better analytics than hospitals and health systems, but that's changed. Providers have caught up, and in some cases, they now have better insights than payers. Typically, we analyze 12 months of payer data — across inpatient, outpatient, ER, lab, imaging, and more — then compare those payments with publicly available price transparency data. is allows us to determine what payers are reimbursing competitors. If our data shows that a hospital or physician group is receiving lower rates than competitors despite providing comparable or better services, that becomes a key point in negotiations. We present this data to payers, demonstrating the need for fairer reimbursement to ensure continued investment in quality care, technology, and patient experience. Without this level of insight, providers are at a disadvantage. In today's landscape, data is power. n